Marvel Ltd was formed on 1st January 2016 with a fully subscribed share capital of ₦200,000. On the same date a loan of ₦100,000 was raised. On 31st march 2016, storage facilities with a twenty year life span and no residual value were purchased for ₦150,000. On the same date, 1000 stock items were purchased for ₦100,000. On 30th June 2016, 600 of the stock items were sold for ₦90,000. Expenses of ₦10,000 were paid on 30th June 2016. All transactions were for cash.
The company provides a full year’s depreciation in the year of acquisition of an asset.
A general price index fluctuated as follows:
1st January 2016 660
31st January 2016 715
30th June 2016 780
31st December 2016 858
Assume the straight line method of depreciation to:
i. Prepare the historical cost accounts for the year to 31 December 2016.
ii. Restate the historical cost financial statements for the year to 31 December 2016 using a general price index.
See the suggested solution to practice activity 14.6 here.
Suggested solution to practice activity 14.6
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