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CIMA Exam CIMAPRA19-F02-1 Topic 1 Question 99 Discussion

Actual exam question for CIMA's CIMAPRA19-F02-1 exam
Question #: 99
Topic #: 1
[All CIMAPRA19-F02-1 Questions]

LM acquired 80% of the equity shares of ST when ST's retained earnings were $50 million. The fair value of the net assets of ST included a contingent liability with a fair value of $100 million at the date of acquisition and a fair value of $40 million at 31 December 20X6. No other fair value adjustments were required at the date of acquisition.

LM and ST had retained earnings of $200 million and $80 million respectively at 31 December 20X6.

The consolidated retained earnings of LM at 31 December 20X6 were:

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Suggested Answer: C

by Margart at Sep 14, 2024, 11:18 PM

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Jesusita
2 months ago
This question is making my head spin. I think I'll just go with B) $176 million and cross my fingers. At least it's a nice, round number, right?
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Adolph
2 months ago
Wait, did they really just expect us to remember the formula for calculating consolidated retained earnings? I'm going to randomly guess C) $272 million and hope for the best.
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Matthew
2 months ago
I'm not sure about this one. The question mentions something about a contingent liability, which is making me second-guess myself. But I'll stick with A) $164 million for now.
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Kara
1 months ago
Yeah, let's go with A) $164 million then.
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Ernie
1 months ago
I agree, the contingent liability shouldn't affect the consolidated retained earnings.
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Cecily
1 months ago
I think the answer is A) $164 million.
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Monte
3 months ago
Hmm, the contingent liability adjustment seems tricky. I'll go with D) $284 million. That must account for the fair value change in the contingent liability.
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Maurine
1 months ago
Let's go with D) $284 million then, it makes sense given the information provided.
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Elvera
1 months ago
I'm leaning towards option D) $284 million as well, it seems like the most logical choice.
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Geoffrey
1 months ago
I agree, it can have a significant impact on the consolidated retained earnings.
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Peter
2 months ago
I think the fair value adjustment for the contingent liability is important.
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Ailene
3 months ago
But if you consider the fair value adjustments and the retained earnings of both companies, it should be A) $164 million.
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Marta
3 months ago
I disagree, I believe the answer is B) $176 million.
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Dalene
3 months ago
I think the answer is B) $176 million. The question states that LM acquired 80% of ST, so LM's share of ST's retained earnings would be 80% of $50 million, which is $40 million. LM's own retained earnings were $200 million, so the total consolidated retained earnings would be $200 million + $40 million = $240 million.
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Suzan
3 months ago
Yes, that makes sense. LM's share of ST's retained earnings plus their own would give the total consolidated retained earnings.
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Jamie
3 months ago
I think the answer is B) $176 million.
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Ailene
3 months ago
I think the answer is A) $164 million.
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