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Question
Ajonibode runs a business as a sole trader and the following information relates to the business:
On January 1, 2015, the net assets of the business were N1,675,000. During the year to December 31, 2015, the business made a profit of N625,000 and Ajonibode took out N550,000 in drawings. Due to a shortage of cash, he paid in additional capital of N100,000 in early December 2015.
What are the net assets of the business as of December 31, 2015?
A. N1,675,000
B. N1,850,000
C. N2,300,000
D. N2,400,000
E. N2,950,000
Answer
Answer:
B. N1,850,000
Explanation:
Net assets as of December 31, 2015, are calculated by adjusting the January 1 net assets for profit, drawings, and additional capital. The formula is:
Net Assets=Opening Net Assets+Profit−Drawings+Additional Capital
= N1,675,000 + N625,000 – N550,000 + N100,000 = N1,850,000.
- Tags: Drawings, Net Assets, Profit, Sole Trader
- Level: Level 1
- Topic: Financial Statements Preparation
- Series: MAY 2016
- Uploader: Joseph