Case study Marvin makes a care

Case study

Marvin makes a career choice

Marvin always had an ambition to be a magician. As a child he took great delight in making his younger brothers and sisters disappear and he was often in demand to perform conjuring tricks at parties. It was a natural career choice for him when, at the age of 21, he decided to leave college on 1 July and make his fortune in the world, setting up in business as a magician. He made the following payments in his first week out of college: On 1 July he paid £3,000 for a glittering costume with a top hat and cloak; on 2 July he paid £2,000 for a special edition of a book, ‘The ancient secrets of magic; and on 3 July he bought four packs of magicians’ playing cards from Kazam Limited for £100 each. Marvin expected to use these items for many years. He paid cash from his own savings for the costume and the book, but he agreed that he would pay for the playing cards in a few weeks’ time from the business bank account. His first appearance as a magician was on 7 July at the National Magic Show, for which he was paid a fee of £750 by cheque, with which he opened a business bank account on the same day. He incurred £20 travel expenses which he again paid from his own savings.

Required

(a) Prepare a summary of Marvin’s income and expenses for the week ended 7 July. Ignore any depreciation on Marvin’s assets.

(b) Draw up a list as at 7 July of Marvin’s non-current assets and current assets, then deduct any current liabilities from the assets. What is Marvin’s equity at that date? Show how you can prove that the equity figure is correct.

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