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Professor please help me I am very confused.
I am confused the dealing of finance charges.
(i) Like a question, Pandar Co in Kaplan kit shows that parent gives loan to its subsidiary and has 2000 interest receivable on it. Parents Individual finance charge: 1800 and Subsidiary’s individual finance charge: 3000. Post acquisition period is 6 months. Calculation is done like this: (1800+(3000-2000)x6/12)= 2300
(ii) Like a question, Plank Co in Kaplan kit shows that parent given loan to its subsidiary and has 5m interest receivable on it. Parents Individual finance charge: 12000 and Subsidiary’s individual finance charge: 15000. Post acquisition period is 9 months. Calculation of finance charge done by this: (12000+ (15000×9/12) – 5000)= 17500.
I am confused whether we have to first subtract intra group interest and then apportion interest as per post acquisition period. Like in (i)
Or do we have to first apportion interest as per post acquisition period and then subtract intra-group interest. Like in (ii)
It will all come down to the specific wording in the question itself, although there could be a mistake in the answer.
The key is to deduct the intra-group interest and pro-rate it if required due to the mid-year acquisition.