The balance sheets of Parkway plc for 20X7 and 20X8 are given below, together with the profit and loss account for the year ended 30 June 20X8.

Notes 1 The freehold land and buildings were purchased on 1 July 20X0. The company policy is to depreciate buildings over 50 years and to provide no depreciation on land.
2 Depreciation on plant and machiner y and motor vehicles is provided at the rate of 20% per annum on a straight-line basis.
3 Depreciation on buildings and plant and equipment has been included in administration expenses, while that on motor vehicles is included in distribution expenses.
4 The directors of Parkway plc have provided you with the following information relating to price rises:
RPI Inventory Land Buildings Plant Vehicles 1 July 20X0 100 60 70 50 90 120 1 July 20X7 170 140 290 145 135 180 30 June 20X8 190 180 310 175 165 175 Average for year ending 30 June 20X8 180 160 300 163 145 177 Required:

(a) Making and stating any assumptions that are necessary, and giving reasons for those assumptions, calculate the monetary working capital adjustment for Parkway plc.

(b) Critically evaluate the usefulness of the monetary working capital adjustment.

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Balance Sheet 20X8 20X7 000 000 000 000 000 000 Non-current assets Cost Depn NBV Cost Depn NBV Freehold land Buildings 60,000 40,000 8,000 32,000 - 60,000 60,000 60,000 40,000 7,200 32,800 Plant and machinery Vehicles 30,000 16,000 14,000 40,000 20,000 20,000 30,000 10,000 40,000 12,000 28,000 20,000 170,000 44,000 126,000 170,000 29,200 140,800 Current assets Inventory 80,000 70,000 Trade receivables 60,000 40,000 Short-term investments 50,000 Cash at bank and in hand 5,000 195,000 - 5,000 115,000 Current liabilities Trade payables Bank overdraft Taxation Dividends 90,000 60,000 50,000 45,000 28,000 15,000 15,000 10,000 183,000 130,000 Net current assets 12,000 (15,000) 138,000 125,800 Financed by Ordinary share capital Share premium Retained profits Long-term loans Sales Cost of sales Gross profit Income statement of Parkway plc for the year ended 30 June 20X8 000 738,000 620,000 118,000 80,000 80,000 10,000 10,000 28,000 15,800 118,000 105,800 20,000 20,000 138,000 125,800