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OT notes chapter 1 example 4

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › OT notes chapter 1 example 4

  • This topic has 1 reply, 2 voices, and was last updated 8 years ago by P2-D2.
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  • August 14, 2016 at 10:26 pm #333176
    nari
    Member
    • Topics: 261
    • Replies: 176
    • ☆☆☆

    Hello
    Why is the share of profit for 5 months 1,667? Shouldnt it be 5/12 X 3000=1,250?

    August 16, 2016 at 10:11 am #333472
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7163
    • ☆☆☆☆☆

    Hi,

    You cannot take 5/12 of the 3,000 profit for the year as this includes the specific reorganisation cost that cannot be pro-rated as it occurred on a specific date in the year.

    We therefore have to add this back to the profit for the year to get the profit excluding the reorganisation cost, which gives 4,000. We can then pro-rate this by 5/12 to give the 1,667.

    Thanks

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