By Admin on May 15, 2010
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By Roy on June 19, 2010
Goodwill can be described as the additional value obtained from an acquisition over and above the value of the net assets acquired. This additional value does not last for ever. Like other non-current assets, its value erodes over time. It is therefore appropriate to depreciate or amortise goodwill over a number of years after a subsidiary has been acquired.
When goodwill is amortised:
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By Roy on June 19, 2010
If the parent pays more for the investment in the subsidiary than the value of the subsidiary’s net assets, the difference represents the amount paid for the unrecorded goodwill in the subsidiary.
Example
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By Roy on June 19, 2010
Example
A was incorporated on 1 January 20X5. On 1 January 20X7 it acquired 100% of the ordinary shares in B which was incorporated on that day. Two years later, on 31 December 20X9, the balance sheet of the two companies were as follow.
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By Roy on June 18, 2010
When one company invests in another, the investment appears as an asset in the investor’s balance sheet, and dividends received are credited to the income statement. To reflect the ture nature of the relationship between the parent company and the subsidiary, the two companies can be recognised as a single entity because the subsidiary is controlled by the parent.
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By Roy on June 18, 2010
The financial statements should disclose the following for capitalised development costs:
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By Roy on June 18, 2010
Research is original and planned investigation undertaken with the prospect of gaining new knowledge and understanding.
Development is the application of research findings.
Research expenditure
No intangible asset arising from research should be recognised.
Development expenditure
An intangibel asset arising from development should be recognised if, and only if, an enterprise can demonstrate all of the following:
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By Roy on June 17, 2010
In the balance sheet accounts payable, “Cr” insteads increasing and “Dr” insteads decreasing. The accounts payable are liabilities in the balance sheet. They are shown like this:
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By Roy on June 17, 2010
There is a possible situation where a debt is written off as bad in one accounting period, perhaps because the debtor has been declared bankrupt, and the money, or part of the money, due is then unexpectedly received in a subsequent accounting period.
When a debt is written off, the double entry is:
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By Roy on June 17, 2010
A bad debt written off is considered to be uncollectable, a doubtful debt allowance is some doubt as to its collectability.
As known, a bad debt written off is as an expense shown in the income statement. It is considered to be uncollectable. A doubtful debt allowance is an amount owing to the business concerning which there is some doubt as to its collectability. It’s for purdent and reasonable and shown under the accounts receiable.
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By Roy on June 16, 2010
Example to explain and analyse the allowance for doubtful debt.
Aspring has accounts receivable of $11,200 at his year end of 31 May 20X9. Of these he decides that there is some doubt as to whether or not he will receive a sum of $500 from B and he also wishes to allow for the possibility of not receiving 2% of his remaining receivables.
At 1 June 20X9 Aspring had a balance on his allowance for doubtful debts account of $230.
Solution:
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