Explanation/Resolution to online practice questions

Which chapter is it?

Chapter 7

We're asked to find the nci value Value at date of acquisition was 1,200,000 shares @ $2.60 each = $3,120,000 Share of post acquisition retained is (30% x ((720,000 - 100,000) - 640,000)) = (6,000) Nci at 31 December is $3,114,000 ($3,120,000 - $6,000) $100,000 adjustment is depreciation on building fair value adjustment for 4 months = $2,400,000 / 8 years x 4 months / 12 months OK?

So it means we assume the revaluation of $2,400,000 has been accounted before 31 December? Which means it is included in the 720,000? What I did was: Get the 3,120,000 Next: (30% x (720,000+2,400,000-100,000)-640,000)) In the example of Dalius and Ramuna from the notes there were depreciable non-current assets and we Added the FV adjustment and then subtracted the depreciation. Why is it different here?

"So it means we assume the revaluation of $2,400,000 has been accounted before 31 December? Which means it is included in the 720,000?" - NO! If it had been accounted for then there would be no need for the $100,000 extra depreciation adjustment "Next: (30% x (720,000+2,400,000-100,000)-640,000))" - why have you given 30% of the $2,400,000? The question says that fair value is the value of the shares as at date of acquisition and they were valued at $2.60 each Wasn't Dalius and Ramuna a question where nci was valued on a proportional basis?

I understood it 100%. Since we valued the NCI at fair value, it is as if the 2,400,000 were already inlcuded in the 3,120,000, right? So the 2,400,000 would only be used when calculating our share of the Cons Ret Ears, right?

"Since we valued the NCI at fair value, it is as if the 2,400,000 were already inlcuded in the 3,120,000, right?" - correct "So the 2,400,000 would only be used when calculating our share of the Cons Ret Ears, right?" - and even then, we only use that information to calculate the extra depreciation expense

So Mr MIke, you are saying we will only use the 2,400,000 to calculate the extra depreciation, then How are we getting the figure for COns Ret Ears? 1. (70% x (720,000+2,400,000-100,000)-640,000) Or 2. Calculate the fair value of our shares at date of acquisition and deduct the share equity, so we are left only with Ret Ears (and reserves if any) - and then deduct depreciation from the post acquisition Ret Ears? (720-100-640) I am a bit confuse

What's the matter with following what I say in the lectures (and in the course notes) over and over again? Consolidated retained earnings comprise: H's own + H's share of S post-acq retained - Goodwill impaired since acquisition (just our share) What's the retained earnings figure for the parent as at the year end? What's the (retained earnings figure for the subsidiary as at the year end less the 100,000 extra depreciation on the revalued amount and less the retained earnings for the subsidiary as at date of acquisition) Take 70% of that figure and add it on to the parent's retained earnings figure Heaven alone knows what you are trying to achieve with your alternative approaches although alternative 1) is the correct calculation for H's share of S post-acq retained We also need $2,400,000 less $100,000 depreciation to be added in to consolidated tangible non current assets and, of course, $2,400,000 would have been added in as part of net assets at date of acquisition for the purposes of calculating goodwill

I´m sorry, my calculation on nr 1 refer to S´s post-acqu retained, I forgot to add H´s own, but I definitely have understood the examples and notes. My only doubt is that in the example of Dalius and Ramuna, on working 3, we added the 30,000 Fair value adjustment to the Ret Earnings and then deducted the excess depreciation, so why don´t we add the 2,400,000 to the 720,000 and then deduct the 100,000 and the Pre-acq?

Oh, I´m sorry, I think there´s been a confusion. My problem is when you said: "“So the 2,400,000 would only be used when calculating our share of the Cons Ret Ears, right?” – and even then, we only use that information to calculate the extra depreciation expense", I thought the FV adjustment would be left out and only the extra depreciation would be included.

From the question we have the information that net assets at date of acquisition are$2,400,000 understated. So, we add $2,400,000 into those net assets and thus reduce the goodwill figure But we won't (probably) change the values in the subsidiary's figures Now we get to working W3 H's own etc But just concentrate on H's share of S post-acq retained We find this by comparing S at date of acquisition with S at accounting date. At date of acquisition, the S figures have been increased (per working W2, but NOT in the S published figures) by $2,400,000 At accounting date, the S figures have been increased (per working W2) by that same $2,400,000 but have been decreased by the additional $100,000 extra depreciation So, if we compare S figures then and now, they were increased by $2,400,000 then ..... and they are increased by $2,400,000 now but decreased by $100,000 now Ok, so DON'T add in the $2,400,000 in working W3 as at date of acquisition and DON'T add in $2,400,000 in working W3 as at accounting date. The one cancels out the other. But we DO have to deduct the $100,000 extra depreciation Is that better?

100% Clear. If we include it as at date of acquisition we must make sure it is also inluded as at accounting date. Thank you so much for your patience, you´ll hear from me again for other exercises.

You're welcome .... and I'm already looking forward to your next questions :-)