Pyramid - Specimen paper

Well, I think we do in fact take it into account. When calculating goodwill in working W2, the $1 million extra liability will be used when arriving at the fair value of the subsidiary's net assets (share capital + reserves + / - fair value adjustments including this additional tax liability) Now, when we come to working W3, the retained earnings figure at date of acquisition as used in working W2 (as adjusted for the deferred tax liability) will be used in the calculation of the consolidated retained earnings Are you really sure that it hasn't been taken into account?

Hi Mike, Thanks for getting back to me. Unless I'm missing it. This is the answer FV of net asset Shares 9000 Ret ear 19000 FV 3000 DT Liab (1000) Total 30000 Cons ret ears workings Per Q 27000 Less Pre acq (19000) 8000 depn of fv (600) Then that's it they get "our share" of 7400 Unless I'm missing something... ??

Now I've looked at the question! The question actually tells you what the post acquisition retained earnings are for Square! The only reason for the traditional working W3 is to find those post-acquisition retained earnings! We can still do it in the "normal" way As reported 27,000 - dt liability 1,000 = 26,000 At acquisition 19,000 - dt liability 1,000 = 18,000 Post acquisition retained 8,000