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Hi,
i am really stuck on on this Jco question, how the depreciation calculation is calculated.
Question:
STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 20X5
Additional information
(a) J Co acquired 600,000 ordinary shares in P Co on 1 January 20X0 for $1,000,000 when the accumulated retained earnings of P Co were $200,000. (A Subsidary)
(b) At the date of acquisition of P Co, the fair value of its freehold property was considered to be $400,000 greater than its value in P Co’s statement of financial position. P 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.
(c) J Co acquired 225,000 ordinary shares in S Co on 1 January 20X4 for $500,000 when the retained profits of S Co 150,000. (An Associate )
Solution represent : 400,000/50% = 200,000*6/40
But i really dont understand where that 40 came from
and also can this be explained: 20X0 and 20W0 what is the difference between them, do they represent two different period.
Hi,
It is a bit confusing when we don’t have the full years. 20W0 is 10 years before 20X0 as W comes before X in the alphabet. Therefore when the subsidiary was acquired there have been ten years elapse since the property was acquired and thus there are 40 years left to depreciate it over.
Don’t worry as you will have proper years in any exam question.
Thanks
hi chris
a parent company had investment income of 160,000 shown in its SPL. When consolidating
with the subsidiary, the investment income is not included in the CSPL, it said it is excluded becouse thats is external use only. my question is what if this investment income is from outside the group ( example the parent company might have investment income from traded shares or bonds) do we still have to exclude in CSPL? please clarify this thanks
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