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BPP Learning – Question

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › BPP Learning – Question

  • This topic has 1 reply, 2 voices, and was last updated 5 years ago by P2-D2.
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  • Author
    Posts
  • February 18, 2020 at 7:48 pm #562311
    konstantinos.koumpouras
    Member
    • Topics: 2
    • Replies: 0
    • ☆

    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 =3570

    I 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 am #562571
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7172
    • ☆☆☆☆☆

    Hi,

    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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    Posts
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