PEV June 2007 2.1c help

Instead of adjusting the capital section of the balance sheet, just go through the fixed assets and current assets and creditors and update them one by one.

agilmoj

I hope that you are not in my class. If so, I will give you the same advice I give in class. BEWARE OF EXAMINERS' ANSWERS.

1. They are useful for comparing with your own
2. They can cause confusion if you are using them to try to learn a topic.

There are 2 ways find a revised net asset value on a balance sheet.

1. Look at the capital
2. Look at the statement of assets and liabilities

In an exam 1. is much easier. In this case:-
we had £683,000 and we increased the profit from -£42,000 to £318,000 (£360,000) so we will have £1,043,000.

Using 2.
We

1. Increased closing stocks (I added £40,000 to stock and decreased the cash balance by the same amount)
2. Trade debtors increased by £75,000 (I increased trade debtors and reduced cash)
3. Trade creditors fell (decrease cash by £30,000 decrease trade creditors)
4. Short term borrowing increased by £145,000. (I increased cash by £145,000 and increased short-term borrowings.
5. Profit increased by £360,000 (Increase cash)
6. Long trem loans fell by £360,000 (decrease cash decrease long term loans)

Now look at the revised balance sheet (in thousands)
Machinery £1600
Stock £90
Trade debtors £225
Cash nil
Short term borrowing £145
Trade creditors £45
Net current assets £125

Long term borrowings £682
Net assets £1,043