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I do not understand the answer:
W2a profit split
for the year per question 24,000
Less TNCA profit (20,000)
4,000
3,333 667In calcualtion of Net assets @DOA, 10 months profit should be 20,000, why is 19,333
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This is to work out Goodwill so you’re trying to find the company value AT acquisition.
Annual profit of £24k less the internal £20k TNCA = £4k for the year (to the group)
This profit of £4k needs to be split to see which bit relates to the pre-acquisition (10months over the 12 months)
Getting the £3333Some of the inventory was worth £16k more than valued at acquisition.
So there is £16k more value in the company at acquisition.Hence £3333 and the £16k = £19,333 current value this year compared to their figures.
That’s how I am understanding the answer (Had to read it a few times)
Thank you very much, Egrek. I did not realise that the profit for the year $24 include the intra-group sale of PPE before. Now I see it.
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🙂 I only noticed it on the 2nd read.
But then I thought that was the bit you were happy with, so had ignored it the first time around!
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