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I’m confused about this 2 question:
Question 1.
Wallace, a limited liability company acquired 60% of the voting share capital of Bruce on 1 February 20X8.You are presented with the following information for Wallace, and its subsidiary, Bruce. The income and expenses of Bruce accrued evenly over the year
Statements of financial position as at 31 October 20X8Investment Wallace to Bruce are RM9,000.
Indicate if the following will be included in or excluded from the consolidated statement of financial position of Wallace as at 31 October 20X8.
Answer:
Investment in Bruce <Excluded from>
Explanation :
On consolidation the investment in Bruce is replaced by the individual assets and liabilities of the subsidiary.
Question 2:
Hinge Co acquired an 80% investment, gaining control of Lock Co on 1 July 20X6.
The draft statements of profit or loss for the two companies for the year ended 31 December 20X6 were as follows:
Hinge Co Lock Co
$ $
Revenue 420,000 280,000
Less: Cost of sales 273,000 194,000
Gross Profit 147,000 86,000
Less: Operating expenses 63,000 23,500
Profit from operation 84,000 62,500
Add: Investment income 8,000 0Complete the following table with the figures which will be reported in Hinge Co’s consolidated statement of profit or loss for the year ended 31 December 20X6.
Answer:
Consolidated statement of profit or loss for the year ended 31 December 20X6Revenue XX
Cost of sales xx
Operating exp xx
Investment income <$8,000>This is the investment income of Hinge Co.
MY QUESTION :
2 question had diff answer of investment income when prepare consolidated financial statement.
Question one mention is excluded (no need) but question 2 is show in financial position.I had confused now investment income from parent coy to subsidiary need
present in consolidation financial position or not ?As i know is no need to show and should be elimated, isn’t? could anyone explain.
Anyone can help me ? Thanks.
The two questions are not comparable – one is asking about the SOFP and the second is asking about the SOPL.
The cost of investments in a subsidiary is never shown in the consolidated SOFP.
The consolidated SOPL shows all income of the group including any investment income (there is no mention of the investment income coming from the subsidiary).
Please do watch my free lectures on consolidations. The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
Thanks for your kind explanation.
So i understand now is question 2 is no mention is subsidiary investment income and is diff of SOPL and SOFP.How about if this is subsidiary investment income, do we need to disclose at SOPL ?
Thanks in advance.Sorry, one more question.
Fred opened a suspense account with a debit balance of $650. He discovered the following errors:
(1) Bank interest received of $43 has been debited to the interest payable account and credited to the cash account
(2) Cash sales of $710 have not been recorded in the sales account; the cash has been debited to cash at bank
(3) Discounts received of $118 have only been debited to the payables control accountWhat should the balance on the suspense account be after these errors have been corrected?
$58 Dr
$178 Dr
$1,242 Dr
$1478 Dr
Answer is :
Correct Answer
$1,478 DrSuspense account
Dr ($) Cr ($)
Opening balance 650
Discounts received 118
Sales 710 Closing balance 1,478
1,478 1,478MY QUESTION:
(2)Cash sales not record in sales account, and sales is credit But why the suspense ac is put at debit ?
And (3) is also same, discount received 118, should be credit in purchase…
isn’t because after all the correction is done, (2) will be credit sales, debit suspense account ? and also (3) is same as (2). credit purchase, debit suspense.
For (2), to correct the mistake we need to credit sales and therefore we debit the suspense account. The entry in the suspense account is always the ‘opposite’ of the correcting entry.
For (3) the correcting entry is to credit discount received account, and therefore we debit the suspense account.
Have you watched my free lectures on suspense accounts?
(With reference to your earlier question, dividends from subsidiaries are not examinable in Paper F3)
Yes.Thanks for ur kind reply.
Sorry, one more question from free lectures about depreciation of revalued asset.
from lectures note pg.31.
Purpurs has a year end of 31 December each year.
In his Statement of Financial Position as at 31 December 2002 he has buildings at a cost of
$3,600,000 and accumulated depreciation of $1,080,000.
His depreciation policy is to charge 2% straight line.
On 30 June 2003, the building is to be revalued at $3,072,000. There is no change in the remaining
estimated useful life of the building.
Show the relevant ledger accounts for the year to 31 December 2003.My question:
When a non-current asset has been revalued, depreciation charge will be higher than it was before revaluation.
and the double entry of depreciation revalued $44,522 is debit to depreciation expenses and x mention credit to where.but i can see as pass year question 2016.
On 1 April 2015, F Co revalued a property. As a result, the annual depreciation charge
increased by $20,000 as compared to depreciation based on historical cost. The company
wishes to make the allowed transfer of excess depreciation between the revaluation
surplus and retained earnings in accordance with IAS 16 Property, Plant and Equipment.
Immediately before the transfer was made, retained earnings and the revaluation surplus
were as follows:Retained earnings $875,000
Revaluation surplus $200,000What should be the balance on the retained earnings and revaluation surplus accounts
after the transfer?The answer is Debit revaluation surplus ??
and credit retained earnings.May i know what is the correct debit entry ?
Thanks ~~~You must start a new thread when you are asking a new question. It is so that everyone can benefit from the answers – we cannot give free private tuition 🙂
The entry for charging depreciation (whether there has been a revaluation or not) is always debit depreciation expense and credit accumulated depreciation.
When there is been a revaluation, the excess of the new depreciation over the old depreciation is debit revaluation surplus and credit retained earnings (just have you have typed!).
All of this is explained in my free lectures.
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