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Need help!
On this question where does the retained earnings at acquisition figure of 5000 come from?Thanks
did you watch the lecture which solves this question?
https://opentuition.com/acca/f7/acca-f7-december-2008-question-1-pedantic/
The statement of profit and loss shows that £3000 profits were earned in the last year by the subsidiary. The subsidiary was purchased half way through the year, and it is assumed that profits are accrued evenly unless told otherwise. Therefore £1500 was earned before acquisition and £1500 afterwards. Therefore take £1500 off the retained earnings of £6500 shown in the SOFP, leaving you with pre-acquisition retained earnings of £5000.
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