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i like to know fron you is the method which is described below will be acceptabe in term of pup on nca.
as in kaplan book,we calculate pup as difference in cv at subsidiary book(which sold the nca) and cv in parent books and then deduct from subsidiary net asset list as follow(from ch 9 example 1
—————————–at acqu date ———————————-at csfp dateshare capital ————— 200000—————————- —–200000
premiun ———————- 10000 ————————————10000
retained earnings —————- 59333 ———————–64000
Pup on nca – —————————————————–15000
you have deducted 20000 from sub and then adding 5000 to parent but net effect is 15000.will the above treatment is correct and not(logic) and secondly how the dividen is treated in above way and if sub is incurred loss which is in your answer then dividend whic it pay for two month is from pre acquistion profits and dividend from pre acq pofit is deducted from retained earning.plz wxplain this matter(dividend).
thanks for answering my previous question
The course notes should show the net 15,000 deducted from the selling company. The previous notes showed 20,000 deducted from the selling company with a 5,000 add-back to the buying company.
The current course notes are the correct way (the previous course notes WERE correct but the rules changed)
A company can only pay a dividend out of profits available for the purpose. If the subsidiary has made a loss post acquisition but has positive retained earnings pre-acquisition, the dividend MUST have paid financed out of those pre-acquisition profits
The comprehensive example to which you refer is no longer the one to follow. Download the most recent set of course notes and follow through the question Ausra and Danute
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