The following is a summary of the asset and liabilities of Ojo trading company as at 31st December, 2018<br/>Initial Capital = 5000<br/>Net Profit = 1000<br/>Furniture = 2000<br/>Equipment = 2900<br/>Debtors = 100<br/>Stock = 1000<br/>Bank = 500<br/>From the above, calculate current liabilities
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Correct Answer: Option C
Explanation:
Use the accounting equation:<br/><br/>\( \text{Assets} = \text{Capital} + \text{Liabilities} \)<br/><br/>First, calculate total assets.<br/><br/>Fixed assets:<br/>Furniture = 2,000<br/>Equipment = 2,900<br/>Total fixed assets = \(2,000 + 2,900 = 4,900\)<br/><br/>Current assets:<br/>Debtors = 100<br/>Stock = 1,000<br/>Bank = 500<br/>Total current assets = \(100 + 1,000 + 500 = 1,600\)<br/><br/>Total assets = \(4,900 + 1,600 = 6,500\)<br/><br/>Next, calculate total capital.<br/><br/>Capital = Initial Capital + Net Profit<br/>\(= 5,000 + 1,000 = 6,000\)<br/><br/>Now, rearrange the accounting equation to find liabilities:<br/><br/>\( \text{Liabilities} = \text{Assets} - \text{Capital} \)<br/><br/>\( \text{Liabilities} = 6,500 - 6,000 = 600 \)<br/><br/>Since no long-term liabilities are given, the total liability of N600 is the current liability.<br/><br/>Therefore, current liabilities = N600.
Use the accounting equation:<br/><br/>\( \text{Assets} = \text{Capital} + \text{Liabilities} \)<br/><br/>First, calculate total assets.<br/><br/>Fixed assets:<br/>Furniture = 2,000<br/>Equipment = 2,900<br/>Total fixed assets = \(2,000 + 2,900 = 4,900\)<br/><br/>Current assets:<br/>Debtors = 100<br/>Stock = 1,000<br/>Bank = 500<br/>Total current assets = \(100 + 1,000 + 500 = 1,600\)<br/><br/>Total assets = \(4,900 + 1,600 = 6,500\)<br/><br/>Next, calculate total capital.<br/><br/>Capital = Initial Capital + Net Profit<br/>\(= 5,000 + 1,000 = 6,000\)<br/><br/>Now, rearrange the accounting equation to find liabilities:<br/><br/>\( \text{Liabilities} = \text{Assets} - \text{Capital} \)<br/><br/>\( \text{Liabilities} = 6,500 - 6,000 = 600 \)<br/><br/>Since no long-term liabilities are given, the total liability of N600 is the current liability.<br/><br/>Therefore, current liabilities = N600.