ACCA FR · Chapter 12 · Question 6 of 13
Panther Co acquired 75% of Serval Co two years ago. At acquisition Serval Co's retained earnings were $3,000,000, and its plant had a fair value $300,000 above its carrying amount, with a remaining life of 5 years. Now Panther Co's retained earnings are $10,000,000 and Serval Co's are $4,500,000. There has been no impairment of goodwill and no intra-group trading. What are consolidated retained earnings?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) $11,035,000
Explanation
Serval Co's post-acquisition retained earnings = $4,500,000 - $3,000,000 = $1,500,000, less extra depreciation on the fair value uplift ($300,000/5 x 2 years = $120,000) = $1,380,000. Group share = 75% x $1,380,000 = $1,035,000. Consolidated retained earnings = $10,000,000 + $1,035,000 = $11,035,000.
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