Reference no: EM132618292

Kollektiv Limited purchased 100% of the shares in Dramaphone Limited on 1 July 2020, for a cash consideration of $ 1,200,000. On that date, the equity balances of Dramaphone Limited were:

Share Capital $1,000,000

Retained Earnings $300,000

Problem 1: All of the identifiable net assets were recorded at their fair value in the books of Dramaphone Limited. The tax rate is 30%. The pre-acquisition entry on acquisition date would include a:

Select one:

Option a. Dr Retained Earnings $ 100,000

Option b. Cr Gain on Bargain Purchase $ 100,000

Option c. Dr Goodwill $ 100,000

Option d. Dr BCVR $ 70,000

Option e. None of the other options.