Reference no: EM132964549

You are a financial accountant working for Galadriol plc and are assisting with finalising the consolidated financial statements for the year ended 30 June 2021. The following matters are still outstanding.

• On 1 January 2021, Galadriol plc acquired land costing €2million. This was paid for using a €2million loan provided by a German bank on 1 January 2021. The cost of the land and the bank loan have been translated at the average exchange rate for the year. No repayments have been made by the year end.
• On 5 March 2021, Galadriol plc placed an order for €1.5million of goods from a European manufacturer. The goods arrived on 13 March 2021 and the invoice was correctly translated and accounted for. On 31 May 2021, half of the invoice was settled. This transaction has been recorded in the consolidated financial statements using the average exchange rate for the year. No further entries have been made in respect of these transactions.

The spot exchange rates were as follows:

1 January 2021 €1.12 : £1
5 March 2021 €1.15 : £1
13 March 2021 €1.16 : £1
31 May 2021 €1.19 : £1
30 June 2021 €1.14 : £1
Average for the year €1.13 : £1

Problem 1: On 30 June 2021, Galadriol plc disposed of one of its UK based subsidiary companies, in which it held 75% of the ordinary share capital. The only accounting entries that have been made are to debit bank and credit investments in the individual company statement of financial position with the consideration received. Briefly explain the accounting treatment for a disposal of a subsidiary in the consolidated financial statements.