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Dear Tutor
I wonder what is the best way to approach error conrrection qustion on SBR paper.
on Specimen Sept2018, Q1, missing NIC on goodwill calculation, I found it’s hard, what is the best way to prepare and approach this kind of questions? what figures should use and CR or DR?1. For House and March, both has the bargain purchase, but when correct the journal entries,
why to
House: Dr P/L
March: Dr Retained earnings
2. March: PPE correction, why $2m goes to CR retained earnings ,
why do we need to Cr PPE $5m?many thanks
1. House – the accountant has incorrectly credited 8 to profit and loss. This needs to be reversed.
2. March – it is hard to decipher the journals in the model answer. I suspect that they are revaluing the land by 2, then derecognising it at its new value of five as part of the consideration for the new subsidiary. I would’ve thought that the revaluation would first go to a revaluation reserve and then be transferred to retained earnings. All that is certain is that it must be measured at 5 for the purpose of calculating goodwill.Bear in mind that you do not have to write journals. All you need to do is to say what went up and what went down and that is a lot safer when trying to put an answer together.
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