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Gone blank, when I read the part about transfer of goods and a mark up.
A, bought 90% of equity share Capital of B, two years ago, on 1 July 2012 when retained earnings of B stood at $12000.
During the year A, transferred goods to B, for $45000- this figure includes a mark-up of 50% two thirds of these goods remained at inventory at the year end.
The Balance on the current Accounts between A & B was $53000.
Fair value on date of acquisition of Non-controlling interest $10000.
A———————– BN- Current Assets
property plant & equipment—————-240 –—– 72
investment in B ———- ——————85 —— ——0Current Assets
inventory——————– ———————22————- 48
receivable————————————–254—————60
cash at bank ———————————–24 —————12
Equity
share capital ———————————–36—————12
retained earnings ————————- 189————– 72
Non- C Liabilities—————————-290 ————–70
Current Liabilities — ————— ——120————– 30What figure would appeared for retain earnings?
The goods remaining in inventory were transferred at 2/3 x 45,000 = 30,000.
The 30,000 includes unrealised profit of 50/150 x 30,000 = 10,000
(The original cost was 20,000 but there had been a profit added of 10,000)The unrealised profit needs removing from the earnings of the company that transferred them – in this case A.
Do the retained earnings are:
A 189 – 10 = 179
plus A’s shares of B’s post acquisition retained earnings:
90% x (72 – 12) = 54So a total of 233
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