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Pi Ltd
Date: 31 December 2023
Details:
- Raw materials inventory (cotton):
- Cost: £36,000
- Replacement cost: £34,000
- Finished goods inventory:
Product | Theta | Iota |
Direct costs | £70,000 | £60,000 |
Proportion of fixed overhead | £18,000 | £16,000 |
Proportion of selling costs | £5,500 | £5,000 |
Net realizable value | £110,000 | £90,000 |
- Machinery:
Acquired on 1 January 2017 for £330,000, depreciated over 9 years using the reducing balance method. - Freehold property:
Acquired 18 years ago for £2,800,000, land value estimated at £750,000. Buildings are depreciated over 55 years. - Research and development:
- Research costs: £750,000
- Development costs: £1,350,000, benefiting over 5 years.
Required:
Explain the accounting treatment for these items in Pi Ltd's financial statements for the period ending 31 December 2023.
Answer & Explanation
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