Skip to content

ACCA Applied Knowledge · Financial Accounting · The main elements of financial statements

Kestrel Co's statement of financial position at 1 January showed assets of $900,000 and equity of $540,000. During the year Kestrel earned profit of $85,000, paid dividends of $30,000, issued shares for $50,000 and revalued land upwards by $20,000 (credited to other comprehensive income). Liabilities at 31 December were $400,000. What were total assets at 31 December?

Total assets are $1,065,000. Closing equity is opening $540,000 plus profit $85,000, share issue $50,000 and revaluation $20,000, less dividends $30,000, giving $665,000. Adding liabilities of $400,000 gives assets under the accounting equation.

  1. A$1,065,000Correct
  2. B$1,045,000
  3. C$1,085,000
  4. D$1,015,000

Explanation

Closing equity = 540,000 + 85,000 - 30,000 + 50,000 + 20,000 = 665,000. Assets = equity + liabilities = 665,000 + 400,000 = 1,065,000. Option B omits the revaluation gain; option C fails to deduct dividends.

Did you get it right without looking?

One question tells you little. A timed set on The main elements of financial statements shows your real accuracy, how long you take and where you lose marks.

Practise The main elements of financial statementsFree diagnostic mock

More The main elements of financial statements questions