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Hi Mike,
There is two issues from this question.
Robby (parent), Hail (sub), Zinc (Sub by step-acqn)Issue1–Robby acquired Hail on 1 June 2010 with cash $50m. Robby has treated the investment in Hail at FVTOCI.
Investment in Hail figures from B/S at y/e 31 May 2012 = 55m
What’s the adjustment for above?
My answer:
Dr OCI 50M
CR INVESTMENT 50M
DR OCI 5M
CR OCI 5M
Is above correct?Issure 2: Robby acquire 5% of Zinc on 1 June 2009 at $2m.It had been treated in FS to 31 May 2011 at FVTPL
On 1 December 2011 Robby acquired a further 55% of Zinc and gain control.
At 1 Dec 2011, FV of the previous holding before busniess combination =$5m.In the answer: For consolidated retained earnings
Increase in fair value of equity interest in Zinc +$2m
–What’s the logic behind it?My answer:
The gain on previous holding =5-2=3m. This $3m should be added to consolidated retained earning. But it seems not correct. the examiner just added $2m in RE.Thanks in advance
Dr OCI 5m
Cr OCI 5mReally????? What did you mean – it surely cannot be what you have written
I think I too would have arrived at a 3m gain on the deemed disposal of the original 5%
Hi Mike,
Thanks for your reply.
Sorry I made a mistake in my previous typing
Issue1–It should be
Dr OCI 5M
CR investment 5m
In the Other component of equity calculations:
the answer deducted 5m from OCI.Issue 2 –In the consolidated RE calculations:
The answer + 2m
Is there any possible for you to have a look the answer to the paper? Please see the link below.Cheers
Below is the copy from the anser
Retained earnings
Robby
Increase in fair value of equity interest – Zinc +2·00Other components of equity
Robby:
Profit on revaluation of investment in Hail (5·00)I am confused about those two adjustments.
Thanks in advanceMy question is regarding PPE in this question.
Please, see the answers Working 8, and explain me why do we add increase in value of PPE of hail and zinc (24 and1)? These increases are already included in the amounts shown on the balance (60 and 26), right?
I am confused! Please, clarify!Thanks!
Isolto – it’s unlikely that the adjustments are ALREADY included within the figures. May I suggest that you read the question again and pay careful attention to the bit which explains about these revaluations and whether or not they are already included. dates are important!
I’ve said earlier that I do not have a copy of this question, so I’m clutching at straws in the dark on this. But common sense dictates that, if these adjustments are shown in working 8, it’s because they are not already included in the figures of 60 and 26
Hopefully!
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