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Disposal of subsidiary

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Disposal of subsidiary

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by Stephen Widberg.
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  • Author
    Posts
  • June 7, 2021 at 10:18 am #623615
    Fannee
    • Topics: 6
    • Replies: 1
    • ☆

    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

    June 7, 2021 at 4:33 pm #623701
    Stephen Widberg
    Moderator
    • Topics: 10
    • Replies: 2531
    • ☆☆☆☆☆

    I’m sorry – this doesn’t seem to relate to the real SBR exam in current format – we don’t get asked questions like this.. Which past exam question is it please?

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