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E.g. Party A charged party B and party B charges party C. In this case, when party B issued an invoice for the disbursements to party C, should party B invoice for the disbursements gross or net of the invoice received by party A? Moreover, is the input tax allowed party B or by party C, since the expense is obo party C?
Moreover, with respect to PUP, why do we debit COS instead of Revenue? Shouln’t we decrease revenue by the unrleaised profit, therefor debiting revenue?
Should it be that inrercompany balances are eliminated, i.e. Dr payable, cr receivable, and the reserves of the company that is being merged going to the merger reserve?
But if there is a merger by acquisation, there is no subsidiary, as the company no longer exists after merger.
Example, company A acquires all assets and liabilities of company B. Upon the said merger becoming into effect, company B will be struck off from the registry and it will no longer exist. The consideration for this merger by acquisition is nil.
No consolidation accounting was previously being done as both companies do not have any investment in subsidiaries and also they are both limited companies. As as the merger date, company B only had a receivable from company A in it’s balance sheet. Thus, the only entries in company B’s balance sheet were:
Dr receivable (from company A)
Cr Odrinary Shares
Cr retained earnings.After acquisition date, this need to be recorded in the single entity (individual accounts) of company A (to account for the merger).
Before any adjustment entries for the merger are made, company A has a payable to company B. Post merger, what should the double entry be in the separate accounts of company A? Debit the payable (as the supplier no longer exist) and where should the credit entry be?
So there is a merger by acquisation. Company A acquires all assets and liabilities of company B. Upon the said merger becoming into effect, company B will be struck off from the registry and it will no longer exist. The consideration for this merger by acquisition is nil.
No consolidation accounting was previously being done as both companies do not have any investment in subsidiaries and also they are both limited companies. As as the merger date, company B only had a receivable from company A in it’s balance sheet. Thus, the only entries in company B’s balance sheet were:
Dr receivable (from company A)
Cr Odrinary Shares
Cr retained earnings.After acquisition date, this need to be recorded in the single entity (individual accounts) of company A (to account for the merger).
Before any adjustment entries for the merger are made, company A has a payable to company B. Post merger, what should the double entry be in the separate accounts of company A? Debit the payable (as the supplier no longer exist) and where should the credit entry be?
But how can it be still show as payable to the acquired organisation if the acquired organisation no longer exists due to merger?. There is no consolidation as it is only one entity, being the company of the acquirer. Thus, how would such thing be accounted for in the accounts of the acquirer (no consolidation).
Passes with 65% on my first attempt. Once again, thanks again OT for the great support you provide to us. Couldn’t have done it without you.
Dear Sir,
I am confused with this topic. Do I need to know the current accounting standards or the accounting standards that are yet to be implemented?
Moreover, if I need to know about the accounting standards yet to be issued, where can I find them please?
Regards,
Marylise SaccoI have also encountered the following difficuilty:
Chapter 20 (sales and leaseback) – Can you please explain the concept why proceeds less than FV of the asset are accounted for as a prepayment, and why lease payments less than market rental are accounted for as an additional financing? I cant understand what it has to do with prepayment and vice versa.
Looking forward for your reply.
Regards,
Marylise SaccoI downloaded the notes 3 months ago, and it was apart from the 15 questions at the back. I hope the notes I downloaded cover everything from this exam, as I downloaded them again now and they are a bit different :/
Dear Sir, Thank you for your reply.
I actually did listen to all the lectures, however when I was working out some questions and revised the notes as I went along, I encountered these 2 problems I asked you above re the OT notes :/.
I apologies if I am bothering you, but I am really trying all my best to pass from this exam :(, can you still explain to me the following? as I still can’t get it :/
Isn’t the 15c dividend per share paid on every 50c ($0.50 per share) and thus for every $1 (2 shares) the amount of dividends paid will be 30c, with the equation being 30c divided by 12% please?
Thank you so much in advance.
Q1:
A project has the following projected cash inflows:Year 1 100,000
Year 2 125,000
Year 3 105,000Working capital is required to be in place at the start of each year equal to 10% of the cash inflow for that year. The cost of capital is 10%. What is the present value of the working capital?
The ans is $2735 negative. Can you kindly explain?OT notes,Chapter 15 Example 2:
Isn’t the 15c dividend per share paid on every 50c ($0.50 per share) and thus for every $1 (2 shares) the amount of dividends paid will be 30c, with the equation being 30c divided by 12% please?
Chapter 23: Forward Contracts (pg 124 notes)
If the rate is expressed as a premium from say spot £/$ 0.8434 – 0.7942, in this case and the forward rate is 0.62-0.51cpm, we have to add or also subtract?Thank you in advance
Dear Sir,
I’d love to let you know that I have passed with a mark of 67. Thank you so much for all of your help. Keep up the good work.
Regards,
Marylise
OT Practice Questions pg 276 Q.12
Is the ranking in the last calculation done starting with the one who earns the least earnings, thus in this case it would be options since is nil, followed by the loan which has 3,528 please?
In the notes Chap 21, Example 5, when doing the rankings, why did we deduct the $900,000 from discontinued operations, thus leaving us with a balance of $9,100,000? Could we leave it at 10m, thus we do the extra working of the diluted EPS i.e. 10m/3.5m = $2.86?Thank you in advance 😛
Throughout the years, is the government grant debited in deferred income and credited through P&L please, and is the deferred income split between current and non-current liabilities accordingly?
Brilliant thanks. And if for example the premium would be paid back by the lessor to the lessee by the end of the lease, how would it be accounted in that case?
June 15 Past Paper section B Q3 point V
What is Lease premium exactly please, and why is it split between Current and Non Current assets? Is a premium payment always an asset and a Premium Received always a liability and to be split between Current and Non Current please?
Understood the last question I asked you on June 13, its because it’s the year end balance of shares and not the balance at the start of the year .. thx anyway 🙂
June 13 Past paper section B Q2 point v
It tells you: On 1 July 2012, Atlas made and recorded a fully subscribed rights issue of 1 for 4 at $1.20 each. Immediately before this issue, the stock market value of Atlas’s shares was $2 each.
Ans:The rights issue of 20 million shares (50,000/50 cents each x 1/5) at $1.20 has been recorded as $10 million equity shares (20 million x $0.50) and $14 million share premium (20 million x ($1.20 – $0.50
Shouldn’t the total shares be divided by 4 and not by 5 please?
Re“Specimen paper Sep 16″ Q.24
I have brought the 950 from The loss of Onerous contract ( 850 + (200/2)) :/Doesn’t the factory fall under Property in this case? :/ or the profit of $1,200 on factory is not taken into consideration since it is the expected selling price and thus not yet earned, thus we ignore it?
In Cash flow, Revaluation would be ignored right?
Moreover, I need help in how to tackle a consolidated question, since I am doing a mess with my workings and getting lost. What is the best approach and format to tackle them? Should I write the double entries effected in each point and then start working for not missing anything out?
Thank you in advance.
Specimen paper Sep 16
Q24. Why did the question only take loss of plant and did not include profit/loss on property and equipment? Since I did 1,750 loss on plant, 1200 profit on factory and 950 loss on equipment.Specimen paper of 2014
Section B Q2: point i)
Square had an unrecorded deferred tax liability of $1million, which was unchanged as at 30 September 2014.
The 1million would not be deducted from Square’s retained earnings?