Eview Cinemas Co (Kaplan Exam kit)

Hi John,

In context to this question, I have doubts in the calculation of 2 SOFP items:

1) Current assets figure- As per the Exam kit solution, it is $3249. As per my understanding,
Existing value of Current assets= 2347
add:investment in CA = 902
add:interest saved on 10% loan notes= 256 [3200*10%*80%]
add:return on CA 51 [902*7%*80%]
add:return on NCA 343[3572 * 12% *80%]
REVISED VALUE OF CURRENT ASSETS= 3898

In the above calculation I have assumed that interest savings of $256 , return on CA of $51 & return on NCA of $343, all totalling to $650 will be added to retained earnings as an addition to profit after tax and added to current assets as a cash income.

Based on above assumption & calculation, the total of ASSETS side comes to be:
Non current assets = 15403
Current assets= 3898
TOTAL = 19,301

Exam kit solution:
Non current assets: 15,403
Currnt assets= 3249
TOTAL= 18,652

My first question is : Is my assumptions wrong, if yes , why. If not, have I missed some figure such that the figure is not matching with exam kit solution.

2) Retained earnings figure: As per the exam kit , it is $11,801 which they have calculated simply by adding the previous year’s retained earning of $7917 + $3884(profit on sale of EV clubs)

As per my understanding, I have calculated the retained earnings as follows:

Net PAT from Eview cinema 1135
Less:PAT from EV Clubs (454)

Net PAT from Eview cinema= 681
add:interest saved on 10% loan notes 256 [3200*10%*80%]

Add:return on inv in current assets 51 [902*7%*80%]
Add:return on inv in non current assets 343 [3572*12%*80%]

Adjusted PAT 1331

Existing figure of retained earnings= $7917
add:profit on sale of EV clubs= $3884
add: increase in PAT= $196 [1331 -1135]
REVISED FIGURE OF RET.EAR.= $ 11,957

TOTAL of Non current liab & current liab= $5851

Hence TOTAL OF LIAB SIDE= 11,957 + 5851= $17,808

TOTAL OF LIAB SIDE as per Exam kit soln: $18,652
The difference in my answer is due to retained earnings figure.

My question here is, why have they not added the ‘increase in PAT’ due to sale of EV clubs to the exisiting retained earnings?