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(At the date of acquisition, Strata Co produced a draft statement of profit or loss which showed it had made a net loss for the year of $2 million at that date. Paradigm Co accepted this figure as the basis for calculating the pre- and post-acquisition split of Strata Co’s profit for the year ended 31 March 20X3.) <question additional info.
In the answer they have added pre aqu loss to subsidiaries retained earnings??????????
Hi,
What figure are they looking to calculate? Presumably it will be the retained earnings at acquisition, where they are using the retained earnings at the reporting date and adding back the loss to give the retained earnings at the acquisition date.
Don’t forget that if we have made a loss since acquisition then the retained earnings at acquisition will reduce to get to the figure at the reporting date, so to work backwards then we need to add the loss.
Thanks
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