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in this question, one of the adjustments says
Polestar has recorded its investment in Southstar at the cost of the immediate cash payment; other equity investments are carried at fair value through profit or loss as at 1 October 2012. The other equity investments have fallen in value by $200,000 during the year ended 30 September 2013.Financial asset: equity investments (note (iii)) 16,000
Its treatment is done in the following way
Financial asset: equity investments (16,000 – (13,500 cash consideration) – 200 loss)
Can you tell me they have deducted the cash consideration? Only the equity investments have fallen in value so why reduce the amount of cash consideration?
We are told about the cash consideration that was paid on the acquisition of Southstar
Credit Cash 13,500 and debit ……. where?
Do you see it anywhere in the Polestar statement of financial position? It must be in there somewhere!
Any ideas which line item in the Polestar statement of financial position could be the one that includes this $13,500 investment in Southstar?
Could it be the equity investments? I don’t see 13500 anywhere in the Polestar SOFP
Without looking at the actual question maybe you could confirm for me the amount of immediate cash payment made by Polestar
I’m guessing it was $13,500 and the accountant has effected the double entry:
Dr Equity Investments 13,500
Cr Cash 13,500Is it coming clearer now?
There is cash consideration in every question but they have subtracted it from the equity investments in only a couple of them.
You didn’t answer my question!
‘…maybe you could confirm for me the amount of immediate cash payment made by Polestar’
The reason that the cash is not deducted every time from equity investments is that it is not always “hidden” within equity investments
Sometimes it’s not hidden at all and is simply shown as a separate line item in the parent’s statement of financial position
But it will always be recorded SOMEWHERE within the parent’s statement of financial position
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