Calculate the Group's Share of Zeta's Post-Acquisition Retained Earnings

What would be the amount of group's share of Zeta's post-acquisition retained earnings as at 31 March 20X5?

Calculate the group's share of Zeta's post-acquisition retained earnings based on the provided data.

Answer:

The group's share of Zeta's post-acquisition retained earnings as of 31 March 20X5 would be $71,500.

To calculate the group's share of Zeta's post-acquisition retained earnings, we need to consider the percentage of equity shares owned by William and the relevant transactions. William acquired 70% of Zeta's equity shares, which means he holds a controlling interest.

First, we need to determine Zeta's post-acquisition retained earnings at 31 March 20X5. Since the retained earnings at the acquisition date were $200,000, we need to calculate the post-acquisition retained earnings by adding the profit or loss for the year. Zeta's retained earnings at 31 March 20X5 were $340,000, indicating a profit of $140,000 ($340,000 - $200,000).

Next, we need to determine the group's share of this post-acquisition retained earnings. William purchased goods from Zeta amounting to $320,000 during the year, and one quarter ($320,000 / 4 = $80,000) of these goods remained in his inventory at 31 March 20X5. Zeta applies a 25% margin to all sales, so the total sales would be $320,000 / (1 - 0.25) = $426,666.67.

Since William owns 70% of Zeta, his share of the sales would be $426,666.67 × 70% = $298,666.67. Subtracting the cost of goods sold ($320,000 - $80,000 = $240,000) from his share of sales, we get $298,666.67 - $240,000 = $58,666.67 as William's share of the profit. Adding this to the post-acquisition retained earnings, we get $140,000 + $58,666.67 = $198,666.67 as the group's share of Zeta's post-acquisition retained earnings.

Therefore, the group's share of Zeta's post-acquisition retained earnings as of 31 March 20X5 would be $71,500.