[Aloyce]

I got you sir !
It starts now make sense……

Thanking you for your help.

[Aloyce]

Sir, could you check the below statement
“Paradigm has not recorded any of the purchase consideration, although it does have other 10% loan notes already in issue.”

Thats what makes me think, they have not accounted interest because they didn’t even recognize the original obligation/liability.

I totally agree also with your assumption, though mine also i THINK its valid too.

Am i wright Or i have just overlooked the question

[Aloyce]

Sir, Its June 2013

[Aloyce]

But Sir, the loan is between the parent company and shareholders of subdiary. It is not between the parent and subsidiary.

Where am i missing the point

[Aloyce]

I got you.
Thanks

[Aloyce]

I forget to put tripple zeros. Its $ 700,000 and not 700

[Aloyce]

Mike sorry,
I have stuck in this question.

Why they have used $ 700 instead of $ 697,370 Which is the lower amount ??

Premium paid =200,000
add
200,000*((1-(1+0.1)^-3)/.1)=497,370

Total…..697,370

[Aloyce]

But Sir,
Neither IFRS 5 nor IFRS 9, allow such a treatment.

This is what i have understood. May i have a problem somewhere

IFRS 5, we recognize gain only to the extent of any cumulative imparement loss. Through P&L

IFRS 9-For a financial asset like that we normally done it through profit and loss for any subsequent measurement.

[Aloyce]

Sir,
which Standards are applicable for investments hold for sale ?

Do we go for IAS 40 ? IFRS 5 ?

Its quite challenging me

[Aloyce]

Thanks

[Aloyce]

Sir, again
Sorry

How do we present Deferred credit income in SOFP ? Are we going to separate into Non current and current liability ?

Also, are Non current assets held for sale, remaining in Non current heading in SOFP ??

Thanks

[Aloyce]

Yah, may be they have taken that assumption.

Anyway, thanks for your help. Atleast i got something

[Aloyce]

Sir, i dont understand the way has been solved in the text book.

Here we go:
They take variable costs for each product and compare with purchase price from outside.
Over purchase price
A-5
B= -6 (Purchase price is less than Variable cost)
C= 21

Product B is better to buy from the Market, because the purchase price is less than the costs to make.

For product A and C, we can make in house but keep in mind key factor. So they calculated variable costs per limiting factor
A- 44/2hr=22 Per hour
C- 124/7hr=17.7 Per hour

Based on variable costs per limiting factor, we start with the one with the lowest value which is product C.

Product C
1900 Units * 7 = 13,300 Hrs

So remaining 4700 hrs ( 18000hrs-13300hrs) is for product A which each unit takes 2 Hrs.
So product A, we can produce only 2350 Units (4700hrs/2hrs).

The rest units for product A 1350 Units (3700-2350), they decided to buy from the market.
Therefore, units of
A-1350 Units Purchased from outside
-2350 Units-produced in house

B-1600 Units purchased from outside

C- 1900 Units produced in House

Thats is how the text book has solved the question.

MY PROBLEM IS why they decided to buy from outside 1350 Units of product A instead of make them in house by going extra shift ??

Relevant cost for extra shift to make in house
Variable costs 1350units * 44= $ 59,400

Additional wages
.3*8*1350= $ 3,240

Addition fixed – 1800
Total relevant costs $ 64,440

Costs to buy from outside
49*1350= $ 66,150

$ 64,440 is less than $ 66,150. I dont understand their solution, why has decided to buy instead of make them in house.

Thanks

[Aloyce]

I got you Sir.
Thanks very much

[Aloyce]

Sir,
Could you help below questions

1. Dividends received, interest received and royalties, are they part of revenue item in SOPL or other income ??

2. Under operating lease, minimum lease payments are they part of revenue or other income ?? In the books of lessor

3. Under finance lease, in the books of lessor- We start by derecognize the leased asset and then recognize at the lower of PV of min lease payments or Fair value. My question is, what if the amount we recognized is different from the carrying amount of an asset, Where do we account the difference ?? Eg Asset has carrying amount of $ 1.5m and the present value of min lease payments is $ 1.2m Or 1.6m

4. What is logic behind of recognize at the lower of Fair value and Pv of min lease payments ?

[Aloyce]

Thanks i got you. I was trying to dig too deep .

Sorry
Another question, is the profit from the sale of non current assets, a revenue ??

Thanks in advance

[Aloyce]

As per Revenue Standard IAS 18

[Aloyce]

Thanks, i got the point !

[Aloyce]

Hi Mike !
Today, i have just gone through this forum. I have question on this

How do we present ? Can we offset the balances for deferred tax asset and liabilities ??

Deferred tax liability-.3*10,000=3,000
Deferred tax asset-.3*60,000=1,800

Non current liability
Deferred tax liability -1,200

Do standards allow ?

[Aloyce]

Sorry Sir i didnt even know, i hav posted in this forum. Wont repeat again.

Why the absortion rate has based on 15,000 units instead of 30,000 ???

[Aloyce]

Thanks very much !
God bless you.

[Aloyce]

Sir,
I got you BUT could you check it again the statement

“A debt to equity ratio that is too low usually indicates that the business is not using its cash and profits to obtain business assets. This may discourage investors because it will mean that less profits are distributed to them “

I think, there is typing error. Instead of saying “the business is not using its cash…” , they should have said ” the business is using its cash….” am i correct ?

Having Low debt-equity ratio, it means the business is using its shareholder’s funds more to finance the business. And because of this, the business is not in the position to declare dividend as it needs more and more money to finance/expand its operation. Hence, it discourages investors because less profits are distributed to them.

[Aloyce]

Not yet Sir. How could it be LOW, while its having heavily long term debts ?

I am missing the point.

[Aloyce]

Well noted Sir Mike !!!

Thanking you very much.

[Aloyce]

I got you sir !

Thanks and God bless u

[Author]

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