Page 518 - F2 Integrated Workbook STUDENT 2019

F2: Advanced Financial Reporting

14.3 Scall purchased 90% of the 10m ordinary shares of Lid many years ago. The
cost of the investment was $42m. The retained earnings at the acquisition date
were $26m and fair value of NCI was $2.5m. Carrying amounts of the net
assets of Lid were the same as their fair values with the exception of land. The
fair value of the land held by Lid was $5m in excess of its carrying amount at
the acquisition date.

During the year ended 30th September 20X7, Scall sold 60% of the shares in
Lid for $35m when the net assets of Lid had a carrying amount to the group of
$40m (including the fair value adjustment on the land). The fair value of a 30%
holding in Lid as at 30th September 20X7 was $15m. The carrying amount of a
10% holding in Lid at the same date was $2.4m.

NCI is valued using the fair value method.

Calculate the profit on disposal of the shareholding in Lid. Give your
answers in $m.

14.4 VD currently owns 90% of the ordinary share capital of EB. VD disposed of a
further 20% of the shares of EB during the year for $365,000. On the disposal
date, the goodwill of EB was $1,000,000 and the fair value of the net assets of
EB stood at $2,500,000. The NCI of EB is calculated at fair value.

The adjustment that would be taken to equity in relation to this
transaction is:

A Debit $335,000

B Credit $335,000

C Debit $365,000

D Credit $365,000

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