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Snippet of Question:
J Co has 60% control over P Co on the 01 Jan 20X0
Statement of Financial Position as at 31 December 20×5
J Co P CoNon Current Assets
Freehold Property 1950 1250At the date of acquisition of P co, the fair value of its freehold property was considered to be $400,000 greater than its value in P Co’s statement of financial position. P Co had acquired the property ten years earlier and the building element ( comprising 50% of the total value) is depreciated on cost over 50 years.
Answer for fair value adjustment
The answer is movement adj 30
and the post figure 170
Are you able to explain why as no workings were given apart for the 50% split between land and building of £200 each
Many thanks
Hi,
The fair value of the building is to be depreciated over the remaining useful life of 40 years. The 200 is therefor depreciated to give 5 per annum. The acquisition took place six years ago so the accumulated depreciation will be 30 (5 x 6 years), which is the post acquisition figure. The consolidated fair value figure is then 170, being the 200 less the 30.
Thanks
Excellent, many thanks. I see my error as I was calculating 5 years instead of 6 years.
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