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Hello there! I’ve been following your lectures, and they’ve been helpful!.
Wanted to make sure some things.
Do we add the retained earnings with the share capital to get the net assets of the subsidiary IF the subsidiary was purchased at the date of incorporation?
Also, in a similar case, while calculating retained earnings, the retained earnings apportioned to the parent and the subsidiary are the same one we’re given in the question right? Like, no pre acq retained earnings exist to be subtracted?
If we’re making the consolidated SOFP for the date the subsidiary was acquired, and while calculating Retained Earnings, the pre and post Retained Earnings are the same right?
Thanks for all the awesome work you do!
“Do we add the retained earnings with the share capital to get the net assets of the subsidiary IF the subsidiary was purchased at the date of incorporation?”
There won’t be any retained earnings if the subsidiary was acquired on the date of its incorporation – it’s less than one day old and has not had chance to make any transactions
“while calculating retained earnings, the retained earnings apportioned to the parent and the subsidiary are the same one we’re given in the question right? Like, no pre acq retained earnings exist to be subtracted?”
If the subsidiary is acquired on the date of it’s incorporation, all the retained earnings for the subsidiary as given in the question must, by definition, be post-acquisition, yes
“If we’re making the consolidated SOFP for the date the subsidiary was acquired, and while calculating Retained Earnings, the pre and post Retained Earnings are the same right?”
This only holds true if the consolidation is being done as at the date of the subsidiary’s incorporation which is also the date of the acquisition
This is 100% certainly not a situation that you are going to encounter in the exam and I find it hard to visualise it facing you in the real World either!
Hello Mike
You are told “included in the trade receivable of H ltd(parent) is $ 120 due from S ltd (sub).S Ltd included only $70 of this amount in its trade payable. The difference is due to administrative expenses charged to S ltd by H ltd which had not been accounted for by S Ltd”who can treat this on consolidation?
Thank you
Adan!
What’s the problem creating your own new thread instead of piggy-backing onto someone else’s???
Ok, here’s the answer:
Have you watched the video that concerns intra-group balance reconciliation? It’s all in there!
In the case of errors and management charges, the adjustment is made in the records of the group entity that has not recorded the intra-group transaction (or the entity that has made the error)
So, in the case of unrecorded management charges, the parent entity is correct – there’s no way that the subsidiary can argue about the fact nor the amount of the charge – so the entry necessary is in the subsidiary’s records and the specifics of the debits and credits are:
Dr Administrative Expenses $50
Cr Current account with Parent entity $50OK?
Sir I am using Kaplan kit in which I am stuck in retained earning of subsidry
In some quiz they calculate by deducting pre and post R.E and then multiplying by %
&; in some case they deducted pre and post net asset of subsidiary sir I am too confuse plz help me and often my answer is wrongPlease reply on mail jawad_armani@yahoo.com
There’s no way that I’m replying to a separate email!
As for your problem with the Kaplan method … have you tried following the workings that I consistently use – that should eliminate your problems with calculating pre- and post- splits
Apologies sir I didn’t watch your method please Sir,it will be better sir f u understand on Kaplan method I am studying P2 time is too short for full revision it will be too Hard to look and remember other method
So you expect me to learn the Kaplan method when I have been using my method successfully for >40 years?
“I am studying P2”
Post this on the P2 Ask ACCA Tutor forum and P2D2 will no doubt get back to you – he likes the Kaplan method
Please send me your method i shall be very thankful for this kindness plz sir kindly resolve my issue
It will take me longer to type it than it would take you to watch the video lecture
If you can’t be bothered doing that, work through the free course notes (but the video would be easier for you)
Try this, and select those videos covering chapters 6 and 7
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