A non-current asset was sold by Subsidiary Plc to Parent Plc during the 2013/14 financial year.The carrying amount of the asset at the time of the sale was £1 400 000.As part of the consolidation process,the following journal entry was passed. $$\begin{array} { | l | r | l | }
\hline 30 \text { June } 2014 & & \
\hline \text { Dr Profit on sale of asset } & 400000 & \
\hline \text { Dr Asset } & 600000 & \
\hline \text { Cr Accumulated depreciation } & & 1000000 \
\hline
\end{array}$$ What (a)amount did Parent Plc pay Subsidiary Plc for the asset; (b)was the cost of the asset as shown in the books of Subsidiary Plc?

Question

A non-current asset was sold by Subsidiary Plc to Parent Plc during the 2013/14 financial year.The carrying amount of the asset at the time of the sale was £1 400 000.As part of the consolidation process,the following journal entry was passed. $$\begin{array} { | l | r | l | } 
\hline 30 \text { June } 2014 & & \
\hline \text { Dr Profit on sale of asset } & 400000 & \
\hline \text { Dr Asset } & 600000 & \
\hline \text { Cr Accumulated depreciation } & & 1000000 \
\hline
\end{array}$$ What (a)amount did Parent Plc pay Subsidiary Plc for the asset; (b)was the cost of the asset as shown in the books of Subsidiary Plc?

Quizplus · Accepted Answer

The profit on sale of £400,000 suggests the asset was sold for £1,800,000 (£1,400,000 carrying amount + £400,000 profit). The journal entry indicates accumulated depreciation of £1,000,000, so the original cost of the asset was £2,400,000 (£1,400,000 carrying amount + £1,000,000 accumulated depreciation).

A Non-Current Asset Was Sold by Subsidiary Plc to Parent