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John Moffat.
John Moffat.-
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rr9125
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Dear John,
I am looking at the solution for Q3(a) where are are asked to calculate sales value of children’s shoe business and then work out the impact of this sales on SOFP.
The one I cannot get my head around is the latter part from above. When working out the investment in NCA solution shows (525-175=350). However, I am trying to understand the logic behind this workings and I cannot fathom it. How does this the investment/adjustment in NCA amounts to 350m$ at all please? The only clue in relation to children’s shoe business NCA in the question is “The rest of the sale proceeds will be invested in NCA.”
Please could help me understand this? Is there clue I am missing from the question that explains the working as shown above?
Many thanks for your help in advance,
Kind regards,
Rai
John Moffat
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The total proceeds from the sale are $1,217.
Of this, 175 is used to repay the loan notes, and 692 is used to increase the current assets.
This leaves 1217 – 175 – 692 = 350 for the non-current assets
rr9125
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