**SOLUTION**

**Firm disposed off liabilities of Rs. 1,00,000 which results in decrease in current liabilities and current assets by the same amount.**

After disposing liabilities:

After disposing liabilities:

Current Assets = Rs. 4,00,000 (Rs. 5,00,000 – Rs. 1,00,000)

And, Let Current Liabilities be (x – Rs. 1,00,000)

Current ratio = Current assets / Current liabilities

2: 1 = 4,00,000 / (x – 1,00,000)

4,00,000 = 2x – 2,00,000

6,00,000 = 2x

Therefore, x = 3,00,000

Current Liabilities after payment = x – Rs. 1,00,000

= Rs. 2,00,000

Working Capital after Payment = Current Assets – Current Liabilities

= Rs. 4,00,000 – Rs. 2,00,000

= Rs. 2,00,000

Current Assets before payment = Rs. 5,00,000

Current Liabilities before Payment = Rs. 3,00,000

Therefore, Working Capital Before Payment = Current Assets – Current Liabilities

= Rs. 5,00,000 – Rs. 3,00,000 = Rs. 2,00,000

Current Assets = Rs. 4,00,000 (Rs. 5,00,000 – Rs. 1,00,000)

And, Let Current Liabilities be (x – Rs. 1,00,000)

Current ratio = Current assets / Current liabilities

2: 1 = 4,00,000 / (x – 1,00,000)

4,00,000 = 2x – 2,00,000

6,00,000 = 2x

Therefore, x = 3,00,000

Current Liabilities after payment = x – Rs. 1,00,000

= Rs. 2,00,000

Working Capital after Payment = Current Assets – Current Liabilities

= Rs. 4,00,000 – Rs. 2,00,000

= Rs. 2,00,000

Current Assets before payment = Rs. 5,00,000

Current Liabilities before Payment = Rs. 3,00,000

Therefore, Working Capital Before Payment = Current Assets – Current Liabilities

= Rs. 5,00,000 – Rs. 3,00,000 = Rs. 2,00,000