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Frog acquired 100% of the ordinary share capital of Toad on 1 October 20×7
on 31 dec 20×7 retained earnings of Todd and Frog were as follows:Frog Toad
‘000 ‘000
Retained earnings at 2 Jan 20×7 500 100
Retained profit for the year ended 31 Dec 20×7 150 60the profits of toad accrued evenly throughout 20×7.
what is the retained earnings to include in the consolidated FS of Frog group at 31 dec 20×7?Mr moffat can you give a step by step solution? I am not sure how to do this question.
Why have you headed up this posts as ‘errors’? It has nothing to do with errors!
Also, you must have an answer in the same book in which you found the question and so in future ask about whatever it is in the answer that you are not clear about and then I will explain.
The consolidated retained earnings are all the retained earnings of Frog which are 650 (500 + 150), plus 100% of the post-acquisition retained earning of Toad. Given that the shares in Toad were acquired on 1 October, there are 3 months since the date of acquisition and therefore the post acquisition retained earrings are 3/12 x 60 = 25.
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