Effect of alternative capital maintenance objectives on accounts Assume the same facts as in P7.3. In addition, general prices increase by 10% between the start and end of x1.

Required

(1) Draw up Exprés Company’s x1 accounts assuming it uses, as the measurement unit, the purchasing power of the currency at the end of x1 and it values its coffee-making machines at:

(a) historical cost;

(b) replacement cost.

(2) What is the maximum amount of x1 profit that the company can distribute as dividend on 1 January x2, and still maintain:

(a) its financial capital in nominal currency?

(b) its financial capital in end-x1 purchasing power terms, assuming:
(i) it values inventory at HC?
(ii) it values inventory at RC?

(c) its physical capital in nominal currency?
Check figure:
(2)(b)(ii) 27,500.

AppenedixLO1