ACCA Applied Knowledge · Financial Accounting · Subsidiaries
Parent P owns 90% of S. S's retained earnings at the reporting date are $400,000 and were $250,000 at acquisition. What amount of S's post-acquisition retained earnings is included in consolidated retained earnings?
The amount is $135,000. Post-acquisition retained earnings of the subsidiary are $150,000 (400,000 less 250,000), and only the parent's 90% share is included in consolidated retained earnings. The other 10%, or $15,000, belongs to the non-controlling interest.
- A$135,000Correct
- B$150,000
- C$15,000
- D$360,000
Explanation
Post-acquisition profits are 400,000 − 250,000 = 150,000. P's share is 90% × 150,000 = 135,000, and the remaining 10% (15,000) goes to NCI. Using 150,000 would include the NCI's share in group reserves.
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