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Concerning example 4(Laimonas and Kristine),
-Why $9000 has been added to Laimonas’s retained earnings. What’s the logic?
-In the balance sheet, $1,000 has been put which represent the NCI proposed dividend?
Where does $1,000 come from? What’s the understanding behind it?Do you think that maybe the following extract from the question could have something to do with it?
“Laimonas has proposed a dividend of $16,000
Kristine has proposed a dividend of $10,000
Both of the above were proposed before the year end, but not adjusted for”And maybe this extract explains the $1,000 nci proposed dividend?
“Laimonas acquired 90% of Kristine’s share capital”
I’ve got your point but still have some issues.
Why the receivables of Laimonas was increased by $9,000? I do have understand that, the fact that Laimonas has acquired 90%, it will get 90% of Kristine proposed dividend. But why it has been added to the receivables? What’s the logic of it?Thanks.
“Both of the above were proposed before the year end, but not adjusted for”
What entry would Laimonas have used to record the receipt of $9,000 cash if it had arrived before the year end by way of dividend from Kristine?
What entry will Laimonas use to record the receipt of $9,000 cash when eventually it does arrive after the year end by way of dividend from Kristine?
Can you work it out now or do you want the detail?
OK?
I am still confuse. I have some difficulties to solve and have an understanding of what you have written in your reply.
If Laimonas had received the dividend from Kristine before the year end, the double entry would have been:
Dr Cash $9,000
Cr Investment Income $9,000In fact, the dividend had been declared by Kristine before the year end but neither entity had recorded the dividend
However, even though it hadn’t been recorded, it was still a liability payable so far as Kristine was concerned and an asset receivable so far as Laimonas was concerned
So, in Laimonas records, we can’t show Dr Cash because the dividend has not yet been received
But we CAN record the receivable with:
Dr Receivables $9,000
Cr Investment Income $9,000Is that better now?
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