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Steve’s furniture business has cash of $3,575,trade receivables of $2,750, inventory worth $21,870 and a bank loan of $5,600. He rents his showroom from the owner of the premises for $12,000 a quarter, paid in advance on the 1 of February, May, August and November each year.
What is the capital balance at 31 December 20X1?
Answer in the book: B $25,595
Doubt: I think the answer should be $26,595.
I am not convinced with the answer in the book.
Sir, please explain this.
Capital = 3575 + 2750 + 21870 – 5600 + 1/3 x 12000 (rent prepaid as at end December) = 26595.
I agree with you.