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Hi Mike,
I’m really struggling to come to grips in how to deal with additional depreciation in the CSOFP.
For e.g. in the BPP ACCA revision kit (Laurel/Hardy) it states:
– On 1 January 20X7 Hardy owned some items of equipment with a book value of $45,000 that had a fair value of $57,000. These assets were originally purchased by Hardy on 1 January 20X5 and are being depreciated over 6 years.
The solution says 12,000 x 3/4 = 9000. I’m not sure whats going on here.
In another question in the revision kit (J CO/ P CO), it states:
-At the date of acquisition of P Co, the fair value of its freehold property was considered to be $400,000 greater than its value in P Co’s statement of financial position. P Co had acquired the property in January 20W0 and the buildings element (comprising 50% of the total value) is depreciated on cost over 50 years.
the solution was to reduce $200,000 by 300 to give you £170,000 or 36/40 x $200,000. Once again I have no idea whats going.
Help!!!!!!!!!
Thank you
Hi
Before I can answer you I need to make a couple of guesses because you’ve not given me full information!
In Laurel and Hardy, are we preparing financial statements to 31 December, 2009? If not, can you let me know the date of the financial statements, please?
In P Co, I presume that by “reduce $200,000 by 300 to give you £170,000” you mean “reduce $200,000 by $30,000 to give you £170,000”
In addition, there’s something wrong with the mathematics! 36/40 x $200,000 is $180,000 not $170,000 (that’s 34/40)
For P Co question, I need to know the year end and I need the date of acquisition
Give me these missing details and I’ll get back to you
Hi Mike,
My apologies.
In Laurel and Hardy the CSOFP is at 31 December 2009.
For P co $200,000 has been reduced by $30,000 and it is 34/40.
The year end date is at 31 DECEMBER 20X5 and “P Co had acquired the property in January 20W0”
Thank you
“In Laurel and Hardy the CSOFP is at 31 December 2009.”
We acquired Hardy on 1 January 2007 and we’re now preparing financial statements for the year ended 31 December, 2009
So that’s three years since acquisition
The fair value increase was $12,000 and the remaining useful life as at date of acquisition was 4 more years.
Of those 4 years, 3 have now passed ….. and that’s where 3/4 x $12,000 comes from
I should have asked the date of acquisition for the P Co question but I assume that it was 1 January, 20X0
At date of acquisition the building had a remaining useful life of 40 years and we acquired the subsidiary 6 years ago. So, since acquisition, 6 years have passed out of the remaining estimated 40 years
Now, if we reduce $200,000 by 6/40 (or multiply by 34/40) we arrive at $170,000
Does that do it for you?
Hi Mike.
Thank you so much.
Sorry if this is a silly question, but when you say 3 years have passed, which period is this?
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