At 31 December 20x2 Apple and Blossom reported retained earnings of £ 394,500 an

Question

At 31 December 20x2 Apple and Blossom reported retained earnings of £ 394,500 and £ 240,000 respectively. Identify the consolidated retained earnings as at 31 December 20x2 for each of the following independent scenarios.

Apple acquired 80% of Blossom's equity on 1 January 20x1 when Blossom reported a retained loss of £ 90,000. There was a fair valuation gain, recognised at acquisition, of £ 120,000 and, as a result, additional depreciation needs to be written off at £ 5,000 per annum. The consolidated retained earnings are?

Select one or more:

a. £658,500

b. £654,500

c. £650,500

d. £578,500

Explanation / Answer

ANS =D

Retained earnings of APPLE = 394,500

Retained earning of BLOSSOM = 80% X (240000-10000) = 184,000

Total retained earnings = 578,500

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