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Hi John,
I want to bring up question Flufftort Co again because there are some confusion.
For 2015 Decq3, the interest payment of 8.5% and 10% are not recognized in retained earnings (interest expense) and cash in the balance sheet.
But for 2017 DecQ1, interest payment is recognized in BS by reducing reserve and cash balance.
As such, I want to ask when the interest payment would be recognized in BS when we are doing the exam?thanks in advance!
In the 2017 question they are taking the existing profit and just adjusting for the extra interest (not for the existing interest).
Hi John,
Hope you are well,
I also have another question from 2021SDQ3 Hanwood Co. I am wondering why interest saved, return from investment in NCA and CA that are incorporated in PAT are not transferred to reserves in the Balance sheet?
In this case, I cannot find any clue suggesting that CEO is looking for a Balance sheet showing immediate impact on sales of children’s division only.
Thanks in advance!
hey i dont know if i am right, but i think you can include them in the retained earnings. To balance it off, you would assume that they have been received in cash and therefore current assets would have to be adjusted too.
Lets wait for his answer.
No, they should not be incorporated in the SOFP.
Although the question does not specifically state that it wants the immediate impact on the SOFP, this is implicit because although it asks for the forecast EPS it does not ask for a forecast SOFP.
(Otherwise it would have asked for a forecast SOFP and a forecast EPS)
Thank you John, it makes sense now, I have come to realize that sometimes the website does not display my question but it is great that you can see it:)
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