- This topic has 8 replies, 3 voices, and was last updated 11 years ago by
.
- Posts
Hello,
When consolidating the balance sheet, the “available-for-sale investments” are “1800 – 800 consideration + 300 gain = 1300”. Please could you tell me what the “800 consideration” is for?
Thank you,
Stu
Hi, friend!
I think its a part of the consideration (issue new share+ issue new loan note) and it was eliminated in calculating goodwillHi
I don’t have the question readily to hand so am unable in the near future to confirm hainam8x response – sorry
Thank you but sorry I don’t understand. The $800 of loans notes was part of the consideration for the purchase of a subsidiary. Why are we now making adjustments for “available-for-sale-investments”?
No I’m not sure, I was assuming hainam8x is correct. There is 800 for consolidated “total other comprehensive income for the year”, could this be relevent?
But the answer describes the 800 as “consideration” which suggests it is related to the purchase of the subsidiary?
Ah, now I think I have enough to make a reasonable guess!
When the subsidiary was acquired, part of the consideration was $800 loan notes given to the former Sanford members. That double entry has been recorded as Dr Investments Cr Loan notes. Am I correct?
If I’m still correct, then in the working to calculate Goodwill, the $800 will be included as part of the cost of acquisition. If you were to be using T Accounts to record these activities, you would Dr Cost of Control Account whereas the Dr has been taken to Investments within the figure $1,800.
So, now when calculating the figure for Investments for the consolidation, we must exclude the $800 – it’s already been used in the calculation of Goodwill.
Mentally, you should imagine that $800 being taken out of Investments and moved into Cost of Control Account. ie Dr Cost of Control ( therefore affecting the Goodwill calculation ) and Cr Investments ( to take it out of the account )
Ahh thank you a penny’s dropped on my head! And I assume the loan note liability is not reversed because the owners of the loan note are now outside the consolidated group.
Thank you
- You must be logged in to reply to this topic.