ROI in case of buying new machine (Question 241 page 65 BPP Revision Kit)

Because the last line of the question says to value non-current assets at the start of year carrying amount.

Thank John for kind support

You are welcome :-)

Hello Sir John, Trust you are good. Could you please look into the question below for solution. The question is from BPP A new company has a non current asset of $460,000 which will be depreciated to nil on straight line basis over ten years. Net current asset will consistently be $75,000 and annual profit will consistently be $30,000. ROI is measured as a return on net asset. Calculate ROI for yr 2 & 6. Thank you for you time and effort on this.

Note on the question above, 'annual profit will consistently be $30,000'

If it is in the BPP Revision Kit then please tell me the number of the question :-) (Surely the answer is in the Revision Kit anyway, so I am puzzled why you are asking me for the answer :-) )

Hello Sir John, Thank you for your prompt response to my question. I have just manage to solve it now after several attempt.? The question is in the BPP note and the answer was there however, it does not show the calculation.

I am please dyou have managed to sort it out :-)

Q276: The depreciation should not be there - it is a very bad mistake by BPP. (Operating profit is already after depreciation anyway :-) )

Q280: The examiners answer has assumed that it is being calculated on the opening net assets (on the basis that it is the net assets at the beginning of the period that earn the profit for the period). If you used the closing net assets (which is what you have done) then you would still get the marks.

You are welcome :-)