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Dear Tutor,
When i calculate the goodwill, I think the NCI valuation is (20,000+6,000)*40%=10,400, but the answer is 8,000. why it not consider the retained earning .the same quesion is , Net asset @ doa, the answer still not include the retained earning, why is it
Thanks
Because Ausra acquired the shares in Dainius on the date of Dainius’ incorporation. “Incorporation date” for a company is the day the company was “born”. Can you see that, if these shares were bought on the day Dainius was born, then Dainius could not have had time to accumulate any retained earnings by the time Ausra acquired her shares?
Hence, net assets at date of acquisition were just the value of the share capital and NO retained earnings.
OK?
Ok, I see the sentence now. But where does Dainius’s retained earning 6000 come from , you say Dainius was “born”,he could not have had time to accumulate any retained earnings
W2 is a working as at date of acquisition – and there were no retained earnings in Dainius at that date because Dainius had only just been “born”
W3 is a working as at consolidation date and Dainius has had time since being “born” to have made the $6,000 which is in the retained earnings as at consolidation date. Thus all $6,000 is post acquisition retained as at Ausra’s year end
Thanks Sir, I suddenly realized when i sent to the second question.the $6,000 is Dainius made after consolidated
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