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Hi sir for the question Dargent & Latree Co
I am confused for the goodwill.. for the FV adjustments, why do they deduct 4,000? I understand why they add 4,000 because dismantling costs should be included in cost of asset hence adjust by adding it..but why deduct the provision?
Give me a clue please – is there an exam to which you could direct me so that I may find the question?
Ah! It’s June 2017
No provision has been made and, in fact, no record of the discounted estimated decommissioning costs has been made as at date of acquisition
So let’s make that adjustment as at date of acquisition:
Dr Mine Asset Account $4,000 – thus increasing the figure for the fair value of Latree’s net assets as at date of acquisition
Cr Provision for Decommissioning the Mine Account $4,000 – thus decreasing the figure for the fair value of Latree’s net assets as at date of acquisition
So the net effect on the value of Latree’s fair valued net assets at date of acquisition is … $Zero
OK?
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