Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › June 2014 consolidation qn on Penketh
- This topic has 14 replies, 2 voices, and was last updated 7 years ago by MikeLittle.
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- May 19, 2016 at 1:53 pm #315818
We are not required to do up the consolidated SOFP. But i just want to make sure my adjustments are correct for SOFP : PPE
For Transaction (i),
– Upward valuation of 2000
Adjustment : + 2000 to PPE– Upward valuation of 6000
Adjustment: + 6000 to PPEIncrease in depreciation = 1500
Adjustment: + 1500 to Cost of sales &
– 1500 from PPE– Amortisation of intangible = 500
Adjustment: + 500 to Admin expenses &
– 500 from PPEAre my adjustments correct ?
May 19, 2016 at 3:43 pm #315834You appear to have missed the increase from zero to $5 million for the intangible asset
Adjustment: + 5,000 to INCA
Otherwise it’s ok
May 20, 2016 at 2:01 pm #316065So for the last one the amortisation of intangible . There are 3 adjustments required right ?
Adjustments : +500 to admin exp
-500 from PPE
+5000 to intangiblesMay 20, 2016 at 2:31 pm #316068Its stated in the answer key that the post acquistion reserve is 80000. The answer i got for total of post acquisition reserves is 38500.
The post acq retained earnings i got was $40000 .
Therefore i took the
post acq RE 40000 + FV adj dep(1500)
= 38 500.May 20, 2016 at 2:37 pm #316069“So for the last one the amortisation of intangible . There are 3 adjustments required right ?
Adjustments : +500 to admin exp
-500 from PPE
+5000 to intangibles” – debit intangibles, credit (fair valued assets at date of acquisition) reservesI always (lazily) put that credit into retained earnings.
Technically it should be to Revaluation Reserve
May 20, 2016 at 2:44 pm #316070Where does it say 80,000? At the top of working (ii) it says “Sphere’s post acquisition profit (80,000 x 6/12) 40,000
That is then adjusted for the 1,500 additional depreciation on the fair value adjustment and for the 500 amortisation (that you have missed off)
Why do you think the answer key says 80,000 post-acquisition?
May 20, 2016 at 3:38 pm #316076Sorry i guess I misinterpreted the figures. As for transaction (ii) on revaluation. These are my adjustments
– revaluation of 1000
Adjustments:
+1000 to PPE
+1000 to Other comprehensive income
+ ( 60%× 1000) = 600 to revaluation surplus in SOFP.Are my adjustments correct ? The value i got for the consolidated SOPL other comprehensive income , for
Gain / loss on revaluation is 1800I took (2200) + 3000 +1000 = 1800
But the answer key shows 1200.In the answer key these are the workings.
(2200 -( 3000- 2000) gain for sphere)
Why is this so ?? Why did they minus the values and why did they minus 2000 instead of adding 1000 ?May 20, 2016 at 4:16 pm #316081For transaction (iii) ,
In the suggested answers for investment income : otherWhy in the suggested answers a dividend of 1800 is minus from 5000 for Penketh.
The dividend by the associate is 6000. And furthermore, i thought it should be added to Penketh’s investment income in the individual statement right. But why they minus 1800 from 5000.
May 20, 2016 at 4:50 pm #316092Anuja, have I asked you this before …. have you watched the lectures on this?
All of this is covered in the lectures and it seems silly to keep asking me where you could sort out the problems for yourself!
May 20, 2016 at 4:57 pm #316094“+ ( 60%× 1000) = 600 to revaluation surplus in SOFP.” – why 60% – since when have we started dealing in percentages – it’s a full $1,000 gain that goes into comprehensive income
“Why is this so ?? Why did they minus the values and why did they minus 2000 instead of adding 1000 ” – (2,200) was the loss for Penketh
2,000 was the fair value adjustment as at date of acquisition
1,000 is the gain since acquisition
Overall gain for Sphere on the land is 3,000 but 2,000 of that is dealt with in the goodwill calculation
S only (3,000 – 2,000) is now being considered.
And it’s a gain so it’s set off against the 2,200 loss in Penketh’s land values
OK?
May 20, 2016 at 5:03 pm #316095“Why in the suggested answers a dividend of 1800 is minus from 5000 for Penketh” – it’s the Penketh share of the dividend from the associate company and, as such, it’s not included within the retained earnings figure.
That’s why it’s deducted – because it was included within Penketh’s investment income
“The dividend by the associate is 6000.” – and Penketh’s share of that is 30% ie $1,800 and we’re told that “during March 2014 Ventor paid a dividend of $6 million.” so that $1,800 must have been received and recorded and included within the $5,000 Penketh investment income
“And furthermore, i thought it should be added to Penketh’s investment income in the individual statement right” – because it has already been included, we now need to deduct it because, instead, we are going to bring into consolidated retained earnings our share 30% of the Ventor profit after tax and it’s out of that profit after tax that Ventor has deducted the $6,000 dividend
“But why they minus 1800 from 5000.” – just explained that
May 21, 2016 at 3:18 am #316128Because in december 2014 paper, for the revaluation surplus under SOFP, they multiplied the P’s % x revaluation .
May 21, 2016 at 3:25 am #316130Is there lectures regarding the answers to past year acca exams ?
May 21, 2016 at 8:17 am #316148You could try this link!
May 21, 2016 at 8:24 am #316149“Because in december 2014 paper, for the revaluation surplus under SOFP, they multiplied the P’s % x revaluation .” – the gain on the revaluation goes in full to the asset
The credit entry goes to Revaluation Reserve
But if you look at page 42 of the free course notes (or if you watch the video lecture that covers chapter 7) you’ll find the answer there!
OK?
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