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Hi Sir, Mike.
what a wonderful lecture. i have a problem with calculating the retained earning to be shown in cs of fp.in example 5. the retained earning on acquisition (1/7/2001) is given as $18000. Retained earning b/f as shown in question is &37000. G/w had been impaired by 75% and the directors wish to full impaired it. how then do i calculate the Retain earning to be shown in csofp at 30/6/2009. how do i treat retained earning of = 19000 (37000-18000) which I believe are retained earning since acquisition but before consolidation.
need help to understand the reasoning behind this.Hi
Working W3 consolidated retained earnings has the same basis whether it’s consolidated retained earnings brought forward, consolidated retained earnings for the year or consolidated retained earnings carried forward.
It’s the same old song!
H’s own
+
H’s share of S post-acq retained
–
Goodwill impaired since acquisition (just our share)
To calculate consolidated retained earnings brought forward simply add “brought forward” onto the end of each line of the song!
H’s own brought forward
+
H’s share of S post-acq retained brought forward
–
Goodwill impaired since acquisition brought forward (just our share)
Try it and, if you’re still struggling, post again
NB you appear to have a problem with the 19,000. That figure is S post-acq retained. We need our share of that for the song
Ok?
Please assist on how I treat negative Goodwill in both Statement of Profit or Loss and the Statement of Financial Position. Also how does it affect Retained Earnings?
Thank You
It affects statement of financial position in no way whatsoever except ….
….negative goodwill is added to consolidated retained earnings – effectively, it’s a profit on the acquisition of the subsidiary. We’ve just bought $800,000 fair valued net assets and it cost us just $730,000. Dr assets $800, Cr cash $730 Cr $70 ?????? It’s a profit, so credit statement of profit or loss
With reference to statement of profit or loss, negative goodwill is added into profits at the first opportunity
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