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Q1: Working 2 – zinc acquisition, why is it so complicated?
I did:
Consideration paid. 18
FV of NCI 9
Less FV of NA 26
Goodwill = 1I got the same figure. Is it a coincidence?
And I didn’t understand their “Increase in flair value of equity interest (5-2-1)” – what is 2 and 1 here?
Q 2: in the question they say Robby treats Investment in Hai at fair value through OCI, and in answers working 1 they say that an adjustment to be made to investment held at FVTPL. Misprint? If not then why are we making an entry:
Dr OCI 5
Cr investment in hail 5Regarding dividends- I got the point.
re your first post – the increase in fair value is because we’re told that the fv net assets are 26, share cap is 10 and retained earnings are 15. Therefore, there is a fv increase of 1 as at date of acquisition.
Similar information is given about the fair value increase subsequent to acquisition
So, in answer, yes, it was probably a coincidence
Your point number 2, there has been an increase in the value of Hail since acquisition – it cost 50 but is shown in Robby”s Balance Sheet at 55. The increase of 5 has been taken to OCI …. and it shouldn’t have been – so there’s a need to reverse that entry by Dr OCI and Cr Investment
Similarly, the dividend income should not have gone through OCI in Robby – it should be credited to investment income and thus to retained earnings
OK?
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