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Peace ltd acquired 450,000 ordinary shares of Happy ltd on 1st January 2011 for $1,540,000. At that date the balance on the retained earnings of Happy ltd was a credit of $140,000 and the balance on the capital surplus was a credit of $28,000. And there are some values for the stated capital, capital surplus and retained earnings for both companies. How do we solve this type of question?
1. Identify the group structure( what share of total assets was aquired and when) 450k/TotalShares
2. Identify the purchase consideration $1.54m (FVPC)
3. Identify fair value of NCI/ Its share of net assets (FVNCI)
4. Identify what was bought which is share capital, ratained earnings and some adjustments on assets eigther upwards or downwards (140k+28k+?+adj)
5. Work out Net assets of sub @ SOFP date.
6. Goodwill @ DOA = 3+2-4
7 workout group ret earnings = parent earnings + group share of changes in net assets of sub since DOA
8. Nci @DoSOFP = NCI%*netasset@DoSOFP
having all these figures then you slot them into your profoma SOFP. Goodluck, I hope this isnt too late
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