Hydan 6/06

This topic has 5 replies, 2 voices, and was last updated 8 years ago by MikeLittle.

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June 2, 2014 at 5:29 am #172523
aishaasad
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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
June 2, 2014 at 6:07 am #172526
MikeLittle
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I don’t have 2006 questions available. If you want me to answer, you’re going to have to copy the relevant parts of the question and post them.

Sorry!
June 2, 2014 at 12:56 pm #172626
aishaasad
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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
June 2, 2014 at 5:18 pm #172867
MikeLittle
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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?
June 2, 2014 at 5:27 pm #172876
aishaasad
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Yes thank you Sir
June 2, 2014 at 5:47 pm #172908
MikeLittle
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You’re welcome
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