Nancy's business has net assets of $13,200 as at 1 January 20X1. During January she purchases new equipment for $1,200, makes sales on credit of $7,500, receives payments from customers of $3,750 and receives bills from suppliers of $2,250. These are not payable until February.
What are the net assets at the end of January 20X1?
A. $15,750
B. $18,450
C. $18,150
D. $20,700
The answer is B .
I has solved this problem:
Asset = Capital + Liability.
Opening balance: 13,200=13,200 + 0
1/ Purchase new equipment --> Make no effect.
2/ Make sale on credit ---> Decrease 7,500 in Asset and Capital because Nancy hasn't received money from buyer, so :
13,200 - 7,500 =(13,200 -7,500) + 0
3/ Receive from customer --> Cash increases 3,750 so:
13,200 - 7,500 + 3,750= (13,200 -7,500 + 3,750) + 0
4/ Receive bills --> Liability increase, so:
13,200 - 7,500 +3,750 + 2,250 = (13,200 -7,500 + 3,750) + 2,250
So the net asset = Asset - Liability = 13,200 -7,500 + 3,750 = 9,450 !!!
Please show me where I was wrong.
Thank you. :)
FIA Forums
What are the net assets?
No.2
2/ Make sale on credit -> Decrease 7,500 in Asset and Capital because Nancy hasn’t received money from buyer, so :
13,200 – 7,500 =(13,200 -7,500) + 0
=> Nancy has not received money from client so Receivable has encrease. So if U minus 7,500 I think it's not correct
@Tuan: Yes, the right answer is: Net asset = 13,200+7,500-2,250 = 18,450
But I think we should minus 7,500 because the good worths 7,500 has sold, and we have not received money. It means Asset decreases 7,500, and we also minus 7,500 in Capital to ensure the equility of accounting equation. ???
When Nancy purchase new equipment, her Cash (Asset) decreases 1,200 while her non - current Asset increases 1,200. So this transaction seems to have no effect to accounting equation.
Net assets is defined as total assets minus total liabilities = Equity
As at 01.01.X1: 13,200
NI = Revenue - Cost : 7,500 - 2,250 = 5,250 => retain earning has encreased USD 5,250
=> As at the end of Feb net assets is 13,200 + 5250 = 18,450.
What do U think? Please show me if I was wrong.
Or:
1/ Purchase new equipment –> Make no effect. => OK
2/ Make sale on credit —> Total assets encrease 7,500 (in Cash: 3,750 and AR: 3.750) => add in net assets: 13,200 + 7,500 = 20,700;
3/ Receive bills –> Liability increase, so:
20,700 – 2,250 = 18,450
@tranphuonganh97 as u said that''When Nancy purchase new equipment, her Cash (Asset) decreases 1,200 while her non – current Asset increases 1,200. So this transaction seems to have no effect to accounting equation.,
so just like that nancy sold goods worth 7500 it means these are our recievables and it decreases our asset/inventory by 7500 but on the other hands it also increases our receivables by 7500 and u should also b familier that receivables are our current asset so this also has no effect.so the correct ans is b
@Tuan @Jugnu : I understood. Thank you :D
Net Assets = Total Assets - Total Liabilities
And Net Assets = Capital + Profits - Drawings
Net assets= Total assets-Total liability
Or this can also be called net capital
Sign into reply to this topic.