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Hi Sir!
I am finding myself scratching my head and finding difficult to comprehend this.
In regards to Eview Cinemas case scenario, the examiner is not adding the increase profit figure of $196 ($1331 revised – $1135 current) to the retained earnings.
But if you look at Ennea’s case, the examiner has added the increased profit figure of $1720 (proposal 2 = $27720-$26000) to the retained earnings.
May I know why he hasn’t incorporated the increase profit figure for Eview Cinemas’s case?
Is there a plausible rationale behind on why he hasn’t included it? and why he is not consistent with approach?Please Advise on the above matter!
Thanking you in advance for your kind explanation!
In Eview Cinemas the question asks for the immediate impact on the SOFP, and the year 1 profit will not affect the retained earnings until the end of year 1.
In Ennea, we are preparing the forecast SOFP for the coming year and the forecast in the question is the forecast at the end of the coming year, so the profits for the coming year will affect the SOFP at the end of the year.
But Sir, the question does not mention anywhere that the “immediate” impact is to be calculated? Neither does the question Ennea mention this anywhere!
Also, all the investments in NCA and CA would be reflected in end of year 1 SOFP, right?
So if we are reflecting the amount of NCA in SOFP, then why not have we added the amount of retained earnings?The second sentence on the second page of the question Ennea specifically asks for the immediate impact on the SOFP.
Oh got it. I’ve got to read the text more efficiently from now on.
Thank you!
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