Multiple Choice
Which of the following accounts would normally have a debit balance on the trial balance?
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2. Transaction Analysis
Trial Balance
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Given the following balance sheet for Zumbahlen Inc., how is the firm's total operating capital calculated?
A
Total current assets plus total liabilities
B
Total assets minus total liabilities
C
Total current assets plus net fixed assets minus non-interest-bearing current liabilities
D
Net fixed assets minus long-term debt
Verified step by step guidance1
Understand the concept of total operating capital: It represents the capital used in the firm's operations and is calculated as total current assets plus net fixed assets minus non-interest-bearing current liabilities.
Identify the components from the balance sheet: Locate the values for total current assets, net fixed assets, and non-interest-bearing current liabilities.
Add the total current assets and net fixed assets together. This represents the firm's total assets used in operations.
Subtract the non-interest-bearing current liabilities from the sum obtained in the previous step. This adjustment accounts for liabilities that do not incur interest and are part of the firm's operating capital.
Ensure that the calculation excludes long-term debt and other interest-bearing liabilities, as these are not part of the firm's operating capital.
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