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Hello Mr Moffat,
Could you help me please clarify few things:
From MCQ june 2015 Q1
when we calculate interest imputed for RI shouldn’t this figure be in this case on capital after depreciation as the figure of profit is? even for ROI we should do the same thing i.e. using the value of capital without depreciation in this case 2.7 m?
I’ve noticed that it isn’t a strict rule about that it depends on whether the exercise specify to base the calculation on average capital or closing capital. If in this case the initial investment regards this, therefore why we calculate profit after deprec? shouldn’t they be both after or before depreciation?
And from june 2012 Q5
Again regarding this topic ,why we calculate opening assets i.e value of the investment before depreciation whilst profit after depreciation?
thank you in advance
There is no strict rule to be used (in practice it is more likely to be the value of the net assets at the end of the period i.e. after depreciation).
However, the argument for using the opening values is that it is the net assets at the start of the period that are earning the profits for the period.
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