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Prepare the pre-acquisition entries

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Reference no: EM133053045

Question - On 1 July 2019, Micky Ltd acquired all the - issued shares of Rocky Ltd for $220 000. The financial statements of Rocky Ltd showed the equity of Rocky Ltd at that date to be:

Share capital - 20000 $5 shares General reserve

Retained earnings $100 000 $40 000 $60 000

All the assets and liabilities of Rocky Ltd were recorded at amounts equal to their fair values at that date.

During the year ending 30 June 2020, Rocky Ltd undertook the following actions.

On 10 September 2019, paid a dividend of $20 000 from the profits earned prior to 1 July 2019.

On 28 June 2020, declared a dividend of $20 000 to be paid on 15 August 2020.

On 1 January 2020, transferred $15 000 from the general reserve existing at 1 July 2019 to retained earnings.

Required -

(a) Prepare the pre-acquisition entries at 1 July 2019.

(b) Prepare the pre-acquisition entries at 30 June 2020.

Reference no: EM133053045

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