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In this question, consideration (among others) for buying subsidiary is paid with a loan note 6% issue. I couldent understand the treatment of deducting this consideration from Available for sale investments in consolidated accounts, Any help regarding what grounds its been deducted from investment?
6% loan notes (5,000,000 shares x 80% x 100/500*)= $ 800,000
This consideration on acquisition of $800,000 is deducted from Premier’s investments (i.e 1,800,000) because ‘investment in subsidiary’ in the statement of financial position of the parent company is excluded when preparing the consolidated statement of financial position.
P acquired shares of S 5000*80/100 =4000, and P investment is 1800, loan note issue 5000*80/500/100 =800, in the COFP deducted 1800-800 =1000, and total investment 4000+1000=5000 shares.
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