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Hi John,
In Chmura (Dec 2013) and Fernhurst (Sep/Dec 2016) why is depreciation added back and no depreciation added back in Allegro Technologies (Dec 2010 pilot paper amended)?
Also for Ennea (June 2012) how is the retained earnings calculated for proposal 2,3?
Thanks in advance.
Sorry forgot to mention the depreciation was added back for calculating NPV.
Chmura bi, Fernhurst a, Allegro ai.I am sorry but I cannot find the question Allegro Technologies. That pilot paper is no longer available on the ACCA website and it is not in the current edition of the BPP Revision Kit.
Assuming that the depreciation was deducted in the actual workings of the net cash flow, then check if in the question it says “an amount equal to the depreciation is needed each year for the maintenance of the assets”. It is something that the current examiner often includes in questions and if it is there then although the depreciation itself is not a cash flow, maintaining the assets is – so there is no point in adding it back and then subtracting the same amount 🙂
With regards to Ennea, the SOFP given in the question is the forecast SOFP for the coming year. Therefore the forecast retained earnings already includes the forecast profit for the coming year.
With proposal 2, the forecast profit will be higher by 1,720 and so the forecast retained earnings at the end of the year are higher by 1,720 🙂
Yes got the depreciation part. Thank you very much!
For Ennea, What about proposal 3?
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