- May 10, 2020 at 12:46 pm
Do we add them to sales revenue? If not then do we record it separately in the income and expenditure statement?
If so then i am unable to understand the solution for the question Candel where disposal proceeds from draft profit before tax is being removed to calculate the revised profit figure.
Also i noticed that there is no figure for cash and cash equivalents in the Statement of Financial Position
This is the solution given for draft profit
Draft profit before tax 59100
Removal of Disposal Proceeds* (2500)
Loss on disposal (1500)
Amortisation of development costs (4000)
Research and Development expenses (3800)
Removal of legal provision 400
Inclusion of legal costs 100
Finance Costs (1200)
Income Tax Expense (11600)
Profit for the Year 22700May 10, 2020 at 3:55 pm
Proceeds from the sale of PPE are used to calculate a profit or loss on disposal. I can only assume that the adjustment being made is because they have incorrectly recorded the sale proceeds there and they then need to be removed. You can then see in the answer that in the line below they have then correctly recorded the loss on disposal.
The cash and cash equivalents figure might be showing in current liabilities on the SFP if it is a credit balance as the company is overdrawn.
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