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Hello Mike
I noticed that Q1, consolidation question, the depreciation of PPE(from consolidation excess amount) 0.40 , the depreciation is not included/charged in Retained Earnings..Under what circumstances depreciation charges will be excluded from Retained Earnings
Here is my current understanding: If the PPE was from the excess amount of the difference between net iden assets and share capital+ retained earnings, then the PPE’s depreciation is not charge in Retained Earning?
Maybe this extract from the question will answer your question
“The excess of the fair value of the net assets is due to an increase in the value of non-depreciable land.”
OK?
Hmm the question got this line of words
“The excess of the fair value of the net assets is due to an increase in the value of
property, plant and equipment (PPE)”This what im trying to understand , why is this PPE’s depreciation not charged into Retained Earnings directly..Was it because ..It’s charge during the calculation of subsidiary Retained Earning? “[(19-15)-0.40]x60% = 2.16 ?
In working 3 in the answer, in the Zinc working, do I see an amount for extra depreciation? of:
“Zinc:
Post-acquisition reserves (19 – 15) 4·00
Less increase in depreciation (W2) (0·40)
––––––
3·60”Is this what you’re asking about?
Yep…If its deducted there, so there is no need to charge in Retained Earning anymore right?
Is my concept correct?
Yes – personally I would have shown this in my working W3 Consolidated Retained Earnings but it doesn’t matter how you get there – there’s more than one way to skin a cat
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