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I wanted to ask why is the loan note amount of 800 is not added up in 6% loan notes in NCL ?? N secondly 800 is added in goodwill n reflected then why it is deducted from investment?? Shouldn’t it b addded to NCL instead??
Hi,
1st question: why loan note of $800 is not added back to NCL?
Well, basically, parents issues loan notes for Subsidiary, you can can consider it is kind of inter-company transaction/ balance, thats why you cancel it on consolidation.2nd question:
800 is added in goodwill calculation, to calculate the amount of investment.
The company ALREADY RECORDED this (included in Investment of $1800).
When doing consolidation, the principle is eliminate the investment in subsidiary (and also only account for Parent’s equity) , thats why you have to deduct it.Hope this helps a bit,
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