Long Ltd held 90% of the ordinary voting shares of Short Ltd. At the date of acquisition the retained earnings of Strong Ltd were 40,000. The following is an extract from their statement of financial position as at 31 December 20x4:

	Long Ltd	Short Ltd
Retained earnings	360,000	69,000
Dividend payable	50,000	25,000

You ascertain that:

Included in the inventory of Short Ltd were items purchased from Long Ltd for 100,000. Long Ltd prices its products at cost plus 25%.

The dividend payable by Strong Ltd has not been recorded in the Long Ltd books.

What is the correct retained earnings figure for inclusion in the consolidated statement of financial position?

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Part 1

A.

429,000

B.

408,600

C.

389,000

D.

388,600