Hammerstein Ltd has number of assets with the following details. For each asset you are required to
Question:
Hammerstein Ltd has number of assets with the following details. For each asset you are required to state the most true and fair valuation, and to justify your choice. In all cases you should ignore depreciation. (Depreciation is a topic that we will deal with in Chapter 6.)
(a) A building cost £300,000 four years ago. Since then the company has spent £80,000 on an extension to the building and £45,000 on repairs. The current market price of a similar building next door is £400,000.
(b) Two cars were bought last month for use by the company’s sales force. The first cost £12,000 and the second £15,000. The first was written off in an accident just after the balance sheet date and insurance proceeds are expected to be £10,000.
(c) Computing equipment was acquired for £19,000 one year ago. The same equipment is no longer made, but could be bought for about £8,000 on the second-hand market. Equipment that would do much the same job could be bought new and would cost around £15,000.
(d) We have three debtors at the balance sheet date. The first owes £2,000 and has always paid on time in full. The second owes £700 and has disappeared. The third owes £800 and has been promising to pay for the last three months, but has so far paid nothing.
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