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Hi
can anyone explain why in the solution of Qn 51 the decrease in trade receivables is 56 and not 46
I thought that when doing consolidated cash flows, we look at whetehr the it decreased or increased and then subtract what we acquired
In the is question the TR decreased and I subtracted what we acquired due to purchase of sub. And therefore got 46. But the solution is 56
Does this mean that if the TR (or inventory) decreases I need to add what I acquired back and vice versa, meaning that i the closing balance is higher than opening balance I must subtract?
So confused with this
Jocatt is the question.
When you acquired Tigret, it bought it’s assets into the company which had receivables amounting to $5m. You added that in your opening balance because it became your subsidiary on 1 december 2009 (113 + 5 = 118 Minus closing balance thats 62 = 56 being decrease in receivables). Same happens with payables and inventories.
Lets suppose you’ve 4 dolls in your room. Your mother gave you $10 to buy another doll of your choice. You went to the shop, gave $10 to the shopkeeper and bought the doll and kept it with other dolls. Now your mother asks you how many dolls you have now? You say I’ve ‘5’ dolls now, had 4 before buying this new doll and after it got 5..
So you don’t subtract acquired subsidiarys assets they ‘add up’ into the value of your assets.
Doll = Receivable
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