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Answer (C) is correct . Working capital equals current assets minus current liabilities. For Tosh Enterprises, current assets consist of cash, accounts receivable, inventory, and prepaid expenses, a total of $1,480,000 ($400,000 + $200,000 + $800,000 + $80,000). Current liabilities consist of accounts payable, interest payable, and notes payable, a total of $280,000 ($160,000 + $20,000 + $100,000). Accordingly, working capital is $1,200,000 ($1,480,000 – $280,000).

Answer (A) is incorrect because The amount of $600,000 includes long-term bonds payable among the current liabilities.
Answer (B) is incorrect because The amount of $1,120,000 excludes prepaid expenses from current assets.
Answer (D) is incorrect because The amount of $1,220,000 excludes interest payable from current liabilities.