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Dear Sir,
I understand how the year 1 book values for debt and equity are calculated for year 1’s gearing. I wanted to query why the equity (24600) and non-current liabilities (16600) from the previous balance sheet arent also added to these totals?
Thanks for your help, Justine
This is really just financial accounting.
The value of equity only changes from year to year because of issuing new shares and because of retaining earnings.
The value of debt (non-current liabilities) only changes because of interest and the repayment of debt.
Sorry I still don’t understand or didnt explain properly.
So for example, the non-current liabilities are 16,600 didnt get transferred to the new company so would still remain with Bento.
Then if the balance sheet balance for debt is rolled forward from year to year so it would be this 16,600 loan plus the new loans and interest from part b. Otherwise it’s like this 16600 Non current liability just disappeared?
The 16,600 does disappear 🙂
It is because note (ii) of the question says that ‘no liabilities, except trade and other payables specified above, will be transferred to the new company’.
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