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Hi Mr Mike, I have a question from your note.
Ausra acquired danute 31 March 2011
on 31 october 2011
Danute
RE-124000Note:
At the date of acquisition , some of Danute’s inventory had a FV 12000 in excess of its carrying value.All of this inventory had been sold before the year end.Profits for the year year ended on 31 october 2011(before any necessary adjustments to be made) were 60000.
60000*5/12=25000-pre acquisition
60000*7/12=35000-post acquistionI recognised at AD (124000-35000)89000
I recognised DR-124000
Post acquisition period-35000Here is question arising that, if inventory has been sold at the date of acquisition, do i have to include it to AD Retained earning b/f(89000+12000)=101000-Could you explain it this part?
“Profits for the year year ended on 31 october 2011(before any necessary adjustments to be made) were 60000.
60000*5/12=25000-pre acquisition
60000*7/12=35000-post acquistion”Crucially, there is an adjustment to be made that makes this profit split (that you show) incorrect
So there’s no point in me pursuing your question until you sort out the workings to arrive at the correct profit allocation between pre- and post-acquisition
(I really would prefer not to have to answer this! What on Earth can you possibly mean “… if inventory had been sold at the date of acquisition, …”)
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