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Disposal of Subsidiary

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Disposal of Subsidiary

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  • February 11, 2020 at 11:54 am #561359
    anniebabe
    Participant
    • Topics: 33
    • Replies: 99
    • ☆☆

    I am working through the following question:-

    Parrot had disposed of its 80% holding in Cockatoo Cos 20m $1 shares
    For $21.6m
    At disposal FV of net assets was $3.5m and unimpaired goodwill $0.5m
    Parrot Co measures nci at FV of net assets.
    What is profit on disposal?
    The answer is deducting goodwill from proceeds – but the BPP text proforma is to add back goodwill at disposal. I am now confused – can someone explain.
    Thanks

    proceeds $21.6
    goodwill -0.5

    Shares 20.0
    retained earnings 3.5
    total -23.5

    nci 4.7

    Profit on disposal 2.3

    February 12, 2020 at 9:11 pm #561563
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7212
    • ☆☆☆☆☆

    Hi,

    The calculation is as follows:

    Proceeds 21.6

    Less 80% x net assets (80% x [3.5 + 0.5]) 3.2

    Profit 18.4

    Or you can calculate as follows:

    Proceeds 21.6

    Add NCI (20% x [3.5 + 0.5]) 0.8

    Less Net assets 4

    Profit 18.4

    Hope that makes some sense.

    Thanks

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