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Hey there!
Wonder if you can help me?
On 1 January 20X4, Geranium acquired 60% of the equity share capital of Rose for $5 million. At that date, the net assets of Rose were $8 million.
On 1 July 20X9 Geranium sold half of its holding in Rose for $4.5 million. The fair value of the remaining shareholding in Rose on 1 July 20X9 was also $4.5 million. No impairment of the remaining investment was deemed necessary at 31 December 20X9.
The capital and reserves of Rose at 31 December 20X9 are shown below:
$’000
Share capital ($1 ordinary shares) 5,000
Retained earnings at 1 January 20X9 6,500
Retained profit for the year ended 31 December 20X9 2,000
Total 13,500At what amount should the investment in Rose be shown in the consolidated statement of financial position of the Geranium group at 31 December 20X9?
A $2,500,000
B $2,800,000
C $4,800,000
D $5,500,000Solution my attempt!
Disposal.. holding goes from subsidiary to associate.
Therefore we no longer consolidate but have a one liner in the CSOFPInvestment in R
Cost of investment= 4.5m
Ass share of post aq reserves = 30%(8M-6.5M)but my calculation for the Ass share of post aq reserves is wrong but I do not know why.
How would you calculate the investment in R for the CSOFP sir?
cheers!
Hi,
I think the answer is C.
The post acquisition reserves are from 1 July to 31 December. This would be 6 months of the profit for the year of 2,000,000 that gives 1,000,000. Our share of this at 30% is therefore 300,000 which is added on to the fair value of the investment of 4,500,000 from the date control was lost. This then gives 4,800,000.
Hope it’s right, please correct me if I’m wrong.
Thanks
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