ExpertHard1 markMultiple Choice
ACCA · Question 46 · Preparing simple consolidated financial statements
Scenario: TechNova PLC acquired 80% of CyberNetix Ltd on 1 Jan 20X5 for $500,000 cash. At acquisition, CyberNetix's retained earnings were $200,000 and share capital was $100,000. NCI fair value at acquisition was $120,000. During 20X5, TechNova sold goods to CyberNetix for $80,000 (25% mark-up on cost). Half remained in inventory at year-end (31 Dec 20X5). CyberNetix's 20X5 profit was $150,000.
If TechNova's own individual retained earnings at year-end are $800,000, what is the Consolidated Retained Earnings figure?
Scenario: TechNova PLC acquired 80% of CyberNetix Ltd on 1 Jan 20X5 for $500,000 cash. At acquisition, CyberNetix's retained earnings were $200,000 and share capital was $100,000. NCI fair value at acquisition was $120,000. During 20X5, TechNova sold goods to CyberNetix for $80,000 (25% mark-up on cost). Half remained in inventory at year-end (31 Dec 20X5). CyberNetix's 20X5 profit was $150,000.
If TechNova's own individual retained earnings at year-end are $800,000, what is the Consolidated Retained Earnings figure?
Answer options:
A.
$920,000
B.
$912,000
C.
$950,000
D.
$800,000
How to approach this question
Consolidated RE = Parent's own RE + Parent's share of Sub's post-acq RE - PUP (if parent is seller).
Full Answer
B.$912,000✓ Correct
Consolidated RE = TechNova's RE ($800,000) + TechNova's share of CyberNetix's post-acq profit (80% * $150,000 = $120,000) - PUP ($8,000) = $912,000.
Common mistakes
Forgetting to deduct the PUP, or deducting it from the NCI.
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