A refinery buys 15 million barrels of crude oil at a market price of $40 per barrel on11th August 20X1. Having processed the oil, the refinery sells its final products in October 20X1 for an average price of $50 per barrel, when the average market price of crude oil is $44 per barrel. Which of the following statements about current replacement cost accounting is/are correct: (i) Replacement cost profit of $150 million is made on the sale. (ii) The capital maintenance adjustment is $90 million. (iii) Cost of sales is $600 million. a. (i) and (iii) b. (i) and (ii) c. (ii) and (iii) d. (i) only e. No statement is correct f. (ii) only g. (iii) only
A refinery buys 15 million barrels of crude oil at a market price of $40 per barrel on11th August 20X1. Having processed the oil, the refinery sells its final products in October 20X1 for an average price of $50 per barrel, when the average market price of crude oil is $44 per barrel. Which of the following statements about current replacement cost accounting is/are correct: (i) Replacement cost profit of $150 million is made on the sale. (ii) The capital maintenance adjustment is $90 million. (iii) Cost of sales is $600 million. a. (i) and (iii) b. (i) and (ii) c. (ii) and (iii) d. (i) only e. No statement is correct f. (ii) only g. (iii) only
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
A refinery buys 15 million barrels of crude oil at a market price of $40 per barrel on
11th August 20X1. Having processed the oil, the refinery sells its final products in October 20X1 for an average price of $50 per barrel, when the average market price of crude oil is $44 per barrel.
Which of the following statements about current replacement cost accounting is/are correct:
(i) Replacement cost profit of $150 million is made on the sale.
(ii) The capital maintenance adjustment is $90 million.
(iii) Cost of sales is $600 million.
a. (i) and (iii)
b. (i) and (ii)
c. (ii) and (iii)
d. (i) only
e. No statement is correct
f. (ii) only
g. (iii) only
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