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I refer to answer of Q1 workings (vi) and (vii) December 2007 exam answers. I strongly believe there is a mistake made here. Correct calculations should be:
Consolidated retained earnings: $’000
Plateau’s retained earnings: 24,000
Savannah’s post-acquisition ((2,900 – 300 URP + 100 excess depreciation) x 75%): 2,025
Axle’s post-acquisition profits (5,000 x 30%): 1,500
URP in plant, Examiner is wrong here should be -500 included here and +100 above in S’s post acq : (500)
Gain on available-for-sale investment (9,000 – 6,500): 2,500
Impairment of goodwill: (900)
–––––––
Total : 28,625Minority interest
Adjusted equity at 30 September 2007: (12,900 – 300 URP + 100 excess depreciation) = 12,700 x 25% :),175
–––––Any help will be greatly appreciated.
Those of you reading this, AmbitiousMe has brought to my attention a recent update in paper F7 which I had missed. The amendment involves the depreciation accounting where there has been an intra-group sale of TNCA at a profit.
My previous lectures and course notes say that the depreciation should be adjusted in the records of the buying company.
The change says that the adjustment for BOTH the unrealised profit on the transfer AND the depreciation adjustment should be NETTED OFF and adjusted in the records of the SELLING COMPANY.
This is the way I shall be telling it from now on – so, with effect from March 1, 2012, Mike Little will now be amending the way in which he has previously treated the “excess” depreciation on the unrealised profits recognised on the occurrance of a transfer of some TNCA by the selling company in a group situation.
I trust that this message is clear – it means that the Spring edition of the course notes will need to be amended by you, the students!
And thank you to AmbitiousMe for bringing this to my attention
Mike, you are welcome. And thank you very much for providing us free top of the range resources.
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