- This topic has 1 reply, 2 voices, and was last updated 8 years ago by
.
- Posts
Dear Sir,
Request your guidance on my two queries related to Ausra and Danute example in chapter 9.
1. At the date of acquisition, some of Danute’s inventory had a fair value $12,000 in excess of its carrying value. All of this inventory had been sold before the year end.
Now lets assume that the note says that “All of this inventory is UNSOLD”. This could be unlikely in practice but I would appreciate if you could explain the necessary adjustments required in such a case.
2. On 31 July 2011, Danute had sold an item of property, plant and equipment to Ausra realising a profit on sale of $36,000. Ausra was depreciating this item over its remaining useful life of 4 years. It is group policy to charge a full year’s depreciation in the year
of purchase, and none in the year of sale.Now lets assume that the note says Danute had sold an item of property, plant and equipment to Ausra realising a LOSS on sale of $36,000.
Do we then create a provision for unrealised loss and add to retained earnings of the selling co.?
Thank you in advance.
Regards,
NitinAnon39, this is an F7 question – it is not related to F6 Taxation
Nitin, in future, if you want to avoid trying to disseminate the confusing (and sometimes completely incorrect) posts of Anon39, may I suggest that you post in the correct, appropriate forum … Ask ACCA Tutor forum?
With reference to a possible amendment to the question such that the property transfer was at a loss, that asset is now being carried at an amount that is lower than its true cost – accumulated depreciation and adjustment should be made (because there’s no indication that that loss is an impairment)
So instead of having a deduction from Danute’s retained earnings for a provision for unrealised profits, we would have an addition to Danute’s retained earnings as a negative provision for an unrealised loss
OK?
- You must be logged in to reply to this topic.