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Hi My tutor, I have a question.
Plastik acquired subtrak on 1 january 2014
at 30 september 2014
plastikProfit for the year 8,000
Retained earnings 6,300at 30 september 2014
subtrakprofit for the year2,000
Retained earnings 3500
Note
On 30 September 2014, Plastik accepted a $1 million 10% loan note from Subtrak.if again Plastik pco takes loan note of subtrak kind of investing subtrak’s loan note and 1000*10%=100*9/12=75 time apportion and why i do not have to add it over profit for the year of Subtrak. Last time i asked the same kind of question such as investing 50 million of loan note 8%.we were usually finding its finance cost and time apportionment and added it over profit for the year.
The loan note interest appears to have been recorded neither in Investment Income in the parent nor in Finance Costs of the subsidiary
Further more, there appears to be only $200 finance costs in Plastik’s profit statement whereas the figure should be increased to 10% x $2,500 ie there should be an accrual of $50
I’m stumped! There isn’t any mention of loan interest except for the finance costs line that shows $200 for Plastik and $135 unrolled interest on the deferred purchase consideration
No, I can’t see what’s happening 🙁
As for your question “and why i do not have to add it over profit for the year of Subtrak.”
There’s no adjustment to make for the profit split of pre- and post- for Subtrak because the finance charge does not appear within the figures so the split is a straight forward 3 month / 9 month split
Mike , am gonna post another question that i have posted it if you remember it is almost the same.
The question has been taken from Becker page number 115On 1 april pandar purchased 80%of the equity shares in SAlva
P/l at 30 september 2016
Salva
profit for the year ended 30 september-21000retained earning b/f 1 october 2015-152000
Note
Immediately after its acquisition of Salva,Pandar invested 50 million in an 8% loan note from Salva.All interest accuring to 30 September 2016 had been accounted for by both companiesit is almost the same as the question above
50000*8%*6/12=2000
profit for the year 21000+2000=23000
23000*6/12=11500
23000*6/12=11500at the date of acquisition 152000+11500=163500
date of reporting 152000+23000=175000
post acquisition period-11500it is the same what is diference if i took loan or invested loan note of Sco.it makes the same sense just synonym expression.I do not understand. why i do not add over profit for the year but here.last time u said it is intra-group item also above example loan note is intra-group.
Mike , am gonna post another question that i have posted it if you remember it is almost the same.
The question has been taken from Becker page number 115On 1 april pandar purchased 80%of the equity shares in SAlva
P/l at 30 september 2016
Salva
profit for the year ended 30 september-21000retained earning b/f 1 october 2015-152000
Note
Immediately after its acquisition of Salva,Pandar invested 50 million in an 8% loan note from Salva.All interest accuring to 30 September 2016 had been accounted for by both companiesit is almost the same as the question above
50000*8%*6/12=2000
profit for the year 21000+2000=23000
23000*6/12=11500
23000*6/12=11500at the date of acquisition 152000+11500=163500
date of reporting 152000+23000=175000
post acquisition period-11500it is the same what is diference if i took loan or invested loan note of Sco.it makes the same sense just synonym expression.I do not understand. why i do not add over profit for the year but here.last time u said it is intra-group item also above example loan note is intra-group.
Pandar finance cost is 1800
salva finance cost is 3000here 2000 included salva’s finance cost which reduced profit for the 23000 to 21000 that is why we add 2000 over 21000
but in the above example subtrak does not have any finance cost it recorded only in plastik so it does not reduce profit for the year of Subtrak.
UNderstood
The difference is here!
“All interest accuring to 30 September 2016 had been accounted for by both companies”
In Pandar and Salva the interest HAS been recorded whereas in Plastik and Subtrak the interest HAS NOT been recorded
In Pandar, we have to add it back before we can time-apportion
In Plastik, there’s nothing to add back – it hasn’t yet been included within the Subtrak figures for the year
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