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I need help!
Gain/(loss) on revaluation of land calculated at 3000 – 2000 = 1000
The fair value of land increased by 2m and further 1m since acquisition. Doesn’t that means that gain of 3m?
Thanks in advance
No, the 2m gain is a fair value adjustment as at date of acquisition and is part of the FV of SNA @DOA
The 2m is therefore notionally added to the land as at date of acquisition
The 1m is a post acquisition increase and should be shown as part of the calculation in working W3 (H’s own + H’s share of S post acq retained …..)
Is that better?
Regarding the investment income. Penketh acquire 30% of Ventor’s equity shares. Why answer for share of profit from associate is (10,000 x 30% x 6/12)? My understand is Penketh is the owner of parent, Penketh acquired Sphere’s 90 million shares and Penketh acquire Ventor’s, not Sphere’s. Please correct me if I’m wrong.
Because Ventor is the associates and has acquired since 1 October which is only 6 months. If I’m not wrong 🙂
This looks like a parent Penketh, subsidiary Sphere and associate Ventor
If the associate is acquired mid-year, we need to time apportion
So 30% of 6 months’ profits after tax should give you 1,500
Is that any clearer?
I’m sorry, another question. When we calculate the profit for the year attributable to non-controlling interest. Why no deduct the unrealised profit in inventory?
Who sold the inventory ie who recognised the profit that is unrealised? It was, in this question, probably Penketh in which case the pup adjustment is in the Penketh results.
IF it had been Sphere, the adjustment would have been in Sphere’s retained earnings and thus the nci would have had their percentage share of a lower figure
OK?
Hello,
I have a question regarding the calculation of goodwill in this one…
When we add the fair value adjustments of $6m for plant, how come we do not add the adjustment for depreciation for this amount?Many thanks
Because we’re looking in working W2 at the situation as at date of acquisition and, as at date of acquisition, there has been no time for the fair value adjusted plant to have any depreciation on that fair value adjustment
When you get to working W3, consolidated retained earnings, THEN there will be an adjustment in respect of the extra depreciation to be made on the fair value surplus of the fair valued plant as at date of acquisition because time has now passed
OK?
The revaluation of 1M took place after acq
So is this right dr.land 1000
Cr.con’s. Rev reserve 600
Cr.NCI 400
Can u tell me how we get the rev gaib 3000-2000.as in from wherePersonally I would Dr Land and Cr Revaluation Reserve with the full $1m
and then calculate the nci as their share of the profit for the year and their share of other comprehensive income
Where do we get $1m revaluation gain? There’s $3m per the question but we know that $2m of that had already arisen as at the date of acquisition so the difference of $1m must have arisen after acquisition.
An easier way of finding that $1m is to read the last sentence in note (ii) in the question
Ok?
The journal for dividend paid by an associate.is it Dr.ret earnings and cr.invest. in associate?
Oh yes.
The associate pays the dividend
So Dr cash
And cr invest in associateBut do we have to add this cash amount in the con’s sofp under current assets?
The credit is to investment income in the parent’s own financial statements
On consolidation we ignore the investment income and in working W5B we take the group’s share of the associate’s profit after tax (that figure is before the associate dividend so we include in the consolidated statement of income our share of the pre-dividend, post-tax profits of the associate)
Working W5A (Investment in Associate on the Statemnet of Financial Position) is calculated as:
Cost +
Share of Post Acquisition Retained –
Any impairmentsI don’t see the any mention of adding the dividend received from the associate. Do you?
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