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Hi
I am using Kaplan revision kit and stuck with the calculation of new investments in non current assets. This is question 50 in the revision kit and the info available is:
Statement of Financial Position
Opening non current assets $1200
Additions $66
Accumulated depreciation $367
Net Book Value = $899Net current assets $270
loan -$990
net asset employed = $179P&L
Revenue = $5000 (expected to grow at 9% per annum
COS = $3000 (expected to grow at 9% per annum
GP = $2000
Other operating cost = $1877 ($1000 is fixed cost, $127 depreciation, $750 VC)Fixed cost is expected to increase at 6%, 15% of revenue is variable cost.
Depreciation is charged at 10% per annum on the year end non-current asset balance before accumulated depreciation and is included in other operating costs.
The company will not dispose of any of its non current assets but will increase its investment in new current asset by 20% per annum. the company’s depreciation policy matches the currently available tax allowable depreciation. this straight line write off policy is not likely to change.
I will appreciate any help on this.
thanks
I do not have the Kaplan Exam Kit, but I do have the original exam question and the examiners answer (which will be what the Kaplan Kit will have reprinted.
The investment in new non-current assets last year (from the SOFP given in the question) was 66.
This will increase by 20% each year, and so the investment next year will be 66 x 1.20 = 79. The investment in the following year will be 79 x 1.20 = 95, and so on 🙂I can’t believe it how simple this was.
Really appreciate your help on this.
Thank you John
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