The following information is available in relation to MCRV Ltd (based on the ICAS Repor t) for the year ending 31 December 20X8:

(a) Statement of assets and liabilities as at 31 December. This statement at the star t of the year is assumed to contain valuations at net realisable value throughout:

(i) Fixed assets are estimated by the directors on the basis of an orderly disposal in a secondhand market.

(ii) The NRV of raw materials was assumed by the directors to be the same as their purchase price.

(iii) The NRV of finished goods was estimated as selling price less the estimated costs of disposal in the normal course of business.

(b) A summar y of the cash book.

(c) The non-cash transactions during the year are as shown in the journal entries.

Required:

(a) Prepare an operations statement for the year ended 31 December 20X8 to show wealth created by operations.

(b) Prepare a statement of changes in wealth, in the following format:
Increase in wealth due to operations Increase in value of fixed assets Decrease in value of long-term loans Realisable increase in net assets

(c) Explain circumstances in which there can be a decrease in the value of long-term loans.

(d) Explain how the percentage return on capital employed, current ratio and acid test ratio based on the historical cost concept would differ from those calculated using the concept applied in the above question.

Transcribed Image Text:

Statement of assets and liabilities as at 31 December Statement of assets and liabilities as at 31 December Fixed assets Current assets Stock Debtors Cash 20X7 20X8 E 200 270 50 66 30 40 10 76 290 452 Less: Current liabilities Creditors 35 Long-term loans 60 70 222 30 95 195 352 g[g 100