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profit/loss on disposal

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › profit/loss on disposal

  • This topic has 3 replies, 3 voices, and was last updated 10 months ago by P2-D2.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • March 7, 2022 at 2:29 pm #650059
    thulasikaur
    Participant
    • Topics: 5
    • Replies: 7
    • ☆

    Fork Co owns an 80% investment in Spoon Co which it purchased several years ago. The goodwill on acquisition was valued at $1,674,000 and there has been no impairment of that goodwill since the date of acquisition.

    On 30 September 20X4, Fork Co disposed of its entire investment in Spoon Co details of which are as follows:

    $’000

    Sales proceeds of Fork Co’s entire investment in Spoon Co

    5,580

    Cost of Fork Co’s entire investment in Spoon Co

    3,720

    Immediately before the disposal, the consolidated financial statements of Fork Co included the following amounts in respect of Spoon Co:

    $’000

    Carrying amount of the net assets (excluding goodwill)

    4,464

    Carrying amount of the non-controlling interests

    900

    Calculate the profit/loss on disposal (before tax) that will be recorded in Fork Co’s CONSOLIDATED statement of profit or loss for the year ended 30 September 20X4 (in whole $).

    answr:342000

    Sales proceeds 5,580

    Net assets at disposal 4,464

    Goodwill at disposal 1,674

    Less: carrying amount of NCI (900) (5,238)

    342

    hi sir, In the lecture video and notes the way of calculating profit/loss on disposal is totally different where,(sales proceed + NCI -Net assets- goodwill=profit/loss on disposal) but here in the question they deduct nci and add net asset and goodwil.

    which way should I follow sir?

    March 8, 2022 at 9:12 am #650191
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6453
    • ☆☆☆☆☆

    Hi,

    I think the answer is correct and just presented in a different format.

    5,580 (proceeds) + 900 (NCI) – 4,464 (net assets) – 1,674 (goodwill) = 342

    Thanks

    March 17, 2022 at 10:09 am #651410
    alawi sayed
    Participant
    • Topics: 153
    • Replies: 166
    • ☆☆☆

    Hello Sir,

    Can I add something to this ,

    what about the original cost amount which is:

    Cost of Fork Co’s entire investment in Spoon Co

    3,720

    what we have to do with that or it does it mean anything to us in this situation ,because it was put in the question to confuse us,

    Please clarify sir,

    Thanks,

    March 17, 2022 at 7:34 pm #651444
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6453
    • ☆☆☆☆☆

    Hi,

    The cost is not part of the group accounts, so we do not do anything with it in the group accounts.

    In the individual accounts we would calculate a profit on disposal of the investment where we compare the proceeds to the cost of the investment.

    Thanks

  • Author
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