[raahulshah]

In concern with June2013
Even i am confused now. I would have taken post acquisition combined market value of equity which is 29603.2m and divided by total number of shares post acq which is 3000m which would have given 9.87 instead of using 9.24.
John if i would have used this approach will i get marks or the examiner strictly follows the answer key ?

[raahulshah]

Sure thanks 🙂

[raahulshah]

We are investing 1025 now (T0) . Working capital has to be increased by inflation rate. Year 1(T1) the inflation rate is 4% . So 1025*1.04=1066 . So the increase in Working capital for T1 is 1066-1025=41 .

John will explain it to you better than me . Wait for his reply

[raahulshah]

“However, when using the APV approach we should use the actual gearing that will existing in the project itself”

I saw a question of APV where the project will be financed entirely by convertible debentures. So as per the above logic, the value of equity will be 0 isn’t it ? ?
But they have used the existing debt n equity .

[raahulshah]

I appreciate your help.
Yeah the question is poorly framed with regards to NCA .

[raahulshah]

Pass with 92 .. thanks to the mock papers flashcards. Thanks OT

[raahulshah]

Okay so it means only those having direct effect needs sufficient evidence.. so the answer is 1..thanks a lot 🙂

[raahulshah]

yup perfect.. thats what i have been doing before having a look in bpp so it raised a doubt ..
well thank you 🙂

[raahulshah]

So sir since your script is in line with the examiner’s comment what is the appropriate treatment?? I mean in your script you have written which method ?? the one given by kaplan or bpp ??

[raahulshah]

sorry i meant that

in a question when its given that the firm achieves the normal selling price by adding a margin of xx% and the cost is given..so we cant apply margin on cost to find profit so will have to convert into markup and then apply ..i meant that 🙂

[raahulshah]

Or is it 25/(100 + 25)
so margin is 1/5

this one i was talking about ..

the problem in “cost + profit = selling price” is sometimes i make mistake when it says margin on cost so its better i convert into markup as markup is always on cost and margin is always on selling price..

[raahulshah]

margin = markup/100 + markup

And markup = margin /100- margin

i meant that this is the formula if u want to convert a markup percentage into a margin and vice versa..

[raahulshah]

its ask the tutor and i am sorry for trying to help arooba as i am not a tutor but i just tried to resolve the problem as i had some idea about it so thought of helping out..

[raahulshah]

Yes no unreliazed profit but we will have to remove the 50 from revenue and cost of sales as intra group..

[raahulshah]

let me help you with this which will help you in the exam

first do you agree that the payable balance in the parent would be 16000 before paying the 6000?? since he paid 6000 so now it shows 10000 in his payables..
now further if we want to remove intra group transactions then we will have to remove from receivables too..so first will remove 6000 from receivables of subsidiary since parent has removed ..now we have to set off the remaining 10000 from both the entities..

ok?

[raahulshah]

i dont know whether i am right or wrong but wouldnt it be

receivables (100000+80000-6000-10000)= 164000

payables (60000+30000-10000)= 80000

bank( xxx+6000)

[raahulshah]

Oh yes
As margin = markup/100 + markup

And markup = margin /100- margin

Ryt??

[raahulshah]

Yeah I am okay.. But I had another question that if it was written that normal selling price is achieved by adding margin of 40% so we will multiply the cost of 140000 with 40/140 and the amount will be 180000 .. Right? ?

[raahulshah]

Oh certainly it would have been my typing mistake of that 30% ..and if it would have been achieved by adding 40% margin then we will convert into markup and that would be multiplying with 40/140 ??

[raahulshah]

hope your all doubts are solved..

[raahulshah]

you will understand better this way

25800+18100+800-2400

we add 800 because the goods are in transit so the parent has accounted for in his receivable so we increase the payable by 800 too so that we can remove the intra group transaction of 2400..

[raahulshah]

yes the property is carried at fair value ..so 2400 is revaluation ..

[raahulshah]

the calculated interest is on 6 months..since the sale is made on jan and year end is june ..so 3000*10%*6/12..

[raahulshah]

let me write the whole question
at the end of the year the closing inventory was valued at cost of 1.46m and goods costing 140000 were damaged and their normal selling price is achieved by adding 30% markup on cost ..an agent will sell this goods at 75% of normal selling price and will charge a commission of 20%.. what is the value of closing inventory ??

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