Wholly owned Subsidiary has the following balances at control date 20X1:
$$\begin{array} { l l }
\text { Capital } & \$ 500000 \
\text { Asset revaluation reserve } & \$ 200000 \
\text { Retained profits } & \$ 100000
\end{array}$$
During 20X2 Subsidiary generates $100 000 profits and revalues plant downwards by $375 000.The 20X2 profit is before any impact of the downward asset revaluation.The asset revaluation reserve all relates to previous revaluation of plant.
During 20X3 Subsidiary incurs $50 000 of losses.
The amount of accumulated losses included in the consolidation for 20X3 (that is, not eliminated) is $125 000.

Question

Wholly owned Subsidiary has the following balances at control date 20X1:
 $$\begin{array} { l l } 
\text { Capital } & \$ 500000 \
\text { Asset revaluation reserve } & \$ 200000 \
\text { Retained profits } & \$ 100000
\end{array}$$ 
During 20X2 Subsidiary generates $100 000 profits and revalues plant downwards by $375 000.The 20X2 profit is before any impact of the downward asset revaluation.The asset revaluation reserve all relates to previous revaluation of plant.
During 20X3 Subsidiary incurs $50 000 of losses.
The amount of accumulated losses included in the consolidation for 20X3 (that is, not eliminated) is $125 000.

Quizplus · Accepted Answer

The accumulated losses included in the consolidation for 20X3 are $125,000, which is equal to the retained profits of $100,000 at the control date plus the losses of $50,000 incurred in 20X3, less the downward revaluation of plant of $375,000 in 20X2.

Wholly Owned Subsidiary Has the Following Balances at Control Date