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A business commenced with capital in cash of $1000. Inventory costing $800 net of sales tax is purchased on credit. Half of the inventory is then sold for $1000 plus sales tax, The customers paying in cash at once .
the accounting equation after these transactions would show:
A. assets $1775 less Liabilities $175 equals capital $1600
B. assets $2775 less Liabilities $975 equals capital $1200
C. assets $2775 less Liabilities $800 equals capital $1600
D. assets $2775 less Liabilities $975 equals capital $1600Can you help me find out the answer
thanks
Why are you attempting questions for which you do not have the answer? You should be using a Revision Kit from one of the ACCA approved publishers – they are full of exam standard questions, together with answers and workings!
You have either copied the question wrongly, or there is a typing error in the original question, because none of the answers can possibly be correct!
A cannot be correct because the assets must be the original cash of 1,000 + the cash from the sale which is more than 1,000 because of sales tax.
B cannot be correct, because 2775 – 975 does not equal 1,200.
C cannot be correct, because 2775 – 800 does not equal 1600
D cannot be correct, because 2775 – 975 does not equal 1600
(Obviously the capital is 1,000 + (1000 – 1/2×800) = 1600)
Sorry it was my mistake!
the answer is D but I typed a wrong assets amountD. Assets 2575 less liabilities 975 equals capital 1600.
can you ex[lain for me how they calculate the assets , liability amount for this question?
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