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Dear Sir, Could you please help me to explain the answer for question 324.d of BPP syllabus.I do not know why not deducting depreciation when calculating net assets investment Thank you very much.
The examiner has used the opening net assets (i.e. before the current years depreciation) on the basis that it was the assets at the start of the year that generated the profit for the year.
However there is a good argument for using the value after depreciation instead, and if you had done this you would still have got the marks.
Questions usually make it clear as to whether to use the opening or closing net asset values (in which case you obviously follow the instruction) but this question does not make it clear which is why either is acceptable.
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