Question 1

Section B - Case 2

Scenario: EcoBuild Ltd is preparing financial statements for the year ended 30 September 20X6. Draft profit before tax is $450,000. Adjustments required:
1) A machine costing $120,000 bought on 1 April 20X6 was incorrectly expensed in full. Depreciation is 20% straight-line (pro-rata).
2) Closing inventory was undervalued by $15,000.
3) An allowance for receivables of $8,000 needs to be created.
4) Rent of $12,000 paid for the quarter ending 30 November 20X6 was fully expensed.
Draft Revenue is $2,000,000, Cost of Sales $1,200,000.

Calculate the revised Cost of Sales figure (in $).

Accepted Answer

The only adjustment affecting Cost of Sales is the closing inventory undervaluation. An increase in closing inventory decreases Cost of Sales. $1,200,000 - $15,000 = $1,185,000.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Adding the $15,000 to Cost of Sales instead of deducting it.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 6

More questions from this exam