Pasadenas starts a business on the 1 June 20x8, introducing the following assets:                       cash     £5,000                                    van       £1,000Pasadenas’s godfather agrees to lend the business £7,200 at an annual interest rate of 5% per annum.The business makes the following cash payments:                                    goods for resale                        £6,000rent for 6 months                      £1,500In the first month of trade the business makes sales of £5,000 operating on a mark-up on cost of 25%. The inventory/stock held at the end of the first month’s trade was valued at £2,000.[Note: not all information provided above is required to answer this question correctly]Pasadenas’s capital account at the end of the first month’s trade is:  Answers:a. £6,000 b. £13,000 c. £720 d. £6,720

Question
Asked Oct 29, 2019

Pasadenas starts a business on the 1 June 20x8, introducing the following assets:                       

cash     £5,000

                                    van       £1,000

Pasadenas’s godfather agrees to lend the business £7,200 at an annual interest rate of 5% per annum.

The business makes the following cash payments:

                                    goods for resale                        £6,000

rent for 6 months                      £1,500

In the first month of trade the business makes sales of £5,000 operating on a mark-up on cost of 25%. The inventory/stock held at the end of the first month’s trade was valued at £2,000.

[Note: not all information provided above is required to answer this question correctly]

Pasadenas’s capital account at the end of the first month’s trade is:

   
Answers:
a. 

£6,000

 
b. 

£13,000

 
c. 

£720

 
d. 

£6,720

check_circleExpert Solution
Step 1

Calculate the amount ...

$5,000
Sales
Purchases ($6,000- $2,000 closing stock)
Gross profit
Less: Rent expenses ($1,500/6)
Interest expenses ($7,250*5%*1/12)
Net profit
$4,000
$1,000
$250
$30
$720
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$5,000 Sales Purchases ($6,000- $2,000 closing stock) Gross profit Less: Rent expenses ($1,500/6) Interest expenses ($7,250*5%*1/12) Net profit $4,000 $1,000 $250 $30 $720

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