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Sir,
When we are calculating Retained earnings and NCI, PURP should be subtracted seperately after the post acquisition, isn’t it?
Eg:- Calculating the NCI for ex7:
FV of NCI 5000
Post acquisition (15000×25%) 3750
8750
Less: PURP (1200)
7550In our campus they taught in this method. Also in the study text for ex., answers are in this method
I’m totally confused, which is correct??
Please clear my doubtThe PURP is subtracted from the retained earnings of whichever of the two companies sold to the other company.
So if it is the parent that sold to the subsidiary (and therefore the inventory at the end of the year is with the subsidiary) then the PURP is subtracted from the retained earnings of the parent.
If the subsidiary sold to the parent (and therefore the inventory is with the parent) then the PURP is subtracted from the retained earnings of the subsidiary.
This is the only correct way (and is the way I show it and the way that Kaplan show it – I have obviously no idea what your ‘campus’ does).
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