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Parent -Panther Subsidiary-Seal
Acquisition Date April 1 2011 Balance Sheet Date March 31,20121. Seal had an unrecorded deffered tax liability of $1 million, which was unchanged at balance sheet date.
Should this transaction be credited to Seal’s Net Assets at both acquisition and balance sheet date?
On balance sheet -11% Loan Note – Panther 12 000000 Seal 4000000
2. Immediately after acquisition, Seal issued $4 million of the 11% Loan Note, $2.5 million of which was bought by Panther. All interest due on this loan note as at March 31,2012 has been paid and received.How do i approach this?
Where does this transaction affect? The net assets?1 yes
2 we need to cancel the 2.5m out of parent’s financial instrument assets against 2.5m of the subsidiary’s financial instrument liabilities
If the question is also asking for a consolidated statement of income, then the loan interest received by the parent needs to be cancelled against the same amount of loan interest paid by the subsidiary
Ok?
so i just subtract the 2.5 m from the 4m liability of the subsidiary making the sub balance 1.5 m
and the add the 2.5m to the parent’s asset?This is the question:
On April 1, 2011 Panther acquired 80% of Seal’s equity shares by means of an immediate share exchange and a cash payment of 88 cents per aquired share, deferred until April, 1 2012. Panther has recorded the share exchange, but not the cash consideration. Panther’s cost of capital is 10% per annum.
Panther Seal
Non- Current Assets
PP and E 38 100 000 28 500 000
Investment Seal 24 000 000
Investment Comb 6 000 000
Investment- Loan Note 2 500 000
Investments- Other Equity 2 000 000
Total NCA 72 600 000 28 500 000
Current Assets
Inventory 13 900 000 10 400 000
Trade Receivables 11 400 000 5 500 000
Bank 900 000 600 000
Total Current Assets 26 200 000 16 500 000
Total Assets 98 800 000 45 000 000Equities and Liabilities
Ordinary Shares @ $1 each 25 000 000 10 000 000
Share Premium 17 600 000 –
Retained Earnings 30 200 000 26 000 000
72 800 000 36 000 000
Non-Current Liabilities
11% Loan Notes 12 000 000 4 000 000
Deferred Tax 4 500 000 –
Current Liabilities
Trade Payable 9 500 000 5 000 000
98 800 000 45 000 000From the advise u gave i the 2.5 would be taken from the Investment- Loan Note making it 0. and the 2.5 would also be taken from the loan not of the subsidiary making it 1.5m
Therefore this is an inter company transaction and does not affect the net assets. Am i correct?It’s an inra- group balance, not an inter company transaction
And nowhere in this last post of yours is there any indication that the 2.5m is a part of the 4m subsidiary loan note liability
In fact, if I read your blues and blacks correctly, the 2.5 m appears to be an asset of the subsidiary (it’s in black) and what’s an investment comb? A high value piece of hairdresser’s equipment?
Seriously, what do you mean “investment comb”?
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