The balance sheet of Rackett & Ball plc., a U.K.-based sporting goods manufacturer, is presented here. Figures are stated in millions of pounds (?m). During the year, the producer’s price index increased from 100 to 120, averaging.
|
£2010 m |
£2011 m |
|
|
Fixed Assets: |
||
|
Intangible assets |
56 |
150 |
|
Tangible assets |
260 |
318 |
|
Investments |
4 |
5 |
|
320 |
479 |
|
|
Current Assets: |
||
|
Inventory |
175 |
220 |
|
Trade receivable |
242 |
270 |
|
Marketable securities |
30 |
50 |
|
Cash |
25 |
25 |
|
472 |
565 |
|
|
Current Liabilities: |
||
|
Trade payables |
-170 |
-160 |
|
Net current assets |
302 |
405 |
|
Total assets less current liabilities |
622 |
884 |
|
Long-term liabilities |
85 |
128 |
|
Total net assets |
237 |
356 |
|
Owner’s Equity: |
||
|
Common stock |
42 |
42 |
|
Premium on common stock |
87 |
87 |
|
Retained earnings |
108 |
227 |
|
Total owner’s equity |
237 |
356 |
110.The aggregate current cost of sales, depreciation, and monetary working capital adjustment is assumed to be ?216m. Required: Assuming that changes in the producer’s price index are a satisfactory measure of the change in R&B’s purchasing power, calculate, as best as you can, R&B’s monetary working capital adjustment and its gearing adjustment.