Account preparation II

lifeisstrange

Hi everybody,
I am currently studying account preparation II and there are two questions relating to the online engage Kaplan mock exam 1 where I am not able to figure out the answers.

1) This task is about calculating missing balances and using the accounting equation:

At 31/12/2002, a sole trader had the following assets and liabilities:
-Plant and Machinery cost: £20000
-Plant and Machinery accumulated depreciation: £4300
-Inventory: £3300
-Receivables: £1300
-Bank balance (Overdrawn): £500
-Sales Tax owed to HMRC: £1250
-Payables: £ 990
During the year ended 31/12/2002, the sole trader made a profit of £2200 and withdrew £1200 cash from the business bank account for personal use.
What was the capital account balance at 1/01/2002?

2) Mark up

A business is attempting to value its closing inventory. It has inventory on hand with a selling price of £15000. The business prices its goods using a mark-up of 20%. How much should the business include in the financial statements for closing inventory?

Please could you help me to find the solution for those two questions? I have tried but each time I have the wrong answer and no answers are given for the mock exam 1. Thanks

crispy

Q1 - Prepare a balance sheet from the info you have - the total asests less total liabilities would give you your capital figure as at 31/12/02. You know you have made a profit for the year (increasing capital) and taken some drawings (decreasing capital)- therefore from the capital figure calculated at 31/12/02 just work backwards to get the opening figure at 1/1/02.


Q2 - Inventory should be measured at lower of cost and NRV. If you have been provided the selling price and mark-up, work backwards to work out the cost- and thus give you your closing inventory valuation.

lifeisstrange

Thank you very much Crispy. I have tried again and now I have the correct answer.