A merchandiser uses a perpetual inventory system. The beginning Capital balance of a merchandiser was $100,000. During the year, sales revenue amounted to $75,000, sales returns and allowances were $1,000, sales discounts were $3,000, cost of goods sold was $40,000, and all other expenses totaled $10,000. The total withdrawals amounted to $25,000. The closing balance of Capital would be:
A)$99,000
B)$96,000
C)$90,000
D)$100,000

Question

Quizplus · Accepted Answer

To calculate the closing balance of Capital, we need to use the following formula:
Beginning Capital + Net Income (or - Net Loss) - Withdrawals = Closing Capital

Beginning Capital = $100,000
Net Sales = $75,000 - $1,000 - $3,000 = $71,000
Cost of Goods Sold = $40,000
Expenses = $10,000
Net Income = Net Sales - Cost of Goods Sold - Expenses = $21,000
Withdrawals = $25,000
Therefore, Closing Capital = $100,000 + $21,000 - $25,000 = $96,000. 
So, the correct answer is B.

A Merchandiser Uses a Perpetual Inventory System