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NOTE : I have not written whole question as it is too long therefore have mentioned the year which is( JUNE 2015 )
on 1 april 2014 cyclip commenced the construction of a new production facility financing this by a bank loan. cyclip has followed the local GAAP in the county where it operates which prohibits the capitalisation of interest . bycomb has calculated that in accordance with IAS 23 Borrowing costs interest of $100.000 ( which accured evenly throughout the year) would have been capitalised at 31 march 2015. the production facility is still under construction as at 31 march 2015.
my question is how this information would affect net assets of subsidiary at the date of acquisition, subsidiary’s retained earnings and finance costs.
“how this information would affect net assets of subsidiary at the date of acquisition”
You haven’t told me the date of acquisition!
Calculate the expensed interest for the period before acquisition and add on to the fair valued assets as at that date and increase the retained earnings by the reduction of the pre-acquisition finance costs (just the one entry in working W2 the goodwill calculation)
The remainder of the $100,000 not so far adjusted should be adjusted for the period post-acquisition …
Dr TNCA
Cr Finance costsCan you take it from there?
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