PEV december 2005

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:25AM in AAT student discussion
Hi everybody,
I am a bit stuck with December'05 paper and exactly Section 2, task 2.2 When they ask you to recalculate income statement and then to calculate revised ROCE, my figure for capital employed is 3,100 but in the answers they give as 3,542. Can please anybody who is revising PEV help me with it as I have no idea how to get this 3,542 for capital employed.

Thanks

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PEV december 2005

    Take 3,800 original net assets minus the original profit = 3,800 - 210 = 3590

    Then add the revised profit = 3590 + 452 = 4042

    Then take off the amount of fixed assets sold and given as shares = 4042 - 500 = 3542 the revised capital employed.

    Not sure if that is the right order but I wouldn't have been able to do it without the answer.

    Hope that helps,

    Tori :lol:
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PEV december 2005

    Hi Tori,

    thanks for your reply. The only thing I didnt' understand why we should deduct old profit and add revised one to net assets. I thought the formula for ROCE is operating profit/ fixed assets + net current assets. Or maybe not?

    Thanks

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PEV december 2005

    Hi

    Net assets is the same as the capital figure so you are doing operating profit/capital here i.e. Net assets is the balancing figure on the balance sheet, you have not been given the financed by section however, which would equal the same. In the financed by section of a balance sheet profits are added to get this year's capital figure. Therefore as the profit has changed due to improvements the capital figure is now made up of this revised figure.
    The financed by section contains ordinary shares and retained profits, the revised balance sheet would therefore be:

    Fixed assets 2765 (i.e.-500)
    Debtors 1050
    Cash 527
    Creditors (600)
    Net Assets 3542

    Financed by:
    Shares 500
    Retained profits 3042
    Capital 3542


    Cash = either balancing figure or 85 + 242 + 200 from debtors (242 being the difference in the two profits) = 527

    I hope that makes sense its the best way I could think to put it, the question is a bit awkward.

    Torix
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PEV december 2005

    Hi,

    yes, it does make sense now!

    thanks a lot.

Categories

Privacy Policy