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Imputed interest charge

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Imputed interest charge

  • This topic has 1 reply, 2 voices, and was last updated 2 years ago by John Moffat.
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  • October 1, 2020 at 7:06 am #587093
    yusra97
    Member
    • Topics: 66
    • Replies: 61
    • ☆☆

    I watched your lectures. Notional interest is actually imputed interest sir?
    There’s a question
    Traceable residual income for a division is being calculated. The following information is available.
    1)Head office requires a rate of return of 10% for the division.
    2) Properties specifically relating to the division, which are managed by head office amount to $800,000
    3) Other assets totalling $400,000 are controlled by the division.
    What is the imputed interest charge to be used in the traceable residual income computation for the division?
    Correct answer is 40,000
    Sir i dont get the logic. Please explain me in simple words.

    October 1, 2020 at 10:01 am #587111
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51532
    • ☆☆☆☆☆

    Yes, notional interest is imputed interest.

    The RI is calculated using the assets controlled by the division and the profits controlled by the division.

    The head office required a 10% return. 10% x 400,000 = $40,000

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