WAZOBIA Enterprise's financial position as at 31st December, 1996 is as follows: N fixtures 1,000.00 stock 31st december 8,000.00 Debtors 5,000.00 Creditors...
Question 1 Report
WAZOBIA Enterprise's financial position as at 31st December, 1996 is as follows:
| N | |
| fixtures | 1,000.00 |
| stock 31st december | 8,000.00 |
| Debtors | 5,000.00 |
| Creditors | 3,000.00 |
| Cash in hand | 7,000.00 |
| Bank overdraft | 1,200.00 |
| Typewriter | 4,500.00 |
| furniture | 2,500.00 |
| capital | 8,000.00 |
Calculate:
(a) Capital owned
(b) Working capital
(c) Current liabilities
(d) Fixed capital
(e) Capital employed.
Answer Details
WAZOBIA Enterprise as at 31st December, 1996
First classify each item:
| Item | N | Classification |
|---|---|---|
| Fixtures | 1,000.00 | Fixed asset |
| Typewriter | 4,500.00 | Fixed asset |
| Furniture | 2,500.00 | Fixed asset |
| Stock (31st Dec) | 8,000.00 | Current asset |
| Debtors | 5,000.00 | Current asset |
| Cash in hand | 7,000.00 | Current asset |
| Creditors | 3,000.00 | Current liability |
| Bank overdraft | 1,200.00 | Current liability |
Fixed assets = 1,000 + 4,500 + 2,500 = N8,000
Current assets = 8,000 + 5,000 + 7,000 = N20,000
Total assets = 8,000 + 20,000 = N28,000
(The N8,000 listed as "capital" is a book figure; capital owned is recalculated below from the assets and liabilities.)
(a) Capital owned = Total assets - Total external liabilities
= 28,000 - (3,000 + 1,200) = 28,000 - 4,200 = N23,800
(b) Working capital = Current assets - Current liabilities
= 20,000 - 4,200 = N15,800
(c) Current liabilities = Creditors + Bank overdraft = 3,000 + 1,200 = N4,200
(d) Fixed capital = value of fixed assets = N8,000
(e) Capital employed = Fixed assets + Working capital = 8,000 + 15,800 = N23,800
(Check: Total assets - Current liabilities = 28,000 - 4,200 = N23,800.)
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