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Hello,
According to note (ii) we accelerate payment of loan+interests by:
Dr. Cash 9
Cr Investment 5
Cr. Receivables 4But it is stated that Highmoor had accrued interest income in its books (which is intercompany). Don’t we have to cancel it by?:
Dr. R.E. of H (Interests income) 4
Cr. R.E. of S (Interest costs) 4
?
As I understand the issue it would lead to different allocation of R.E and NCI in CSOFP.This issue is ignored as well in Kaplan as here on opentuition lecture.
Please help,
Regards,
TomaszSo far as each company is concerned, their entries are correct. For the purposes of the consolidated statement of income, there would need to be cancellation of the finance income against the appropriate amount of the finance expense.
But for the purposes of the statement of financial position and the calculation of working W3 Consolidated Retained Earnings, we take:-
Hs own +
H’s share of S post-acq retained –
Goodwill impaired since acquisition (just our share)
No mention there of cancellation, is there?
OK?
OK:)
I must have been tired yesterday…Intercompany trading does not influence R.E., only unrealised profit should be corrected against inventory.
NCI should also be in the amount of “minorities” profit/loss without intercompany corrections.Yesterday I had much different point of view don’t know why now:)
Thank you for help!Regards,
TomaszBTW
Great lectures!I think I will switch into opentuition when learning for a next paper
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