The retained earnings of a parent company were M550 000 and their 80% subsidiary had retained earnings of M300 000. When the subsidiary was acquired they had retained earnings of M210 000. The parent company sold a non-current asset to their subsidiary for M300 000. At the date of transfer the asset had a carrying value of M225 000. The subsidiary has charged depreciation of M30 000 on this asset since acquisition. If the parent had retained the asset they would have charged M19 000. The parent company gave the subsidiary a loan of M300 000 to enable them to make this purchase. The interest charged on this loan is 5% per annum and a full years charge has been made in the financial statements. Show the adjustments that are required on consolidation and calculate the consolidated retained earnings after the adjustments made
The
M300 000. When the subsidiary was acquired they had retained earnings of M210 000. The parent company
sold a non-current asset to their subsidiary for M300 000. At the date of transfer the asset had a carrying value
of M225 000. The subsidiary has charged
had retained the asset they would have charged M19 000. The parent company gave the subsidiary a loan of
M300 000 to enable them to make this purchase. The interest charged on this loan is 5% per annum and a full
years charge has been made in the financial statements.
Show the adjustments that are required on consolidation and calculate the consolidated retained earnings after the adjustments made.
Step by step
Solved in 4 steps with 2 images
