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Hi Sir, I actually do not understand the impact of SOFP with regards to the current asset & PPE adjustment.
1. Why do we need to subtract the 1.5 increase in current ratio when it is actually increasing?
2. How can we use the $6772M of CA adjustment in PPE adjustment, what is the relation between those two?
Thank you Sir.
The 1.5 increase has not been subtracted at all.
The sale proceeds are 7674.
Of this, 3,200 is used to pay off the loan notes, which leaves 4,474.Part of the 4,474 is used to increase the current ratio. Given that the current liabilities are 2,166, the current assets must be increased to 1.5 x 2,166 = 3,249. Given that current assets are currently 2,347 it means they are increased by 3,249 – 2,347 = 902.
So this leaves 4474 – 902 = 3572. This amount is invested in PP&E.
Dear sir,
for the answer on the impact on SOFP, instead of separating the heading into “sales disposal” and “adjustments”, can i simply use “impact” and write down the figuress?
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