[Dainty]

Its hw d question was writtin. Comb is an associate….
And Thank you

[Dainty]

This is the question:
On April 1, 2011 Panther acquired 80% of Seal’s equity shares by means of an immediate share exchange and a cash payment of 88 cents per aquired share, deferred until April, 1 2012. Panther has recorded the share exchange, but not the cash consideration. Panther’s cost of capital is 10% per annum.
Panther Seal
Non- Current Assets
PP and E 38 100 000 28 500 000
Investment Seal 24 000 000
Investment Comb 6 000 000
Investment- Loan Note 2 500 000
Investments- Other Equity 2 000 000
Total NCA 72 600 000 28 500 000
Current Assets
Inventory 13 900 000 10 400 000
Trade Receivables 11 400 000 5 500 000
Bank 900 000 600 000
Total Current Assets 26 200 000 16 500 000
Total Assets 98 800 000 45 000 000

Equities and Liabilities
Ordinary Shares @ $1 each 25 000 000 10 000 000
Share Premium 17 600 000 –
Retained Earnings 30 200 000 26 000 000
72 800 000 36 000 000
Non-Current Liabilities
11% Loan Notes 12 000 000 4 000 000
Deferred Tax 4 500 000 –
Current Liabilities
Trade Payable 9 500 000 5 000 000
98 800 000 45 000 000

From the advise u gave i the 2.5 would be taken from the Investment- Loan Note making it 0. and the 2.5 would also be taken from the loan not of the subsidiary making it 1.5m
Therefore this is an inter company transaction and does not affect the net assets. Am i correct?

[Dainty]

so i just subtract the 2.5 m from the 4m liability of the subsidiary making the sub balance 1.5 m
and the add the 2.5m to the parent’s asset?

[Dainty]

Thank you very much

[Author]

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