Prepare the pre-acquisition entries at June

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Question - On 1 July 2019, Gail Ltd acquired all the issued shares of Ray Ltd for $90 000. The financial statements of Ray Ltd showed the equity of Ray Ltd at that date to be:

Share capital - 10000 $5 shares $50,000

General reserve 25000

Retained earnings 15000

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

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

On 1 January 2020, transferred $5 000 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: EM132567045

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