MCQ 223, Bpp kit — OpenTuition Forums

MMax7y ago

Following is the summary of Monkton's Co's statement of Financial position $m Noncurrent assets 5 Net current assets 3 Financed by Ord shares 1 Reserves 5 Loan note 2 Noncurrent assets include machinery which cost $10m when purchased 7 years ago and has a useful life of 10 years. Monkton co uses straightline depreciation. These assets were recently professionally valued at $1m What is the value per share using realizable value basis of valuation? Sir here can you please tell me that what fig we will use for Noncurrent assets?

John MoffatTutor7y ago#1

This question does not appear in the current edition of the BPP Revision Kit (although presumably you have an answer in your edition!). The machinery has a value on the SOFP of $10 - (7 x $1) = $3. These will be valued at their realisable value of $1M. The remaining non-current assets have a book value of $5 - $3 = $2, and in the absence of any further information this is the value that will be used for them.

MMax7y ago#2

Sir in this how we come to know that NRV of machinery is $1M? And the remaining $2M assets which we are taking is the book value, so wouldn't it be wrong that we are taking book values , since the question has asked to calculate value per share using realizable value basis of valuation?

John MoffatTutor7y ago#3

Firstly the question specifically says that the assets have recently been professionally valued at $1M and so this, by definition, is the realisable value. Secondly, as I wrote in my previous reply, in the absence of any other information you have no choice but to assume the book value is the realisable value of the remaining assets. What other value would you suggest on the information given???