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Hi Mr Mike, I took it from your note.I have done non-current asset sale between Pco and Sco but this seems to be some confusing and I will have some question?
On 1 January, 2009 Linas acquired 60% of the equity share capital of Asta for $160,000 when the balance on Asta’s retained earnings was $275,000. The Statements of Financial Position of the two entities at 31 December, 2009 are as follows:
During the year ended 31 December, 2009 Linas sold a piece of plant and equipment to Asta for $90,000. The asset originally cost $200,000 and had been written down to $80,000 as at 31 December, 2008. Both entities depreciate non-current assets on a straight line basis over 5 years, with a full year’s charge in the year of purchase and none in the year of sale. Asta is depreciating the cost of the asset over its remaining useful life of 2 years.
Sales-90000
cost of sales(200000-80000)/2
gross profit -30000then I will recognize this depreciation in the ”cost of sales” if instructions says add it over cost of sales and impairment of 80000 in the administrative expense, isn’t it?
DId i get right?No, you didn’t
Look at this extract again from the relevant note:
“and had been written down to $80,000” – What’s the word immediately before the $80,000?
The intra-group profit is $10,000 and that is being realised over the two years so the net pup in Linas’ records is $5,000
You must learn to be extremely careful when reading the questions!
OK?
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