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Find capital maintenance adjustment

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Reference no: EM132714298

Let us assume that a company begins with:

  • Capital stock of €100.
  • Cash of €100.
  • At the beginning of the year, one item of inventory is bought for €100.
  • The item of inventory is sold at the end of the year for €150, its replacement cost at that time is €120 and general inflation throughout the year is 10 per cent. 
  • Profit measured using each of the capital maintenance concepts mentioned ( nominal financial capital maintenance, real financial capital maintenance, and real physical capital maintenance , would be as shown as follows:

Problem 1: Find

  1. sales: ?
  2. less cost of sale?
  3. operating profit?
  4. less inflation adjustment?
  5. total gain ?
  6. capital maintenance adjustment?

Reference no: EM132714298

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