Sir why do they deduct loan interest from interest income of hydan and finance cost of systan
Shouldnt that be other way round since it is hydan who made the loan issue
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Hydan 6/06
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Sorry!
STATEMENTS OF PROFIT OR LOSS FOR THE YEAR ENDED 31 MARCH 20X6
Hydan Systan Pre- Post- acquisition acquisition
Interest income 350 nil nil
Finance costs (420) nil (200)
In order to finance an increase in the production capacity of Systan, Hydan made a non-dated loan at the date of acquisition of $4 million to Systan that carried an actual and effective interest rate of 10% per annum. The interest to 31 March 20X6 on this loan has been paid by Systan and accounted for by both companies.
Acquisition date= 1.10.20X5
Hydan made the loan to Systan. So Systan pays interest on the loan and Hydan receives interest from Systan at the rate of 10% for half a year on $4m
Ok?
Yes thank you Sir
You're welcome
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