Hi sir I’m unsure of these entries. On 1 December 2010,T squires S for cash consideration of $541m.The consideration include cash $477 and transfer of non depreciable land with fair value of $64m.Carrying value at acquisition date $56m.At y/E,the asset is still included in the non current asset of T and sales proceeds had been credited to p/l. Entries: Dr Retained earnings $56m Cr PPE. $56m I can’t understand why Dr R/E. Thank you sir.
The initial entry they have made is to record the proceeds as a credit to profit or loss, so when we remove the non-current asset from the accounts we need to remove this credit from profit or loss too.
Would there be a gain going through on the disposal of the PPE? Credit retained earnings (64-56) 8m and show the 64m as part of the consideration in goodwill?