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Hi Tutor, I got a question about how you calculate Retained Earnings in the sept/dec 15 paper.
I was told when you working out the subsidiary net assets for R/E. you should have a tabular format with the share capital and reserves, and then R/E and then the other adjustments.
However I don’t seem to get how it is calculated in this question for Q3. Got this information for the year ended 30 June 2015 for the subsidiaryRetained earnings – at 1 July 2014
14,000
– for year ended 30 June 2015
10,000and told Subsidiary’s business is seasonal and 60% of its annual profit is made in the period 1 January to 30 June each year.
So I was wondering would the RE be at the date of acquisition which was the 1st of January 2015 and the reporting date which would be (24000 I Believe)?
So would the RE at acquisition be 14000 + (40% x 10000) = 18000?
My way of setting this out would be …
Share capital
Share premium
Retained earnings brought forward 14,000
Retained earnings 6 months 4,000
Fair value adjustmentsYou can set it out in tabular form if you want
Net assets at date of acquisition Net assets at year end
But I wouldn’t!
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