Question

1) p acquire s on 31.12.20x4. the fair value of plant and equipment belonging to S was rm1.5 million and rm500000. useful life for both asset are 10 years on acquisition date. the asset were not adjusted to its fair value. the net book value recorded in s's books on 31.12.20x7 are rm700000 for plant and rm315000. determine the adjustment needed to prepare conso account on 31.12.x7

2) p acquire s on 31.12.20x4. the fair value of plant and equipment belonging to S was rm1.5 million and rm500000. useful life for both asset are 10 years on acquisition date. the asset were not adjusted to its fair value. the net book value recorded in s's books on 31.12.20x7 are rm700000 for plant and rm315000. Plant and machinery fair value were determine to be at RM1.4million and RM280 000 on 31.12.20x7. determine the adjustment needed to prepare conso account on 31.12.x7

Answer 1

As P acquired S, an adjustment is required to be done to make consolidated financial statements.

The following adjustment is required-

a)The FV at the date of acquisition was-
Plant - 15,00,000
Equipment -5,00,000

Dep for 3 yrs out of 10 yrs-
on plant = 15,00,000*3/10=4,50,000

on equipment=500,000*3/10=150,000

Value on 31.12.20x7

• plant=15,00,000-4,50,000=10,50,000

incorrect amt recorded- 700,000

adjustment to be made of +3,50,000

• equipment=500,000-150,000=3,50,000

incorrect amt recorded=315,000

adjustment to ba made of +35,000

b)

The FV at the date of acquisition was-
Plant - 15,00,000
Equipment -5,00,000

FV on 31.12.20x7-

Plant- 140,000

Equipment- 280,000

As the financial stements are prepared on FV ,the following values should be used-

Plant- 140,000

Equipment- 280,000