Use the following information to answer questions
On 1 July 2008, P Limited acquired all the issued shares of S Limited for $50 000 when the equity of S Limited consisted of:
$\begin{array} { l l }
\text { Share Capital } & \$ 35,000 \
\text { Retained Earnings } & \$ 15,000
\end{array}$
During the year ended 30 June 2009, S Limited paid an interim dividend of $5 000 from profits earned before 1 July 2008.
-The pre-acquisition elimination entry at 30 June 2009 is:
A)$\begin{array} { c l l l }
\text { Opening Retained earnings } & \mathrm { Dr } & 10,000 & \
\text { Share capital } & \mathrm { Dr } & 35,000 & \
\text { Shares in S Limited } & \mathrm { Cr } & 45,000
\end{array}$
B)$\begin{array} { l l l l }
\text { Opening Retained earnings } & \mathrm { Dr } & 15,000 & \
\text { Share capital } & \mathrm { Dr } & 35,000 & \
\text { Shares in S Limited } & \mathrm { Cr } & 50,000
\end{array}$
C)$\begin{array} { l l r l }
\text { Opening Retained earnings } & \mathrm { Dr } & 10,000 & \
\text { Share capital } & \mathrm { Dr } & 35,000 & \
\text { Dividends payable } & \mathrm { Dr } & 5,000 & \
\quad \text { Shares in S Limited } & \mathrm { Cr } & 50,000
\end{array}$
D)$\begin{array} { l l l l }
\text { Opening Retained earnings } & \mathrm { Dr } & 15,000 & \
\text { Share capital } & \mathrm { Dr } & 35,000 & \
\text { Shares in S Limited } & \mathrm { Cr } & & 45,000 \
\text { Dividends paid } & \mathrm { Cr } & & 5,000
\end{array}$

Question

Use the following information to answer questions 
On 1 July 2008, P Limited acquired all the issued shares of S Limited for $50 000 when the equity of S Limited consisted of:
$\begin{array} { l l } 
\text { Share Capital } & \$ 35,000 \
\text { Retained Earnings } & \$ 15,000
\end{array}$
During the year ended 30 June 2009, S Limited paid an interim dividend of $5 000 from profits earned before 1 July 2008.
-The pre-acquisition elimination entry at 30 June 2009 is:
A)$\begin{array} { c l l l } 
\text { Opening Retained earnings } & \mathrm { Dr } & 10,000 & \
\text { Share capital } & \mathrm { Dr } & 35,000 & \
\text { Shares in S Limited } & \mathrm { Cr } &  45,000
\end{array}$ 
B)$\begin{array} { l l l l } 
\text { Opening Retained earnings } & \mathrm { Dr } & 15,000 & \
\text { Share capital } & \mathrm { Dr } & 35,000 & \
\text { Shares in S Limited } & \mathrm { Cr } &  50,000
\end{array}$ 
C)$\begin{array} { l l r l } 
\text { Opening Retained earnings } & \mathrm { Dr } & 10,000 & \
\text { Share capital } & \mathrm { Dr } & 35,000 & \
\text { Dividends payable } & \mathrm { Dr } & 5,000 & \
\quad \text { Shares in S Limited } & \mathrm { Cr } & 50,000
\end{array}$ 
D)$\begin{array} { l l l l } 
\text { Opening Retained earnings } & \mathrm { Dr } & 15,000 & \
\text { Share capital } & \mathrm { Dr } & 35,000 & \
\text { Shares in S Limited } & \mathrm { Cr } & & 45,000 \
\text { Dividends paid } & \mathrm { Cr } & & 5,000
\end{array}$

Quizplus · Accepted Answer

The pre-acquisition elimination entry should eliminate the share capital and retained earnings of S Limited against the investment in S Limited. The total equity of S Limited at acquisition was $50,000 ($35,000 share capital + $15,000 retained earnings), which matches the investment cost.

Use the Following Information to Answer Questions on 1 Share Capital $35,000 Retained Earnings $15,000\begin{array} { l l } \text { Share Capital } & \$ 35,000 \\\text { Retained Earnings } & \$ 15,000\end{array} Share Capital Retained Earnings ​$35,000$15,000​

Use the Following Information to Answer Questions
on 1 $\begin{array} { l l } \text { Share Capital } & \$ 35,000 \\\text { Retained Earnings } & \$ 15,000\end{array}$