ExpertEasy1 markShort Answer
ACCA · Question 51 · Single Entity Accounts
SCENARIO: AgriSteel Heavy Industries manufactures specialized farming machinery. Draft financial statements for the year ended 30 September 20X6 show a draft net profit of $1,200,000. The following adjustments are needed:
- Closing inventory was valued at cost $450,000, but includes damaged tractors costing $50,000 that can only be sold for $30,000 after $5,000 repair costs.
- A machine bought for $200,000 on 1 Oct 20X5 was incorrectly charged to repairs. Depreciation is 20% reducing balance.
- A provision for a legal claim of $80,000 needs to be created.
- The allowance for receivables needs to increase by $15,000.
Calculate the Net Realizable Value (NRV) of the damaged tractors. (Enter the number only)
SCENARIO: AgriSteel Heavy Industries manufactures specialized farming machinery. Draft financial statements for the year ended 30 September 20X6 show a draft net profit of $1,200,000. The following adjustments are needed:
- Closing inventory was valued at cost $450,000, but includes damaged tractors costing $50,000 that can only be sold for $30,000 after $5,000 repair costs.
- A machine bought for $200,000 on 1 Oct 20X5 was incorrectly charged to repairs. Depreciation is 20% reducing balance.
- A provision for a legal claim of $80,000 needs to be created.
- The allowance for receivables needs to increase by $15,000.
Calculate the Net Realizable Value (NRV) of the damaged tractors. (Enter the number only)
How to approach this question
NRV = Estimated selling price - Estimated costs to complete and sell.
Full Answer
NRV = Expected selling price ($30,000) - Repair costs ($5,000) = $25,000.
Common mistakes
Forgetting to deduct the repair costs, resulting in an NRV of $30,000.
Practice the full ACCA FA — Financial Accounting Practice Exam 3
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