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Hello,
Could you tell me why we need to deduct both the loss of $4000 at 01 April 2012 and net loss after tax of $2000 ( which makes a total loss of $6000) from the goodwill calculation and not just deduct the pre acquisition loss of $2000?
Thank you
Because “Retained earnings/losses – at 1 April 2012 were $(4,000)” and “the draft statement of profit or loss produced by Strata showed it had made a net loss after tax of $2 million at that date”
In total, that’s a $6 million deficit as at date of acquisition
OK?
Dear Mike,
When it says that the loss at 1 October 2012 is at -$2m, doesn’t it mean that it was at -$4m at 1 April 2012 and that it increased to the amount of -$2m at October 2012 and that therfore during these 6 months, it made a profit of $2m?
Thank you
The questions says:
“Strata produced a draft statement of profit or loss which showed it had made a net loss after tax of $2 million at that date.” A statement of profit or loss is a statement for the current period of the profit or loss. It isn’t a cumulative statement from the first day of the company’s existence.
So, NO, the question does NOT mean that Strata has made a $2 million gain in that first 6 months this year (thus reducing its cumulative loss position by $2 million)
On the contrary, it means that Strata has made a loss of $2 million in that first 6 months this year (thus increasing its cumulative deficit by $2 million)
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