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Anyway Mr John…You’re dodging the question..I still can’t get answer to my question which is What happens to pre acquired retained earnings…..Parent company’s shareholders are eligible to get paid from pre acquisition in a form of dividend..?
Alright..But the question is why?
Why dont we just adjust it like we do for inventory?Thanks Mr John..I really appreciate it..
Net profit was calculated as being $10,200. It was later discovered that capital expenditure of $3,000 had been treated as revenue expenditure, and revenue receipts of $1,400 had been treated as capital receipts.
What is the net profit after correcting this error?
In this question, It’s impossible to get the right answer because revenue receipts contains cost + profit from which we cant get profit figure…
It would be great if you explained it by giving a simple example…From prime entry to statements..thanks
So they sold the car to another customer and received the money from him ,which gives them the same profit if they had sold the car to him.
Good afternoon Mr Mike…
1..I’ll give him part of my debt $70 (full debt is $100) and I ask him can we call it a day would you receive it as a full discharge or payment…He says yes so I won’t owe him anymore…
But tomorrow, he won’t keep his promise and insists I pay the rest…If he sues me , will he win? (But he agreed)2.If I give $70 worth of goods to him and accepts it as a full discharge….Tomorrow he will change his mind asking me the rest too…(But he accepted it as a full payment).Can he sue me and win?
Thank you..Ok..But what about extra information…I don’t understand..
Reading question, I would assume company has got 5 million shares worth of $1 each and probably retained earnings…
But here it says net assets 4750,000 and share price of 1.10….
How is that even possible. I canttttt comprehend….Please explain it to me…
Many thanks…Hi Mr John…
I came across a question about consolidated statement including dividend in Parent company’s P and L, and as a liability in both P and Sub companies SOFP…(The question is
I don’t know how to deal with them…
It would be great if you gave some direction….
Thank you…we only want to show receivables and payables from outside the group – we do not want to include receivables and payables between the parent and subsidiary
…Hi Mr John…The question is why not..
As long as S sells all the goods bought from P….
Thank youHi Mr John…
Like you said, parent company isn’t affected at all by consolidating so if investment cost doesn’t change then Should I only pay net assets worth of money of P company in order to buy P and S? (If I own 100% shares of S).
But in fact over a period of time , S has managed to generate some profits (retained earnings)
promoting an increase in net assets of S which will not equal to our investment cost in the end…
Thank you….Many thanks for clear explanation..
On page 117, example 2 , you calculated post acquisition earning like (16,000-6000)*60%.
I found it very confusing because 6000 isn’t total retain earning when P bought S but earning belonged to P… I mean 16000 is total but 6000 isn’t.
Thank youOk…But since it bought another company, subsidiary company’s net assets have increased to 18000 from 10000 which gives us the impression of revaluation of our Investment asset..
And then you prepared consolidation giving us 6000 more than expected at 54000 instead of 48000…
( Investment was the capital amount of subsidiary before making profit , if subsidiary makes a profit of 8000 I think parent company’s net assets should rise by 8000 )
Thanks…Mr John, you replaced investment at cost of 10000 with S’ ingredients…
S company’s capital was 10000 before making profit of 8000…
So the formula Assets-Liabilities=Capital(net assets) doesn’t seem to be working here..
Net assets was 18000 but you replaced this figure with 10000 which is so confusing…Thank you……As you said when cash is refunded , credit cash debit receivables but assuming that transactions for returned goods have already been done : credit receivable( meaning we owe that customer) and debit sales…
I don’t know but I think when a customer (who bought the goods on credit and later paid ) returned the goods we should debit sales and credit a new account called Refund Payables..
Then if we refund the cash , then we would credit cash and debit Refund payables….Yes,I’ve watched them…But anyway I can’t get it…
Suppose, I made a cash sale , credit sale and debit cash..
If my customer returns those goods, I should credit cash and debit sale or returns account as you said in your lecture which reduces sales figure…The second question: Joe’s balance of (debit) $780 had been omitted from the list of balances..(The topic is related to receivable ledger control account)…Does it cause any errors? Thanks.
