December 2009 – Grange

Hello Sir,

First of all, I would like to thank you for wonderful and understandable lectures. They are great!

Secondly, this is my qn:
With regards to Grange, I’m confused on the net assets working (for both Park & Fence). I like your way of separating the post acq.profits into retained earnings and oce. So I would like you to guide me using that method.
I find that in answers (for post acq.profits) its completely different compared to mine.

Can you please guide me where I went wrong?

For PARK:

net assets of Park acq rep post acq
share capital 230 230
retained earnings 115 170 55
oce 10 14 4
fv-land (bal fig) 5 5
———– ———
net assets before franchise purchase 360 419
fv- franchise 10 10
amortization (10/5*1.5) – (3) (3)
———– ——— ———-
370 426 56

In answers they show that for retained earnings is: 52 while mine is 55. Anything wrong in this?

Thank you.
Your help will highly be appreciated.