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- February 18, 2020 at 7:48 pm
Chapter – Accounting for associates – Question page 183
One of the additional information is :
At the date of the acquisition of Paul Co (that is the Subsidiary), the fair value of its freehold property was considered to be 400.000 greater than its value in Paul Co’s statement of financial position. Paul 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.
Consolidated statement of financial position is to be reported at 31.12.20W6
Adjustment(answer):
Freehold property
John Co =1950
Paul Co =1250
Fair value adjustment =400
Additional depreciation (400*50/40)*6years(20W0-20W6) =(30)
Total =3570I don’t understand why the additional depreciation should be divided by 40 years than 50 years as is ?
Thank you
February 21, 2020 at 7:10 amHi,
I’d not calculate it as such. I’d take 50% of the 400,000 to give the 200,000 that needs to be depreciated over the remaining life. I can’t work out the remaining life though as I don’t know the acquisition date. If I did then we would divide the 200,000 by the number of years left.
Thanks
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