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Thank you!
So we don’t consider the decrease in statutory state deductions? Can I please get a reasoning on this?If I calculated EOQ using holding costs of $0.63 (0.21+(14*0.03)) would that be fine?
Great thanks a lot! Just want to know why dusty co excluded finance costs when calculating EOQ…the inconsistency is what is confusing me 🙁
I just checked the answer and its 2828 and they included the finance costs by taking (purchase price 8 *10%=0.8) therefore total holding costs = $1.5. This question was from the Pre Dec 2021 mock exam.
Now I’m really confused!
Sir, how is (2 x 80,000 x $75) / $0.70)^0.5 = 2828? Isn’t it 4140?
Also, in Dusty co, holding costs did not include finance costs when calculating EOQ
So which approach should we follow in the exam?Thank you very much!
Just to clarify:
1) For historic cost use nominal values
For NRV use market values
For replacement cost use redemption value. Is this right?2) Also if market value is not given and we are asked to calculate on NRV basis, should we take the nominal value or redemption value (if its given)?
The problem is if it comes up for MCQS, I cannot state my reasoning for the answer that’s why I’m asking.
In a question regarding the valuation of a business using replacement cost, loan notes were taken at their redemption price which was at a 5% premium. The question was as follows:
Kewley Co has non-current assets on its books with a historic cost value of $5.500,000 but an independent valuation recently put their current replacement cost at 20% higher than cost. Kewley Co’s current assets of $1,200,000 include a long outstanding debt of $50,000 that is unlikely to be paid Kewley Co has loan notes with a nominal value of $1,350,000 in issue which are due to be redeemed at a 5% premium next year. The answer for the value of this business was $6,332,500 (5500000*1.20)+(1200000-50000)-(1350000*1.05). This question was from the Pre-December 2021 FM mock debrief.
I just want to clarify about which values for loan notes should I use (nominal, redemption or market) if the business is to be valued on:
1) Historic cost basis
2) Net realizable value
3) Replacement costThank you! Also regarding business valuations using replacement cost, at what value should we value the loan notes of a business? Nominal or the redemption price? And what value should we use if NRV is used to value a business?
In THP Co – Issue costs were not deducted from TERP
In Grenarp Co – Issue costs were deducted from TERP
In NG Co – Issue costs were not deducted from TERP
In MFZ Co – Issue costs were deducted from TERPCan you please clarify which approach should we follow when it comes to calculating TERP with issue costs? And is there a specific reason for this inconsistency in past exams, am I overlooking something?
So when calculating the impact on shareholder wealth should we compare the revised share price with the TERP or with the market capitalization after rights issue which takes account of the issue costs?
Thank you! Would the answer change if the question stated that the loan notes could be converted into shares in 5 years’ time instead of “at any time”?
Yes, I understand it better now. So the answer in the book is wrong then? Simon has implied authority and NOT apparent authority?
Thanks a lot for your explanation!
Yes, that makes sense! Regarding my earlier post, do you think the answer in the book is right? Or do you think the answer should’ve been that Simon acted within his implied authority?
Thanks!
Sir, in one of ACCA’s technical articles, it says that “if the revaluation takes place at the year-end, then the asset would first be depreciated for a full 12 months based on the original depreciation of that asset. This will enable the carrying amount of the asset to be known at the revaluation date, at which point the revaluation can be accounted for.” Is this what we should follow in the exam?