hi guys i just wanna know the treatmentment of dividend which is proposed before the acquisition but recieved after the aqcquisition in consolidated staetments.plz guyz help ,me in this complex adjustment.
Any dividend paid by subsidiary out of preacquisition profits after the acquisition will effectively be a return of capital to the parent and therefore will reduce the cost of the investment in the goodwill calculation.
cost of investment will be reduced with dividend amount!
sorry for late reply
I’m not sure about this! If it was proposed BEFORE the acquisition, then it will have been deducted in arriving at the net assets as at date of acquisition. Therefore, when the dividend is subsequently paid ( and received by the parent ) is it being paid out of pre-acquisition profits?
I don’t know and I have to leave here in the near future. But, if I can face the prospect, then I’ll come back to it later
Just as a reassurance, Steve Scott very rarely asks a problem involving pre-acquisition dividends and, when he does, the dividend was not proposed as at the date of acquisition.
could anyone please write the double entry for this adjustment? in this scenario if there is dividend expense and dividend payable both presented in the accounts
In Statement of Changes in Equity, Debit Retained Earnings with both the paid dividend and the DECLARED dividend ( if declared before the year end and therefore qualifies as an obligation )
The paid dividend will have been credited to Cash
The declared dividend will be credited to Current Liabilities
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