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ACCA Applied Knowledge · Financial Accounting · The context and purpose of financial statements for external reporting

At 1 January 20X2, Kori Co had assets of $540,000 and liabilities of $210,000. During 20X2 the owners contributed $50,000 of new capital and withdrew $30,000 as dividends. At 31 December 20X2 assets were $700,000 and liabilities were $260,000. What profit did Kori Co earn for 20X2?

Profit is found from the change in equity. Closing equity of $440,000 less opening equity of $330,000 is $110,000. After removing the $50,000 capital introduced and adding back the $30,000 dividends, profit is $90,000.

  1. A$120,000Correct
  2. B$100,000
  3. C$140,000
  4. D$170,000

Explanation

Opening equity = 540,000 - 210,000 = 330,000. Closing equity = 700,000 - 260,000 = 440,000. Increase = 110,000. Increase = profit + capital introduced - dividends, so profit = 110,000 - 50,000 + 30,000 = 90,000? Recheck: 110,000 = P + 50,000 - 30,000 gives P = 90,000. Correct answer is therefore $90,000, which is not listed.

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