While determining the cost of control for a subsidiary(by the holding company):-
For shares purchased cum-dividend, whether adjustment should be made to the investment a/c or to the P&L a/c of the Holding company...
Also what is the adjustment for shares purchased ex-dividend whether should be made to the investment a/c or to the P&L a/c of the Holding company...
If shares are purchased cum dividend then dividend related to pre acquisition period should be credited to investment A/c
If shares are purchased ex dividend then dividend received is credited to P&L A/c
It was given the other way in the cwa material of final......like for cum-dividend shares adjustment is made to P&L a/c...and similar for ex-dividend.......
(could be wrong...?!!)
I mentioned the correct entry, may be in the book they have mentioned the rectifying entry if wrongly credited to P&L then rectifying entry would be
P&L A/c Dr.
To Investment A/c
That is for cum dividend case
No the question merely solves about the adjustments to the capital reserves while calculating the cost of contol.a plain question.
Just remember one thing Cost of Control is find out on the day when shares are purchased i.e. the capital and reserves of that date are considered in the value of investment.
You can attach the question so we can work out what exactly is the problem
CAclubindia
