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Hello
In the workings of Consolidated Ret. Earnings of this question, pre acquisition (of $5000 ) is deducted from Sophistics Ret earnings. Could you xplain why please?
I havent seen any similar amounts deducted from CRE wkings in previous questions like Parentis..Thank you
THey have to use 6000- 5000( retained earning at acquistion ) to arrive the “post profit” the subsidiary earned after acqusition, the they adjust for the “unrealised profit” and “additional dep'” to arrive the actual post -profit
i don’t like the way examiner solve the problem,(lile they try to mess up everything)
you can see in the income statement of sophistic
the profit for the year is 3,000 is the draft profit they earn 12 months,
you need to calcuate the profit they earn after the day of acquisition
From 1 april to 30 september is 6 months
so the post-profit they earn is 3000/12*6 = 1,500( accured evenly “note III”Post-profit 1,5000
adjustmnet:
additional dep’ : (200) (6 months accrual)
unrealised profit from inventory (800)
equal 1,500-200-800=500
the you only need to calculate the amount attribute to parent and NCICara, do the posts from Zaca answer your question? If not, post again and I’ll check out the question myself.
Is there not a recording on the site where I have worked through the example Pedantic and Sophistic?
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