Answering Questions

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    part(s) in Section B

1. The 'physical capital maintenance' concept states that profit is the increase in the physical productive capacity of the business over the period. This concept is applied in:
2. BAC Systems acquired an item of plant on 1 October 2018 at a cost of $1,000,000. It has a useful life of ten years (straight-line depreciation) and an estimated residual value of 20% of its historical cost or current cost as appropriate. As at 30 September 2020, the manufacturer of the plant still makes the same item of plant and its current price is $1,200,000.
What is the correct carrying amount to be shown in the statement of financial position of BAC Systems as at 30 September 2020 under historical cost and current cost?
3. Which of the following statements is an advantage of using the Value in Use method of accounting?
4. Overstatement of profits can arise during periods of inflation. This then leads to a number of other consequences. Which of the following is NOT a likely consequence of overstatement of profits?

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