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Hi Mike,
in the exam June15, Q.9, the Retained Earning calculation deducts the full amount of URP in inventory instead of taking the 80% of it (corresponding to the participation %).
In a similar example in my BPP book (pag.136) instead it considers the URP multiplied by the % of participation.
Which one of the 2 approaches is correct?
Thanks
LuiginaThere is more than one way to skin a cat (English idiom!)
You can take the FULL amount from the associate’s retained earnings and then calculate the group’s share of those reduced retained earnings or …
… you can take the group’s share of the associate’s retained earnings and then deduct the group’s share of the pup
Say pre-adjustment retained earnings were $100,000, the pup was $5,000 and the percentage holding was 30%
We can 1) 30% x (100,000 – 5,000) = 28,500 or …
… 2) (30% x 100,000) – (30% x 5,000) = 28,500
Does it matter?
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