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In this question profit for the year of subsidiary = 66000
Parent acquired subsudiary in mid year
At same time it invested in some loan of subsidiary
The interest on the loan for 6 months = 5000
So my question is , how to calculate post acquisition profit ?
In answer they calculated like this : 66000*6/12 = 33000
But I think post acquisition profit should be calculated like this
(66000+5000)*6/12 – 5000 = 30500
Help me please
Why would you adjust for the interest on the loan prior to pro-rating the profits?
I want to find the post acquisition profit , so that we can distribute it between parent and nci ,now I just want to know post acquisition profit should be 33000 or 30500?
It is the 33,000 being 6/12 of the profit for the year.