- This topic has 1 reply, 1 voice, and was last updated 3 months ago by Kim Smith.
April 28, 2022 at 3:55 pm #654551almansaray
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a) The parent company DLPT has asked the subsidiary Daniel it subsidiary to guarantee a loan for Benita. Benita has defaulted in the repayment of the loan due to bad business. The security provided by Daniel is sporting plan. Daniel is in a good will Business and contributed 40% Benita used to contribute 30% of revenue. As a result of the non-payments of the loan by Benita, Daniel has made the payments on her behalf, and has created a receivable in his records from Benita at year ended. Benita only knew about the three (3) months payment made by Daniel at the end of the third(3) month and has refuse to pay the payable in her own account and has insisted that this will be taken care of at the group level. This has been impacted Daniel and has stop in repaying the loan. The creditor has decided to call the entire loan and has taken legal actions to empower the bottling plant, which has given by the court ruling to recapitalize this subsidiary (Daniel)
Access the implication in respect to: Daniel (subsidiary), Benita and Parent company
b) The fire accident at all for Daniel factory four (4) month before the years ends, destroying the major part of the business including the part where in the bottling plant is located as a result operations has come to stand still, accidentally insurance policy for the bottling plant has lapses, luckily the building had two month to go for the insurance cover. The repairs to the building will cost $1.5B and the insurance cover only $700M. Management of Daniel has just received the judgment with respect the loan it has guarantee for Benita. Parent company has requested that, the property as it revalued and is unwilling to recapitalize this subsidiary (Daniel)
I. What are the implications on the parent company?
II. How should it be recorded in the company-consolidated account
III. What would be the effects if the creditor should fall on the company given the legal implication on the judgmentApril 28, 2022 at 6:48 pm #654570Kim SmithKeymaster
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Sorry – but as I have answered here https://opentuition.com/topic/group-audit-14 – this is a technical query forum for the ACCA qualification – it is not a homework assignment answering service,
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