Hi John,
In context to this question, I have doubts in the calculation of 2 SOFP items:
1) Current assets figure- As per the Exam kit solution, it is $3249. As per my understanding,
Existing value of Current assets= 2347
add:investment in CA = 902
add:interest saved on 10% loan notes= 256 [3200*10%*80%]
add:return on CA 51 [902*7%*80%]
add:return on NCA 343[3572 * 12% *80%]
REVISED VALUE OF CURRENT ASSETS= 3898
In the above calculation I have assumed that interest savings of $256 , return on CA of $51 & return on NCA of $343, all totalling to $650 will be added to retained earnings as an addition to profit after tax and added to current assets as a cash income.
Based on above assumption & calculation, the total of ASSETS side comes to be:
Non current assets = 15403
Current assets= 3898
TOTAL = 19,301
Exam kit solution:
Non current assets: 15,403
Currnt assets= 3249
TOTAL= 18,652
My first question is : Is my assumptions wrong, if yes , why. If not, have I missed some figure such that the figure is not matching with exam kit solution.
2) Retained earnings figure: As per the exam kit , it is $11,801 which they have calculated simply by adding the previous year's retained earning of $7917 + $3884(profit on sale of EV clubs)
As per my understanding, I have calculated the retained earnings as follows:
Net PAT from Eview cinema 1135
Less:PAT from EV Clubs (454)
Net PAT from Eview cinema= 681
add:interest saved on 10% loan notes 256 [3200*10%*80%]
Add:return on inv in current assets 51 [902*7%*80%]
Add:return on inv in non current assets 343 [3572*12%*80%]
Adjusted PAT 1331
Existing figure of retained earnings= $7917
add:profit on sale of EV clubs= $3884
add: increase in PAT= $196 [1331 -1135]
REVISED FIGURE OF RET.EAR.= $ 11,957
TOTAL of Non current liab & current liab= $5851
Hence TOTAL OF LIAB SIDE= 11,957 + 5851= $17,808
TOTAL OF LIAB SIDE as per Exam kit soln: $18,652
The difference in my answer is due to retained earnings figure.
My question here is, why have they not added the 'increase in PAT' due to sale of EV clubs to the exisiting retained earnings?
Ask the Tutor ACCA AFM
Eview Cinemas Co (Kaplan Exam kit)
4y ago#11. The question asks for the immediate impact on the SOFP, and so things such as the interest saved will not impact immediately.
2. The same applied to the retained earnings figure :-)
Hello, John. I am having trouble understanding as to where in the question is it implied that "immidiate impact" is being asked.
I have three very similar questions in front of me - 1. Ennea Co, 2. Hanwood shoes Co and 3. Charborough Co. All three of them have the same wording for the requirement-"calculate the impact of sale on Forecast statement of FP & forecast earnings per share". Ennea Co is also asking about "the impact of sale on earnings". Also 2.Hanwood & 3.Charborough Co questions also mention - "the profit on sale be taken directly to RE"
Out of the three mentioned above only in 1. Ennea Co's solution, the impact of saving/extra exp on financing and benefit of further investment is taken to retained earnings.
In the other two questions (2&3), we don't transfer the impact of financing and investment to retained earnings.
I have read the question and answers multiple time but for the love of God, I can't figure out what is the clue to transfer the impact of financing and investment to RE. Is it the mention of "the profit on sale be taken directly to RE". If yes then why is it impacting financing and investment amount to RE.
18d ago#3It is the following line of the question:
"The CEO wants to know the impact the sale of the EV clubs would have immediately on the statement of financial position" (which is immediately above the current SOFP).
Thank you for replying, John.
I checked the above line and yes it is there but only in bpp book for this question.
But no such line as you quoted above exists in the whole kaplan exam kit or even the phrase "immediately on SOFP''.
If you have a kaplan kit, please check the 3 questions i meantioned- Ennea co ,hanwood shoes &charborough co. If not, i can mail you the question.
17d ago#5I do not have the Kaplan Kit, but it seems that they have not printed the whole question.
I have the question as it actually appeared in the exam and that line was in the question. I am afraid it seems to be a mistake by Kaplan.
Thanks for clarifying.
I looked at Mock B of sep24 and one similar question(Grindall co.) asked '' impact of sale on Forecasted Financial statement and its earnings per share in Year 1.''
Should the above line be considered as the questions asking for ''immediate impact'' or is "profit on sale should be taken directly to reserves'' the clue for immediate impact?
17d ago#7It is the latter that is the clue :-)
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