Effect of alternative valuation bases on accounts On 1 January x1, Exprs Company, a distributor of ultra-fast

Effect of alternative valuation bases on accounts On 1 January x1, Exprés Company, a distributor of ultra-fast (‘Josep’) coffee-making machines, has 30 in stock with a unit historical cost (and current value) of 2,500 (units of local currency). The company’s balance sheet on that date is as follows:

Inventory 75,000 Shareholders’ equity 75,000 The company sells, for cash, 20 machines at 4,000 each at the end of December x1. It has no other revenues or expenses that year.

Because of the strong demand for the Josep coffee-making machines, the manufacturer increases the price to distributors by 20% to 3,000 at end-x1.

Required Draw up Exprés Company’s x1 income statement and end-x1 balance sheet, assuming it values the coffee-making machines at:

(a) historical cost;

(b) replacement cost.

Assume any holding gains arising under

(b) are included in profit for the year.

Check figure:

(b) Total assets 110,000 AppenedixLO1