Explain,with Examples,the Difference Between Dividend Payments Out of Pre-Acquisition Profits

question 26

Essay

Explain,with examples,the difference between dividend payments out of pre-acquisition profits and dividend payments out of post-acquisition profits,and the manner in which they are accounted for in consolidation accounting.

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Definitions:

Opportunity Cost

The value of the best alternative foregone where a choice needs to be made between several mutually exclusive alternatives.

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return.

Future Value

Value of cash flows at a future date, taking into account interest accumulated between when the cash flow occurred and the future date.

Double-Declining Balance

An accelerated method of depreciation that doubles the rate at which an asset’s book value declines compared to straight-line depreciation.