CONSOLIDATION OF FINANCIAL ACCOUNTS

AAZZAD10y ago

HI sir, i want ask ques. that… HILTON CO SHREW CO $ $ sundry assets 660,000 290,000 investment in SHREW 280,000 – ———– ———– 940,000 290,000 ———— ———– Issued share capital 400,000 140,000 share premium account 320,000 50,000 retained earnings As at 1 Jan 20*3 140,000 60,000 Profit for 20*3 80,000 40,000 ———– ———– 940,000 290,000 ———— ———— There have been no changes in the share capital or share premium account of either company since 1 Jan 20*3. The fair value of the non-controlling interest on acquisition was $65000. I’ve problem here that it is shown that pOST-acquisition is {(100000-60000)*80%} in this solution but here i wrote pOST-acquisition 40,000 ,,,,,I’ve problem this how it became 100,000 pls help me with solution……

John MoffatTutor10y ago#1

Since the retained earnings at 1.1.2013 were 60,000 and the profit for 2013 was 40,000, it means that the retained earnings at the end of 2013 were 100,000. So assuming that Hilton bought the shares on 1.1.2013, then the post-acquisition profit is 40,000 (you don't need to write it the way the answer did!) and Hilton's share of it is 80% (on the assumption that Hilton bought 80% of the shares).

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