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Hi – I have difficulties in the following consolidation questions:
Q1(Dec11,Traveler) :
Adjustment(3 – goodwill impairment): when calculating the adjusted net assets of Captive, only fair value adjustment(22) and grossed goodwill (150.3) were added to the figure as per B/S(604). However in adjustment 2, there was a correction entry : Dr consolidated reserves 56 Cr land 56 and this was not accounted for in net assets computation?Adjustment(6): can someone explain the following journey in the answer to account for the contribution holiday: Dr net assets 45 Cr liability 45.
Q1(June12,Robby):
Adjustment(1) can some explain the following journal entry to account for the incorrect treatment of dividend Dr consolidated OCE 2 Cr consolidated reserves 2?Q1(Dec12,Minnie):
Adjustment(4) can someone explain the treatment of divided paid by puttin(2 million) with journal entries?Thanx in advance
“Dr consolidated reserves 56 Cr land 56 and this was not accounted for in net assets computation” This asset has been transferred as part of the purchase consideration and it’s been transferred to THE FORMER SHAREHOLDERS OF CAPTIVE! It has not been transferred to the company captive and that’s why it doesn’t appear within any net asset computation
“can someone explain the following journey in the answer to account for the contribution holiday: Dr net assets 45 Cr liability 45.”
Surely, this line from the question explains it! The company is going to pay into the pension scheme $45m (so debit the pension scheme net assets) but has not yet paid the money and therefore needs to provide for the liability (so credit current liabilities)
“After consulting with the actuaries, the company decided to reduce its contributions for the year to $45 million. The contributions were paid on 7 December 2011.”“Q1(June12,Robby):
Adjustment(1) can some explain the following journal entry to account for the incorrect treatment of dividend Dr consolidated OCE 2 Cr consolidated reserves 2?”Here’s a quote from the printed solution!!!
“Further, the dividend income on investment should be taken to profit or loss and not other comprehensive income.
Therefore the adjustments required are:Dr Other comprehensive income 2·00
Cr Retained earnings 2·00”Incidentally, your post suggests that the entry was debit Consolidated Other Components of Equity whereas I believe you meant Other Comprehensive Income!
“Q1(Dec12,Minnie):
Adjustment(4) can someone explain the treatment of divided paid by puttin(2 million) with journal entries?”What’s the matter with the printed answer explanation? I quote:-
“The dividend should have been credited to Minny’s profit or loss and not OCI. Dividend income as an investment and as an associate is treated in the same way as a credit to profit or loss”
The adjustment necessary is:-
Dr Other Components of Equity 2m
Cr Retained Earnings 2mOK?
Hi, please can you answer this urgently.
In the first question of june 2011, when Rose acquires additional ten percent interest in petal on the last date, i am finding it hard to understand the transfer of equity – negative movement. please can you explain. thanks a ton:-}At the date of the 10% further acquisition, the fair value of Petal’s net assets had increased by 7m since the original acquisition of the 70%.
If the net assets of the company had increased by 7m, then the nci’s 30% value must have increased by their share of that 7m = 2.1m
The nci was originally fair valued at 46m and together with this additional 2.1 that has risen to 48.1m
We are buying 10% out of the nci’s 30% ie one third and one third of 48.1 is 16.03. But we are paying 19m to buy this 16.03. Effectively, the nci has made a profit and should therefore be credited with 2.97 (that’s the difference between 19m and 16.03m) and then debited with 19m (the amount of cash that is paid to them to buy out their entitlement to 10% out of their original 30%)
OK?
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