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Hi dear tutors,
My question is related Retained earnings/(losses) stated on 121 Paradigm task
In this question we are required to prepare the consolidated statement of financial position for Paradigm as at 31 March 20X3.
On 1 October 20X2, Paradigm acquired 75% of Strata’s equity shares
Strata’s
Retained earnings/(losses) – at 1 April 20X2 (4,000)
– for year ended 31 March 20X3 8,000The following information is relevant.
(i) At the date of acquisition, Strata produced a draft statement of profit or loss which showed it had made a net loss after tax of $2 million at that date. Paradigm accepted this figure as the basis for calculating the pre- and post-acquisition split of Strata’s profit for the year ended 31 March 20X3.
In the book Strata’s Retained earnings are calculated as 11200 dollar
4000 + 6000 =10000 +700 + 500= 11200I understand why 700 and 500 dollar are added, but I confused that how 10000 (4000+6000) appears?
I have watched your video but this issue is still not clear to me.
Can you please expain obviously it for me ?Hi,
I don’t really like how they’ve structured the answer as it doesn’t use a net asset working. It is a bit easier if you use one. The net assets at acquisition are the share capital plus the retained losses at acquisition, and those at the reporting date are the share capital plus the retained earnings at that date.
Try it and see how you get on, and then let me know. I’ll then see if you’re correct but in doing so ignore the answer in the revision kit.
Thanks
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