Question

On 1 July 2016, Ma Ltd acquired all the issued shares of Pa Ltd for $326,000. The shares are acquired ex-dividend. At this date, the equity of Pa Ltd was recorded as follows:

Share capital	$340,000
General Reserve	$391,000
Retained Earnings	$215,000
Dividend Payable	$43,000

All the identifiable assets and liabilities were recorded at amounts equal to their fair values.

The consolidation worksheet entry at 30 June 2018 is as follows:

Account Name	Debit	Credit
Share Capital	$340,000
General Reserve	$391,000
Retained Earnings		xxx
Investment in Pa Ltd		yyy

Enter the amount of opening retained earnings (xxx) at 30 June 2018 in the answer block below:

Answer 1

what are Retained Earnings?

Lets see the below

Retained earnings are generally those earnings ,where company specifically retains certain amount expecting a good growth for the company in terms of Earnings, if the situation is vice versa where the company believes that cost they incur would be more than what they would receive as an return, the same would be given as dividends .

Retained Earnings= Retained earnings available at the beginning -Dividend Payable

In this case, company has distributed some dividends hence calculation as follows:

$215000-43000

= $172,000