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The following are the trading of Zainab Trading Co. Ltd

The following are the trading of Zainab Trading Co. Ltd, for the year ended 31st December 1986.

Creditors        20,000
Premises        20,000
Machinery       20,000
cash                20000
Debtors           30,000
stock               50,000
cost of goods sold 100,000
sales                200,000
plant                 30,000
Rent                 10,000

From the above, calculate the (a) Fixed assets; (b) working capital; (c) gross profit (d) net profit.

Explanation

(a) Fixed Assets:

Premises      20,000
Machinery     20,000
Plant             30,000
#70,000

(b) Working Capital =Current Assets – Current Liabilities Current Assets:

Cash         20,000
Debtors     30,000
Stock         50,000
100,000

Current Liabilities:

Creditors   20,000

Working Capital = CA – CL = 100,000 – 20,000 = 80,000.

(c) Gross Profit = Sales – Cost of goods sold

200,000 – 100,000 = #100,000

(d) Net Profit = Gross Profit – Expenses (Rent)

= 100,000 – 10,000 = #90,000