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Difficulty: MediumPreparation of Company Statement of Financial Position

The financial records of Crestwood Logistics Ltd at the end of its financial year showed Total Non-Current Assets of ₦1,200,000 and Net Current Assets of ₦350,000. If 8% Debentures stood at ₦400,000 and total reserves were ₦250,000, what is the value of the Issued Share Capital in the Statement of Financial Position?

  1. ₦900,000Answer
  2. B
    ₦1,300,000
  3. C
    ₦600,000
  4. D
    ₦1,700,000

Answer

The Issued Share Capital of Crestwood Logistics Ltd is ₦900,000.
In a corporate Statement of Financial Position, Total Net Assets equals Non-Current Assets plus Net Current Assets (₦1,200,000 + ₦350,000 = ₦1,550,000). Total Net Assets are financed by Shareholders' Funds (Issued Share Capital + Reserves) and Non-Current Liabilities (Debentures). Subtracting Reserves (₦250,000) and Debentures (₦400,000) from ₦1,550,000 gives an Issued Share Capital of ₦900,000.

Step-by-Step Solution

1
Calculate Total Net Assets (Capital Employed)
Total Net Assets = Non-Current Assets + Net Current Assets = ₦1,200,000 + ₦350,000 = ₦1,550,000
Total Net Assets represents the overall net resources employed by the company.
2
Set up the Capital Employed equation
Capital Employed = Issued Share Capital + Reserves + Non-Current Liabilities (Debentures)
The Statement of Financial Position balancing equation requires total capital financing to equal total net assets.
3
Solve for Issued Share Capital
Issued Share Capital = ₦1,550,000 - ₦250,000 - ₦400,000 = ₦900,000
Deducting reserves and long-term liabilities from capital employed yields the equity share capital.

Key Concept

Accounting Equation and Structure of Company Statement of Financial Position
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Topics

Preparation of Company Statement of Financial Position

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