Loading....

WAEC SSCE - Financial Accounting - 1991 (Objective)

Question 1 Report

Use the following information to answer the given question
\(\begin{array}{c|c} & DR & CR \\ & N & N \\ \hline \text{Goodwill} & 10,000 & \\ \text{Plant and Machinery} & 32,000& \\ \text{Freehold premises} & 50,000& \\ stock & 15,000& \\ debtors & 12,500 & \\ \text{Cash in bank} & 7,500 & \\ \text{cash in hand} & 2,000 & \\ \text{Profit and loss account} & & 34,000 \\ \text{Accrued rent} & & 500 \\ \text{Sundry creditors} & & 9500 \\ Capital & \overline{129,000} & \overline{129,000}\end{array}\)
The value of working capital is
Answer Details
Working capital is the difference between current assets and current liabilities. Current assets are assets that are expected to be converted to cash within a year or a normal operating cycle, whichever is longer. Current liabilities are liabilities that are expected to be paid within a year or a normal operating cycle, whichever is longer. From the given information, we can calculate the current assets and current liabilities as follows: Current assets = stock + debtors + cash in bank + cash in hand = 15,000 + 12,500 + 7,500 + 2,000 = N37,000 Current liabilities = accrued rent + sundry creditors = 500 + 9,500 = N10,000 Therefore, the working capital is: Working capital = Current assets - Current liabilities = N37,000 - N10,000 = N27,000 Therefore, the value of working capital is N27,000. Option A) N27,000 is the correct answer.
Read lesson note on Nature And Significance Of Accounting (JAMB)
View Answer