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Sorry,Im still cannot understand hw to get the post profit of 10000?the pre profit is -2000 has mentioned in the question~Then,what is the retained earnings at the yr end?
We told that the retained earnings as at the end of the year are $4,000
The brought forward retained earnings were -$4,000 and there was a $2,000 loss for the first 6 months.
So, as at date of acquisition the negative was $6,000 and at the end it was positive $4,000
Therefore post acquisition performance must have been $10,000
(I’ve answered this without the question in front of me so the figures may not be correct, but the principle is illustrated)
Then,why the pre profit is not negative 6000?the question’s answer state that the pre profit is -2000~
at the draft sofp the profit for the year was 8000~no need use tis figure to calculate?At the date of acquisition, 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. Paradigm accepted this figure as the basis for calculating the pre- and post-acquisition split of Strata’s profit for the year ended 31 March 2013.”
This mean that use the 2000 as the pre profit?if like you say that ,why the pre not negative 6000?
The question tells you that the pre-tax earnings for the year were $2,000 negative and the overall result for the year was $8,000 positive
What must have happened in the second half of the year to get from $2,000 negative to $8,000 positive?
The 8000 no need to divide by 2 for half of the yr?normally i will use the 8000×6/12=4000
There is no need for you to time apportion the $8,000. Time apportionment happens when the examiner says (as he normally does) “incomes and expenses are deemed to accrue evenly through the year unless otherwise indicated” and here he has “otherwise indicated”
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