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Hi
Referring to the question w7 where it adds the 17m to payables
Earlier in the question it state the words “Included in payables”
When I see those words I don’t expect to have top add it to payables
Does “included” mean I still have to add it in?
Hi,
It’s a tricky one and not one that I’d think too many students would get correct in the exam.
The payable arises due to the purchase of PPE, and not the purchase of goods for resale, so when we are looking at the movement in the payable balance we have to adjust it out of or calculation of the movement in payables because the debit entry is not to the statement of profit and loss, but is capitalised on the face of the SFP. As the movement in payables is to adjust the profit figure using the indirect method then the payable related to the PPE is removed.
Personally, I would deduct the $17m from the closing balance of $110m and you would still get the same answer.
Hope that clears it up for you a bit.
Thanks
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