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Good day sir,
This question relates to question 311- Plastik Co a section C question.
I’m confused as to how the “less pre acquisition” in the retained earnings question was arrived at. Especially the “1500” figure.Hi,
We are given the retained earnings at the end of the reporting period but need them at the acquisition date to use within the net assets at acquisition that is used in the goodwill calculation. We know the following:
RE @ acqn plus post acqn profit = RE @ reporting date
Therefore, to get the retained earnings figure at acquisition we will need to deduct the profits made by the subsidiary since we acquired it. In this instance we have a mid-year acquistion so will need to pro-rate the profits for the year to get the post-acqn profits. I believe that the profits for the year are 2,000 and we have had control for 9 months, hence the 1,500 figure used as this is 9/12 x 2,000.
Thanks
investment in associate account ( t-shape )
Balance b/d (2018) 120
Balance c/d (2019 170
Share of profit of associate company 40According from above i need to know how to do the ledger. Normal there would be dividend received if we do in ledger at credit but in this case if you see if i add 120+40 = 160 but 2019 is 170 so what about the remaining 10 at debit . what is it
It would likely be an additional investment made in the associate where we have DR Investment in associate 10 CR Bank 10
Thanks
you mean debit additional 10 in credit as bank?? wouldnt tht increase the total as 180
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