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following transaction relates to max business:
1May. purchase of good for resale $300
2May. max injects long term capital $1400
3May. rent paid $750
5may. withdrawn cash $400
7may. sales on credit $1200goods sold on 7 may cost $600. At start of week ,assets were $15700 and liabilities were $11200. find closing capital.?
Please don’t simply set me test questions and expect an answer! You must have an answer in the same book in which you found the question, and so you should ask about whatever it is in the answer that you are not clear about and then I will explain.
You will know from my free lectures that capital is always equal to the net assets, and that the increase in net assets (and therefore the increase in capital) is equal to the profit plus capital introduced less drawings.
The capital introduced = 1,400
The drawings = 400
The profit = 1,200 – 600 – 750 = 150 (loss)Use the formula to find the increase in net assets. Adding this to the opening net assets will give you the value of the closing net assets (i.e. the closing capital).
All of this is explained in my free lectures. The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
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