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Physical maintenance mcq : cost $8 at start of year, valued at $12 at end of year when units sold for $15.
Units sold 100000.Inflation at 10%. What was the profit?
Hi,
Sorry, but I’m not here to just answer the MCQ for you. I presume that you have the answer to hand, so if there is something that you do not understand within it then please let me know and I will help.
Also, a bit more courtesy in your questions would be appreciated. The words ‘please’ and ‘thank you’ go a long way.
Thanks
So sorry, my bad! Actually this is an mcq from the f7 exam. Since there were no questions in the kit on this, we had no practice.
Can you please guide on how it was to be worked out?
ThankyouHi,
OK, physical capital maintenance looks at profit being a measure of the entity’s productive capacity. Therefore when measuring the profit, we would need to use the up to date cost of the assets.
The profit would therefore we based on the selling price of $15/unit less the $12/unit cost at the end of the period. The profit of $3/unit can then be applied to the number of units sold.
Enjoy the rest of the course.
Thanks
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