ExpertACCA · Question 62 · Interpretation of Financial Statements
Section B - Case 2: Single Entity Accounts
Scenario: AquaHarvest Marine Farms
AquaHarvest prepares its financial statements for the year ended 30 September 20X6.
Draft Revenue: $500,000
Draft Cost of Sales: $300,000
Draft Current Assets: $60,000
Draft Current Liabilities: $40,000
Issue 1: A payment for marine insurance of $6,000 for the year ending 31 December 20X6 was recorded entirely as an expense in the P&L. (Prepayment is $1,500).
What is the impact of adjusting for the insurance prepayment on the current ratio?
Section B - Case 2: Single Entity Accounts
Scenario: AquaHarvest Marine Farms
AquaHarvest prepares its financial statements for the year ended 30 September 20X6.
Draft Revenue: $500,000
Draft Cost of Sales: $300,000
Draft Current Assets: $60,000
Draft Current Liabilities: $40,000
Issue 1: A payment for marine insurance of $6,000 for the year ending 31 December 20X6 was recorded entirely as an expense in the P&L. (Prepayment is $1,500).
What is the impact of adjusting for the insurance prepayment on the current ratio?
Answer options:
It will increase the current ratio.
It will decrease the current ratio.
It will have no effect on the current ratio.
It will decrease current liabilities.
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