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Q1a- calculation of the retained earnings. The post-acquisition profits for Strata is stated as including total profits for the year ($8,000) which includes pre-acquisition profits (Apr-Sep). Why do we not multiply this by 6/12 to only include post-acquisition profits?
Reference is June 13 Q1a not Dec 13… Check out note (i), it says, “at the date of acquisition” draft statement showed a “loss” they have already given you the figure at the date of acquisition
The 8000 in the SFP is the figure for the whole year, to get the profits for the post acquisition period, deduct the losses (actually add to 8000 as minus and minus is plus)
so 8000 – (-2000) = 10000 is the profit for post acq period
Hope this answers the question
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