Prepare the pre-acquisition entries at july

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Question - On 1 July 2016, Max Ltd acquired all the issued shares of Rodney Ltd for $200 000. The financial statements of Rodney Ltd showed the equity of Rodney Ltd at that date to be:

Share capital - 20 000 $5 shares $100 000

General reserve 40 000

Retained earnings 60 000

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

During the year ending 30 June 2017, Rodney Ltd undertook the following actions.

On 10 September 2016, paid a dividend of $20 000 from the profits earned prior to 1 July 2016.

On 28 June 2017, declared a dividend of $20 000 to be paid on 15 August 2017.

On 1 January 2017, transferred $15 000 from the general reserve existing at 1 July 2016 to retained earnings.

Required - Prepare the pre-acquisition entries at 1 July 2016.

Reference no: EM132543907

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