ACCA FA · Chapter 13 · Question 4 of 12
P acquired 80% of S when S's retained earnings were $380,000. At the year end, P's retained earnings are $820,000 and S's are $470,000. Goodwill has been impaired by $10,000, and non-controlling interest is measured at fair value. What are the consolidated retained earnings?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) $884,000
Explanation
S's post-acquisition profit = $470,000 - $380,000 = $90,000; P's share = 80% x $90,000 = $72,000. With NCI at fair value, the goodwill impairment is shared, so P's share = 80% x $10,000 = $8,000. Group retained earnings = $820,000 + $72,000 - $8,000 = $884,000. Charging the full $10,000 to the group gives $882,000.
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