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Hi sir,
Question 2 – Pyotr & Suzanna
My problem in this question is , when calculating the r.e for the 4 month pre-acq , how did the answer came to be 4.5 mil?
1 March 10 – 28 February 2011 , DOA 1 July 2010. Therefore 4 moths pre and 8 months post. Suzanna’s r.e on the 28 Feb 2011 were $82.5mil .
my calculations were 4/12 x 82.5mil =27.5mil 🙁
Draw yourself a time line! In all the 53 years that Suzanna existed right up to 28 February 2010, the company had retained earnings of $69 million and the Suzanna directors had never heard about Pyotr
So that entire $69 million is pre-acquisition.
Then partway through 2011 along come the Pyotr directors and say “We’re going to take you over” – and even then that only happened on 1 July, so 4 months of this year is also pre-acquisition
So total pre-acquisition profits are 53 years and 4 months or, in $ terms, $69 million + 4 / 12 of this year’s profits
Better?
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