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ACCA Applied Skills · Financial Management · Nature and purpose of the valuation of business and financial assets

Brenner Co's statement of financial position shows net assets of $2,400,000 at carrying amounts. Receivables of $150,000 include $40,000 that is irrecoverable, and inventory carried at $200,000 has a net realisable value of $140,000. Land carried at $500,000 has a market value of $900,000. Ignoring tax, what is the net asset valuation on a realisable basis for these items?

The adjusted net asset value is $2,700,000. Starting at $2,400,000, deduct $40,000 irrecoverable receivables and $60,000 inventory write-down, then add the $400,000 land uplift, giving a net increase of $300,000.

  1. A$2,700,000Correct
  2. B$2,300,000
  3. C$2,500,000
  4. D$2,740,000

Explanation

Adjustments: receivables -40,000; inventory -60,000; land +400,000. Net change = +300,000. 2,400,000 + 300,000 = $2,700,000. Ignoring the write-downs gives $2,800,000; $2,740,000 results from omitting only the inventory write-down.

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