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Hi, I have a question about 2017 March-June Dargent question.
On 1 January 20X6, Dargent Co acquired 75% of Latree Co’s equity shares by means of a share exchange of two shares in Dargent Co for every three Latree Co shares acquired. On that date, further consideration was also issued to the shareholders of Latree Co in the form of a $100 8% loan note for every 100 shares acquired in Latree Co.
None of the purchase consideration, nor the outstanding interest on the loan notes at 31 March 20X6, has yet been recorded by Dargent Co.In answer to this question interest of 300 (15000*8%/12*3) deducted from consolidated retained earnings and 300 added to accrued loan interest.
Why interest charged on loan note is not considered an intra-group transaction and not eliminated in this question?
Thanks in advance.
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