General Overview (inc Dr and Cr)

Question 1

Change in Depreciation Method

Answer 1

(1) Calculate CV

(2) CV / Useful Life Remaining = Depreciation Charge per year

Question 2

Change in Expected Useful Life or Residual Life

Answer 2

(Carrying Amount - Residual Value) / New Remaining Useful Life

Question 3

Revaluation

Answer 3

(1) Dr NCA Cost (Market value - Original Price)
Dr Accumulated Depreciation
Cr Revaluation Reserve

(2) New Depreciation - Old Depreciation = Extra depreciation

(3) Dr Revaluation Reserve
Cr Retained Earnings

Question 4

Disposal of an Asset

Answer 4

Dr Bank
Dr Accumulated Depreciation
Dr Loss - (if CV > Sale Price)

Cr Cost
Cr Income - (if CV < Sale Price)

Question 5

Impairment Test

Answer 5

(1) Find the CV
(2) Determine Fair Value
(3) Find Value in Use

Higher of (2) and (3) is the Recoverable Amount:
- If CV > RA = Impair
Dr Impairment Expense
Cr Asset

• If CV < RA = Do not Impair

Question 6

Government Grants - Deferred Income Approach

Answer 6

(1) Dr Bank
Cr Deferred Income

(2) Calculate Depreciation of Grant
- Dr Deferred Income
- Cr P/L Depreciation

P/L Extract:
Depreciation of Asset (x)
Grant Amortisation x

SFP Extract:
Current Liability = One-year amortisation
Non-current Liability = Remaining balance

Question 7

Government Grants - Off Set Approach

Answer 7

Dr Bank
Cr Asset

Asset NBV = Cost - Grant
- Then depreciate yearly over useful life of asset

Question 8

Group Consolidation - SFP

Answer 8

W1 Group Structure

W2 Net Assets of Subsidiary

• Share Capital
• Share Premium
• Retained Earnings
• FV adjustment
• (Less Depreciation)
• (Less PUP) Upstream

W3 Goodwill

• Cost of Investment
• FV of NCI
• (Less FV of Net Assets @ acquisition)
  = Goodwill on Acquisition
• (Less Impairment)
  = Goodwill

W4 NCI

• FV of NCI
• NCI % of post-acquisition profits
• (Less NCI % of impairment) FV Method only
  = NCI

W5 Group Retained Earnings

• 100% Parent Retained Earnings
• Parent % of post-acquisition profits
• (Less Parent % of Impairment)
• (Less PUP) Downstream
  = GRE

Question 9

Group Consolidation - P/L

Answer 9

W1 Group Structure

W2 PUP

Closing Inventory x (Mark up / 100 + Mark up)
or
Closing Inventory x Margin %
- Add to Cost of Sales

W3 Profit Attributable to NCI

• NCI % of Profit after Tax
• (Less NCI % of Impairment)
• (Less NCI % of PUP) Upstream
• Add back NCI % of Finance Costs

Question 10

Impairment of Goodwill - FV Method

Answer 10

Dr Impairment Expense P/L
Cr Goodwill

Dr NCI % of Impairment Loss
Dr GRE by Parent % of Impairment Loss

Cr Goodwill by full Impairment Loss

Question 11

Impairment of Goodwill - Proportion of Net Assets Method

Answer 11

Dr Impairment Expense P/L
Cr Goodwill

Dr GRE by full Impairment Loss

Cr Goodwill by full Impairment Loss

Question 12

Intra-group Transactions

Answer 12

Dr Payables
Cr Receivables

Rec ( 100% P + 100%S - inter co balance)
Pay ( 100% P + 100% S - inter co balance)

Dr Bank
Cr Receivables

Rec (100% P + 100% S - cash in transit)
Bank (100% P + 100% S + cash in transit)

Question 13

PUP

Answer 13

P sells to S - Downstream

Dr W5 GRE
Cr Inventory SFP

S sells to P - Upstream

Dr W2 Net Assets
Cr Inventory SFP

Question 14

Intercompany Loans

Answer 14

Eg/ £100’000 loan @ 5% interest
(Parent to Sub)

Interest Paid = £5’000 - Needs to be cancelled out

Dr Investment Income 5’000
Cr Finance Costs 5’000