ExpertThis question is part of a case study — click to read the full scenario(Case 51)
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)
ACCA · Question 64 · Ratio Analysis
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.
What does a declining Quick Ratio over several years indicate about AgriSteel?
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.
What does a declining Quick Ratio over several years indicate about AgriSteel?
Answer options:
The company is becoming more profitable.
The company may be facing increasing short-term liquidity problems.
The company is selling its inventory faster.
The company is relying less on debt financing.
How to approach this question
Full Answer
Common mistakes
Practice the full ACCA FA — Financial Accounting Practice Exam 3
65 questions · hints · full answers · grading