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Question 1 Accounting Measurement Systems [20 marks] Spend about 35 minutes on this question Part A Two accountants were discussing the performance of a retail business that earned revenue of $1,000,000 by selling goods and services that it had acquired for $600,000. A said "We can afford to pay a dividend of $400,000." B said "We should consider the current cost of inventory before deciding on dividends." Required 1. Explain the perspectives of A and B, using financial and physical capital [3 marks] 2. Briefly outline the two components of profit under current cost accounting [3 marks] Part B The following table shows the current cost of selected items together with price indices: 01.01.19 31.12.19 Cash Inventory 150.000 160,000 Land 200,000 220,000 Machinery 300,000 320,000 Accumulated Depreciation on Machinery (10% per annum) 120,000 7 Payables 80.000 85,000 Receivables 100,000 90,0 00 Consumer Price Index (CPI) 100 105 Inventory Price Index (IPI] 100 103 Required 1. Calculate the holding gain or loss on monetary items for the year [4 marks] 2. Calculate depreciation on machinery for 2019, using current cost accounting [3 marks] 3. Calculate backlog depreciation on machinery for 2019. Hint: first determine how many years the firm has owned the machinery [3 marks] 4. Briefly outline how the following iterns should be measured using exit pricing: a. Capital [1 mark] b. Depreciation on machinery [1 mark] c. Goodwill [1 mark] d. Land [1 mark]