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Thanks for your lectures on this, really helpful. I have just come up against something that I don’t understand, this question;
Really acquired 75% of the equity share capital of Hard on 1 January 2019 when Hard had retained losses of 112000
Retained Earnings of Really are 2,464,000, and Hard are 1,204,000.
The question is what is the total amount of retained earnings to be included in the consolidated statement.
I thought the answer would be 2,464,000 + ((1,204,000 + 112000) *0.75) because at the time of acquisition retained earnings were at a loss, so seeing as everything post acquisition should be the amount that brought the retained earnings to 0, plus everything above 0 as it currently stands.
My answer in my book says that you should deduct the 112000 but I really don’t understand why, can you help me?
Sorry if that’s a very basic question, I have spent a bit of time thinking about it now!