Specimen Exam Applicable from December 2014 – Question 2

The question asks for:

“Required:

Prepare extracts from Pyramid’s consolidated statement of financial position as at 30 September 2014 for:

(a) Consolidated goodwill;

(b) Property, plant and equipment;

(c) Equity (share capital and reserves);

(d) Non-controlling interests.”

Nowhere does it ask for “consolidated retained earnings”

Now, are you asking about the retained earnings element of “Equity (share capital and reserves)”?

If so, the calculation goes like this:

1st do you understand the deferred finance cost of 8 cents per share x (80% x 9,000 shares = ) 7,200 shares acquired = $576 finance costs

Now, do you accept $8,000 as the subsidiary’s post acquisition retained earnings?

And do you accept the excess depreciation of $600 ($3m fair value adjustment / 5 years) to be deducted from that post-acquisition earnings figure?

So post acquisition adjusted retained earnings are $7,400.

Multiply by “our” share of 80% = $5,920 parent’s share of S post-acq retained

Parent’s own retained earnings were $30,200 (per question)

Deduct $576 finance costs (as above) leaves us with $29,624

Add parent’s share of S post-acq retained from above $5,920 gives us $35,524

Is that better?