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.

Using the revised figures, what is the Gross Profit margin? (Round to one decimal place).

Accepted Answer

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.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Using the unadjusted Cost of Sales figure.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 6

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