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Sir i am confused! Sometimes the retained earnings at reporting date is added to the profit year and sometimes it is being subtracted!! I dont get it why?
Sir do you have kaplan kit? 1Sep2018-31Aug2019 version? There is a question on page 168 of push and shove…item 2..
And i got a mock from my institute
The question is Brent Co. acquired 75% share capital of Goan co on 1May 2003, the summarized profit or loss statement of Goan co is as follows…
Sales revenue -204m
Less: Cos-156m
Grossprofit-48m
Less:Distribution&Admin cost-12
Profit before tax-36
Tax-12
Profit for the year-24
Retained earnings of Goan co at 1Jan 2003were $165m.
What are the retained earnings to be included within the goodwill calculation as date of acquisition?
So the answer is like
24 multiply by 4/12=8
165+8=173..I do not have the Kaplan Kit (only the BPP Kit).
With regard to the question you have typed out, the acquisition took place on 1 May 2003, there the retained earnings as at that date are the retained earnings as at 1 January 2003, plus the profits for the 4 months from 1 January to 1 May, which are 4/12 of the profit for the year to 31 December 2003.
So sir? Profit for the year is subtracted or added? to retained earning at reporting date?
We need the retained earnings at the date of acquisition.
Think about it 🙂
These must be the retained earnings at the start of the year plus the profit between the start of the year and the date of acquisition. Or, depending what information you are given in the question, the retained earnings at the end of the year less the profit since the date of acquisition.
Please do not go into the exam simply learning rules – the examiner is clever and asks questions to make sure that you understand what you are doing.
Thankyouu..i know i ask stupid and dumb questions..but your explanation helped me..actually i was confused between questions ..but your explanation helped me..i wasnt looking into dates seriously..thankyouu sir!
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