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Hello,
In BPP Practice book, Q.330, I did not get how they calculated Retained Earning as (6000)?
It should be (5000), because we have given opening loss of 4000, and the subsdiary made a draft stating that they have incurred loss of 2m during the year.
Since it is a mid year acquisition, we need to split it, it would be 1m for pre and 1m for post.So opening loss + pre loss= total loss to be included in Retained Earnings for Goodwill
It would be (4000)+(1000)= (5000) total loss.How they have included the whole 2m loss in pre period?
Can you please help me in this question?
Hi,
The key piece of narrative information that you are missing is that in the additional information it says that the loss of $2 million is what has been made at that date, i.e. this is the profit for the six-month period and so no pro-rating is required. In this question the profits do not accrue evenly during the year.
Thanks,
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