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Page no.-112. TYU 2- in the question it is given A’s profit after tax is $600000.
How to calculate net assets of associate at the date of acquistion? According to solution it shows net assets of associates at acquistion date is $1000, where did this figure come from?
Please explain
In my copy of the Kaplan text, relevant up to 31 August 2014, TYU is on page 108. Do you have an up-to date version?
Profit this year for the associate is 600,000. We acquired 3 months into the current year, so 1/4 of the 600,000 is pre-acquisition.
Retained Earnings at the end of the year in the associate were 1,200,000 and that includes this year’s 600,000. So retained earnings brought forward must have been 1,200,000 less this year’s 600,000 = 600,000 brought forward from last year.
Add to that 600,000 brought forward the 3 months’ pre-acquisition for this year (150,000) – retained earnings at date of acquisition of 750,000.
The associate’s share capital is 250,000
Add the share capital figure of 250,000 to the retained earnings figure of 750,000 and you get to $1,000,000 shareholders’ equity at date of acquisition and, of course, shareholders’ equity = net assets
Thus, net assets at date of acquisition must be that same $1,000,000
OK?
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