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hi guys.. i need urgent help with this question. i’m not getting the answer. i would be really grateful if anyone could help me out! Thank you! 🙂
The following transactions relate to Max’s business:
1 may purcahse of goods for resale on credit $300
2 may Max injects long term capital into the business $1400
3 may Payment of rent made $750
5 may Max withdraws cash from the business $400
7 may Sales made on credit (originally costing $600) $1200At the start of the week, the assets of the business were $15700 and the liabilities were $11200.
At the end of the week, what is the amount of Max’s capital?
A) $5350
B) $1400
C) $850
D) $1000At the start of the week, the capital = net assets = 15700 – 11200 = 4500.
Over a period, the increase in net assets = capital introduced + profit – drawings. (If you need help on this then watch the free lecture that covers Chapter 2 of our Lecture Notes).
During the week, 1 May has no effect (more assets and more liabilities).
2 May – capital introduced, so net assets increase
3 May – more expense so less profit. Net assets decrease.
5 May – drawings, so net assets decrease.
7 May – profit of 1200 – 600 = 600, so net assets increase.So the increase in net assets = 1400 – 750 – 400 + 600 = 850
So net assets at the end of the week = 4500 + 850 = 5350
So capital at the end of the week = 5350.
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