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Post by blessingndlovu on Sept 3, 2020 5:12:22 GMT
I will be appearing for F2 in October and am working through practice questions. I am confused with retained earnings, do I need to excess depreciation to the retained earnings? Is this not already included in profit?
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Post by terracotta on Sept 3, 2020 20:56:03 GMT
Hi
You will need to consider depreciation as it does have an effect on retained earnings.
If the carrying amount of the sub’s PPE is higher at the time of the acquisition, you will need to work out depreciation and delete it from the sub’s retained earnings. This will then form part of the consolidated retained earnings.
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Post by culkin93 on Sept 4, 2020 4:17:03 GMT
If it was included in retained earnings as an expense, moving it reverses the excess from retained earnings.
So you’re debiting revaluation surplus reserve, and crediting retained earnings.
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