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I am not clear how the net asset value is calculated what i know about it is total assets less total liabilities so i deducted 11806_ 5520 but they have calculated net assets as 6286 why the patent value of 10000 is deducted and how is the inventory adjustment done if realizable value is 70% of book value shouldnt it be 3400×70% ie 2380 rather than 1020 and why they have deducted i thought it should be included in net assets
The net assets from the SOFP are indeed 11806 – 5520 and this equals 6286.
The value of the patent has not been deducted – it has been added. This is because note (v) of the question says that it has not been included in the SOFP.
The inventory is included in net assets. However in the SOFP it is at its book value of 3,400 whereas its ‘true’ value is only 2,380. Therefore the difference of 1,020 needs subtracting from the SOFP value of net assets.
I am confused about patents as what i know is net assets valuation does not take account of intangible assets as patents are already ignored why do we add them again
A net assets valuation needs to include the value of all the assets including the patent. The patent did not appear in the SOFP and so was not included in the value on the SOFP – therefore we need to add it to get the full value of the assets,
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