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Hi,
In the consolidation question, why did they adjust for the dividend paid by associate of 2000 in the group retained earnings, instead of adjusting it in the workings for investment in associate?
I mean like this below:-
Cost of investment in A
Add: % of A post acquisition reserves
LESS: DIVIDEND RECEIVED (30% x 2000) = -600Hi,
I’ve not got the question to hand but if the dividend has not been recorded by the parent then it won’t be part of the group retained earnings. Before any adjustments are made for the balances between the parent and associate, we need to get the accounts correct first. I’d therefore assume that is what is being done.
Thanks
The question can be found on ACCA website
I still don’t understand what u meant by “if the dividend has not been recorded by the parent then it won’t be part of the group retained earnings”. Can you explain further, thanks
When it is received by the parent we would DR Bank CR Interest income (SPL). If it hasn’t been recorded in the SPL the it would not be in the parent’s profit for the year and therefore would not be in the parent’s retained earnings an ultimately not in the group retained earning.
Thanks
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