nicky123

Hi everyone! I'm newbie to this forum, now I'm working on CAT P1. I would be pleased if anyone can help me with the question which I'm stucking at:
-Nancy's business has net assets of $13,200 at the begining of the year. During the following month she purchases new equiqment 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 next month.
What are the net assets at the end of month?
A. $15,750
B. $18,450
C. $18,150
D. $20,700
Thank!!!

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quyet

Can anyone answer? I didn't have answer

bawazir

hi and sorry for dely
the answer is C. 18150
because:
13200 is net aset (new capital)
add 1200 new equipments(fix assets)
add 7500 sales (stock sold ) on credit
mines 3750 cash received from any sales on credit
= 18150

note: 2250 bills from suppliers (do not count) because not due yet.

then the answer is 18150

please if you have oher answer please reply to correct me.
all the best to you all

sjbherself

I agree, out of the 4 choices you have $18150 is the correct answer.

However in real life I would say that none of the answers are correct. Whilst the $2250 from suppliers are not due they should still be included in your trade creditors and reduce your net assets.

nicky123

Thank so much bawazir! This helps me much!!!

speak101

Just always keep in mind accounting equation i.e
A=C+L
Assets=Capital+Liability

Assets include current and non-current assets

Capital includes capital introduced by owner , profit , loss, drawings

Liabilities include short term and long term liabilities

And this format forms balance sheet .

__________________
WORK , WORK , WORK WITH HONESTY AND FAITH IN YOURSELF

genius1986

I would disagree with C. $18,150 as the answer.

Allow us look at the question again:

1) Purchase Fixed Asset $1,200

DR Fixed Asset $1,200
CR Cash/Bank/Creditor $1,200

Increase in Fixed Asset and reduction in Current Asset nullifies the changes in Net Assets.

2) Credit Sales $7,500

DR Debtor $7,500
CR Sales $7,500

Increase in Current Asset and Sales increases Net Assets by $7,500.

3) Receipt from Customer $3,750

DR Cash/Bank $3,750
CR Debtor $3,750

Increase and decrease in Current Assets simultaneously nullifies any changes to Net Assets.

4) Bills from Supplier $2,250

DR Purchases $2,250
CR Creditor $2,250

Increase in Purchases and Current Liability reduces Net Assets by $2,250.

Therefore, my bet to the solution would be $13,200 + $7,500 - $2,250 = $18,450, which coincides with solution B, as suggested in the question.

elmoblais

I agree with genius 1986. I obtained the same answer as him/her.