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Sir ,
here i am ok with cancelling the investment income of 2000 against finance cost of 2000
and i am happy with 1100 investment income fig
the issue comes on finance cost whereFinance costs (1,800 + (3,000 x 6/12) –((W4) 2,000 ? 6/12) + (W4) 2,000- (W4) 2,000)
i am ok with 1800 + 3000×6/12 and just the last 2000 which is meant to credit the finance cost but with middle two figure i am not ok plz explain and specially the 2000×6/12 is bothering me alot as we have already apportioned it then why 6/12 ?It’s the time apportionment issue. Salva issued a loan note shortly after acquisition so the half year’s loan interest is specifically post acquisition. Salva paid 6 months of 8% loan interest on $50,000 = $2,000 and, in total, paid $3,000 in the year. Take out the $2,00 post acquisition (from the total amount of $3,000), divide the remainder by 2 (=(3,000 – 2,000)/2) That gets us to $500. Then add back the $2,000 specifically identified as post acquisition = $2,500
OK?
Check out the answer on this site to the chapter 9 question from the course notes. The question is called Ausra and Danute and has a similar “not-so-straight-forward” period allocation problem for the profits
Specifically, watch out for the treatment of the $36,000 from point (2) in the question
Then, if you still have a problem, post again
Sir i have this problem with the NCI silvas post acquisition profit why is he substracting 1000 eventually when he should add back the intra group recievable by the value of 2000.
a explanation for the figure of silvas post acquisition profit figure will be greatly admired.
thanksHave you read the posts above? Have you checked out the question Ausra and Danute that I recommended to Aishaasad?
Please dodo and then, if you still have a problem, post again
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Hi mike,
I need your help, why the loan notes is included in calculation of goodwill? loan notes is financial instrument, it is liability and not the net asset right? I need your explaination to understand the answer.. tq mike n hv a great day
Where a company issues loan notes as a part of the purchase consideration, surely that is not really a whole lot different than promising a payment of cash in, say, two years’ time
I don’t have the question readily available to me so it is possibly the case that the loan notes are already in issue by the subsidiary and are part of the net assets of the subsidiary. Why would you not include them if they are an element of FV of SNA @ DOA?
Ok?
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