Question 2

QUESTION 2: HISTORICAL COST \& CURRENT COST (10 MARKS) Chesterfield Ltd purchases a machine with a six year life worth K40,000 and raw materials costing 20,000 , to be processed on the machine. At the end of the year the raw materials have just been fully processed and are sold for cash K70,000. Labor costs, electricity, petrol, staff lunch costs K10,000 other than depreciation for the year. On the last day of the year the manager prices the same amount of materials and finds that the current cost has risen to K30,000. He accidentally hears that the cost of the same machine is now K50,000. 1....on..wy rianewo 3.32201 Calculate the profits using: a) Historical Cost Profit b) Current Cost Profit