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Dear Mike,
1.Can you please help me understand the calculation for share premium, it say 8000 shares @ $2 I don’t understand how $2 was calculated, I know that par value is $1
2. Point 3. Pyramid sold to Square:-
It says, Sales to square 16000 and Purchases from Pyramid 14500. Doesn’t both mean that Pyramind sold to square just that they were written differently? In that case why are we subtracting 16000-14500? when we should be adding 16000 + 14500 🙁
Sorry if my questions are ridiculous 🙂
Plen
Hi Plen. Without the question in front of me … weren’t the 8,000 shares valued at $3 each?
In that case, the $2 premium is the $3 value less the $1 nominal value.
Sales to Square $16,000 is as recorded by Pyramid. Purchases from Pyramid $14,500 is as recorded by Square. That’s telling you that there’s 1,500 in transit and needs adjustment
And don’t worry about whether or not your questions are ridiculous
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Strange, I downloaded the answers from ACCA website, but the loan interest of 275 has not been deducted from P’s ret’d nor moved to S’s ret’d when calculating con ret’d ears…
Well, thank Heavens for that. I have no idea which question you are talking about but the idea of adjusting the retained earnings of the two companies just sounds incorrect to me. Why do you think it should be adjusted in the retained earnings figures?
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I saw there is already a post about Pyramid (06/12), so I attached my question here, whithout mentioning the question name.
In fact I forgot to adjust it until I watched the vedio.
It starts at 22:35.
https://opentuition.com/acca/f7/acca-f7-june-2012-question-1-pyramid/
Thank you.
Hi – I’ve just checked my own recording of the Pyramid answer – at 22.35.
OMG What have I done? Yes, I should cancel when working out investment income abd finance charges for the Statement of Income … but what on Earth was I thinking about cancelling / reversing the loan interest payment.
Ok, thanks for pointing it out – that looks like yet another answer which I need to rerecord this Winter 🙁
Hi Mike,
I’ve asked this intra-group interest but still don’t understand why doesn’t need to adjust it in the Retained Earnings working. When I was working this question, I did the same as yours in the video but ACCA answer (https://www.accaglobal.com/content/dam/acca/global/PDF-students/acca/f7/exampapers/int/F7INT_2012_jun_a.pdf) hasn’t done any adjustment.
The interest paid by Square(subsidiary) to Pyramid(parent) came from post-acquisition profit of Square so I thought to add back the interest under S and deduct it under P so the post-acquisition profit of S is free from any intra-group transactions.
So why the answer book doesn’t do any adjustment?
Many Thanks.
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