Disposal of subsidiary

Entity A has one subsidiary Entitiy B,

Statement of FP as at 31Dec20X1

Entity A Entity B
$’000 $’000
Investment at cost
5,000,000 share in C 7,000
Current Asset 500 7,800
———- ———-
7,500 7,800

Share Capital of $1 each (10,000) (5,000)
Acc Loss 2,500 (2,800)
———- ———–
7,500 (7,800)

Statement of Comprehensive Income for YE 31/12/X1

Entity A Entity B

Profit/(Loss) before t ax 1,500 1,400
Taxation 450 420
——— ——–
Profit/(Loss) after tax 1,050 980
Retained profit B/F 2,950 ? 1,820

Retaineed profit C/f 4,000 2,800,

The good will on acquistion of Entity B was previously impaired by $400,000

Entity B was fully disposed of on 30 June 20×1 for a total cash consideration of $9.5 million

Calculate gain on disposal of subsidiary Entity B.

Ans.
Calculate GW

SC 5,000
Pre acq Profit 1,000
——-
6,000
Purchase Consideration 7,000
——–
GW @ acquisition 1,000
Impairment (400)
——–
Net Carrying Amount 600

Ans.
20X0

1.) Dr Share Captial 5,000
Dr Preacquistion Porfit 1,000
Dr GW 1,000
Cr Cost of Investment 7,000
Being elimination of cost of investment in Entity B

20X1

1.) Dr Cost of Investment 7,000
Cr Preacqisition Profit 1,000
Cr GW 1,000
Cr Cost of Investment 5,000
Being reversal of elimination of cost of investment in Entity B

2.) Sales Proceeds 9,500
Less : Net Assets at disposal date
Share Capital 5,000
R/E B/f 1,820
Current Year 490
GW 600 (7,910)
———-
Gain on disposal 1,590

Q.) Based on the above, what is the journal entry at company level and consolidation level

Thank you