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Hello sir,
I am looking at coursenotes page 68. Example 2.
Just want to know why we dont have to adjust the dividend proposed in both investor n investees RE?
If investee declaring dividend. Wont investor be getting dividend income as per shareholding?
Ahhhhh… Is it because it has not been declared… Just proposed? So its different if it were a subsidiary???
I sound sooooo desperately lost!!! Pls help me
Hi, no, where the question says that the companies have declared dividends before the year end, both investee and investor should be accounting for it (20,000 payable in the subsidiary and 60% x 20,000 = 12,000 receivable in the subsidiary)
In the subsidiary, the 20,000 will be deducted from Natalija’s retained earnings but this will be shown in Natalija’s Statement of Changes in Equity.
As for the 12,000 receivable – yes, Viktorija should have accounted for this in her Statement of Income as “Investment income” and when it comes to trying to “prove” the consolidated retained earnings (not expected of you in F7) then when doing Working 3 you would have to include this 12,000.
But for the Consolidated Statement of Income we ignore the dividend received from the subsidiary ie we do not include it within the Consolidated statements.
Is that ok, or do you need more?
If so, post again
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