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i find it hard to calculate retained earning at post acquisition when i want to calculate post acquisition and net asset at acquisition for Exam this question from kaplan – 406 PARADIGM
On 1 October 20X2, Paradigm acquired 75% of Strata’s equity
Year end 31 march 20×3
Retained earnings/(losses) – at 1 April 20X2 (4,000)
– for year ended 31 March 20X3 8,000At 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.now the net asset as calculated by kaplan
At acquisition (6000)
At reporting Date 4000
post Acquisition 10000it gave me a headache how it come out like that , okay it (6000) at acquisition what of the other
is there an easier way to calculate retained earning at Acquisition and post-acquisition without have to calculate at reporting dateHi,
There is no shortcut, sorry. As we have a mid-year acquisition then we need to calculate the retained earnings at acquisition as this figure will help us with the net assets at acquisition that feeds into the goodwill calculation.
This question is particularly difficult though so I’d not lose any sleep over it as there will be far easier ones in the exam.
Here we are told that the RE at the start of the year are (4,000) and that in the period to the date of acquisition a further (2,000) loss has been made. If so then the total RE are (6,000), as you say. After this then I’m not convinced that the solution is correct.
If the RE at the year-end are 8,000 then the post acquisition profits are 14,000 (8,000 + 6,000) and not the 10,000 that you mention appears in the answer.
Thanks
thank you so much !
this is one previous Exam question collected by kaplan i guess so , so probably it will be difficult this time , but i hope not .
however that is how i’ve calculated 14000 and it is make more sense to me
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