BPP EXAM KIT QUESTION 267

Paprika Co purchased 75% of the equity share capital of Salt Co on 30 April 20X4. Non-controlling interest are measured at fair value.
The cost of sales of both companies for the year ended 30 April 20X6 are as follows:

Cost of sales
Paprika $60,000
Salt $100,000

The following information is provided:
(1) Salt Co had machinery included in its net assets at acquisition with a carrying amount of $120,000 but a fair value of $200,000. The machinery had a remaining useful life of eight years at the date of acquisition. All depreciation is charged to cost of sales.

(2) During the year, Salt Co sold some goods to Paprika Co for $32,000 at a margin of 25%. Three quarters of these goods remained in inventory at year end.

What is the cost of sales in Paprika Co’s consolidated statement of profit or loss for the year ended 30 April 20X6?

I understand the rest of the calculations, just not the part where we calculate ‘excess’ depreciation, rather than calculating depreciation on the new revalued amount, i.e. $200,000? The acquisition happened 2 years ago, even if we did calculate excess depreciation then, why do we keep calculating it in the same way every year (i.e. (200-120)/8) because in SOPL, shouldn’t we account for things that happen in just that year only whereas the FV adjustment happened 2 years back?

And in case of FV adjustments, do we always calculate ‘excess’ depreciation and why?