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On 1 January 2015, Palister acquired 75% of stretcher’s Equity . FS at year end 30 June 2015.
Retained earnings at 1 July 2014 of Palister $26,200,000, Stretcher $14,000,000
And year end 30 June 2015 Palistar $24,000,000 and stretcher $10,000,000
Stretcher’s Business is seasonal and 60% of its annual profit is made in the period 1 January to 30 June each year.
Sir, help me to explain how to simply get the net asset of Strecher ( subsidiary )
Answer : 60% * $10,000,000= $6million post acq RE.
Net asset at date of acq $24 million – $6 million = $18,000.
If profits for the year are split 40% per-acquisition and 60% post-acquisition and the profit for the year is $10 million, then $6 million of that $10 million must be post-acquisition
Now retained earnings at the year end, 30 June, 2015 are $24 million of which $6 million is post acquisition
That means that $24 million – $6 million is the retained earnings figure as at date of acquisition
OK?
I did use your method on the lecture on video
As RE b/f =$14,000
Net asset = 40%*10,000= $4000
Total $18,000
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