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Hi…
I need help…
Immediately after acquisition of S co on 1 Oct 20×0, P co transferred an item of plant with carrying amount of $4 million to S co at an agreed value of $5 million.
at this date, the plant had a remaining life of two and a half years. P Co had included the profit on this transfer as a reduction in its depreciation cost. all depreciation is charged through cos.i have difficulty understand the full adj
i know that profit on transfer is $1000
excess depn is $200i cannot understand why $800 is being added to cos? i am getting only $200.
also, in NCI , why is it adding $200.. i thought it should be deducted
what would be the double entry in both sopl and sofp and adj to NCI?
plz help
Hi,
The $800 is the net adjustment from eliminating the profit on transfer of $1000 and then removing the excess depreciation that is being charged on the increased value of the asset.
The $200 is being added as it is increasing the post-acquisition profits of the subsidiary given that we are removing the additional depreciation.
Thanks
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