ExpertMedium1 markMultiple Choice
ACCA · Question 60 · Interpretation of Financial Statements
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:
- A machine costing $120,000 bought on 1 April 20X6 was incorrectly expensed in full. Depreciation is 20% straight-line (pro-rata).
- Closing inventory was undervalued by $15,000.
- An allowance for receivables of $8,000 needs to be created.
- 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.
Using the revised figures, what is the Gross Profit margin? (Round to one decimal place).
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:
- A machine costing $120,000 bought on 1 April 20X6 was incorrectly expensed in full. Depreciation is 20% straight-line (pro-rata).
- Closing inventory was undervalued by $15,000.
- An allowance for receivables of $8,000 needs to be created.
- 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.
Using the revised figures, what is the Gross Profit margin? (Round to one decimal place).
Answer options:
A.
40.0%
B.
40.8%
C.
39.3%
D.
59.3%
How to approach this question
1. Calculate revised Gross Profit: Revenue ($2,000,000) - Revised Cost of Sales ($1,185,000) = $815,000. 2. Calculate margin: ($815,000 / $2,000,000) * 100.
Full Answer
B.40.8%✓ Correct
Revised Cost of Sales is $1,185,000. Revised Gross Profit = $2,000,000 - $1,185,000 = $815,000. Gross Profit Margin = ($815,000 / $2,000,000) * 100 = 40.75%, which rounds to 40.8%.
Common mistakes
Using the unadjusted Cost of Sales figure.
Practice the full ACCA FA — Financial Accounting Practice Exam 6
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