Reference no: EM132618159
Question - Heros Limited acquired all the shares in Burning Star Limited for a 530,000 cash consideration. The shares were acquired on a cum. div. basis. At acquisition date, Burning Star Limited had declared a dividend of 90,000. The equity of Burning Star Limited at acquisition date consisted of:
Share Capital $245,000
Retained Earnings $65,000
All of the identifiable net assets were recorded at their fair value in the books of Burning Star Limited, except for its buildings which had, at acquisition date, a recorded cost of 60,000, accumulated depreciation of 15,000, and a fair value of 65,000.
The tax rate is 30%.
Compute the pre-acquisition entry on acquisition date?
a. Dr Retained Earnings $65 000
Dr Share Capital $245 000
Dr BCVR $130 000
Cr Investment in Burning Star $440 000
b. Dr Retained Earnings $65 000
Dr Share Capital $245 000'
Dr BCVR $220 000
Cr Investment in Burning Star $530 000
c. Dr Retained Earnings $65 000
Dr Share Capital $245 000
Dr BCVR $220 000
Cr Investment in Burning Star $440 000
d. Dr Retained Earnings $65 000
Dr Share Capital $245 000
Dr Building $14 000
Dr Goodwill $1160 00
Cr Investment in Burning Star $440 000
Cr Revenue from Dividends $90 000
e. Dr Retained Earnings $65 000
Dr Share Capital $245 000
Dr Building $14 000
Dr Goodwill $206 000
Cr Investment in Burning Star $550 000