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GROUP RETAINED EARNINGS

Forums › ACCA Forums › ACCA FR Financial Reporting Forums › GROUP RETAINED EARNINGS

  • This topic has 0 replies, 1 voice, and was last updated 11 months ago by lfede09.
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  • February 24, 2022 at 6:04 pm #649290
    lfede09
    Participant
    • Topics: 5
    • Replies: 5
    • ☆

    PARENT 75%
    SUB 25%
    Retained earnings at acquisition:

    Parent 19,200
    Sub (4,000)

    Retained earnings at reporting date:

    Parent 7,400
    Sub: 8,000

    At the date of acquisition the Sub ‘s statement Profit or Loss shows a loss of 2,000.
    At the date of acquisition the FV of a item of plant is 3,000 below the carrying amount. useful life 3 yrs. date of acquisition 01/10/20X2, reporting date 31/03/20X3.
    Share capital of SUB is 20,000.

    The net asset at acquisition should be:
    Share capital: 20,000
    Retained Earnings: (4000) + (2,000)= (6,000)
    FV adj (3,000)
    TOTAL 11,000

    The Group Retained Earning should be:

    PARENT: 19,200+7,400= 26,600
    SUB: (4000)+ 8,000= 4000 + 500(Depreciation: 3,000/3 * 6/12=500) = 4,500 * 75% = 3,375

    The right answer add back the pre acquisition loss as following:
    SUB: (4000)+8000= 4000 + 6,000(pre acquisition loss) + 500= 10,500.

    I do not understand the reason. Can someone help me?
    Thank you in advance.

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