Investment????? DFS
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Does anyone know the answer to the bit where there was two companies to look at and it said there bought 2,500 shares for £5,000 <BR>then asked how much investment would be shown on their balance sheet<BR><BR>i know i should let this go but its doing my head in
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Investment????? DFS
I hadn't got a clue so just added their share of the profit for the year to the investment figure<BR><BR>don't think that is right though, but I didn't know the shares question either so I had to write something!0 -
Investment????? DFS
<BR>I'd never done an example where there was an associated company, so I tried to wing it. I think I said that of the 5000 they paid for their investment, 2500 was goodwill so amortisation would reduce the value of the investment by 250. At the same time, their share of the year's profit was 250 which brings the value back to 5000 on the balance sheet. Gawd knows if I'm right or not!0 -
Investment????? DFS
I was under the impression that investments in subsidiary companies or associates are not shown on the consolidated balance sheet. I think it was a trick question. Did nobody else get this?0 -
Investment????? DFS
Did it say for a consolidated balance sheet or just the company's balance sheet?<BR><BR>Can't remember now0 -
Investment????? DFS
i put that the investment should be lower of cost and net realisable value.<BR><BR>therefore cost was £5,000<BR><BR>and net realisable value was £4,750<BR>(1/4 of £19,000)<BR><BR>not sure if correct or not. hadn't revised that bit =o/0 -
Investment????? DFS
I didn't know what to put either...<BR><BR>Think I just said the £5000 investment and nothing added from the P&L0 -
Investment????? DFS
<br><br><< <i>I was under the impression that investments in subsidiary companies or associates are not shown on the consolidated balance sheet. I think it was a trick question. Did nobody else get this?</i> >><br><br><BR>My understanding was that when you consolidate the group accounts, for a subsiduary you add in their assets and liabilities as normal, but for an assocate company you simply adjust the value of the investment as shown on the balance sheet, which is what they wanted today. As I said somewhere else, I just knocked off the amortisation of goodwill and added in the reporting company's share of the associate's profit and got back to the original figure for the investment. But I was winging it - whether I was right or not remains to be seen!0 -
Investment????? DFS
sad in know, just looked in the book for the answer, one of the many i got nearly right (i didn't do the goodwill and amortisation bit)... i think the answer is:<BR>@25% ownership of associate<BR>goodwill on acquisition: investment £5000<BR> less value of associate (19000x25%) £4750<BR> *Goodwill £250 <BR><BR>Investment £5000<BR>add parents share of associates P&L for year (£9000-£8000)x25% = £250<BR>less amortisation of goodwill on acquisition* (250-25) (£225)<BR> on consolidated BS= £5025<BR><BR>actually dunno if it's right... but hey...0 -
Investment????? DFS
I am not sure if this is correct, but as I showed my workings I think that you get credit for that.<BR>The investment was £5000 at 25%<BR>the value of the business at the time of investment was £4500 (working out the P&L account as £8000 at the beginning of the year)<BR>Therefore goddwill was £500<BR>amortisation was over 10 years therefore £50<BR>Investment was £4950<BR><BR>The depreciation is written off each year to the P&L and the profit as being a minority interest in the company is shown in the p&l as return from investments.<BR><BR>Like I said I think if you show your workings, then you will get credit for that0