In relation to pre-acquisition of a subsidiary entity,which of the following events can cause a change in the pre-acquisition entry subsequent to acquisition date?
I Transfers from post-acquisition retained earnings
II Dividends paid from pre-acquisition reserves
III Transfers from pre-acquisition retained earnings
IV Impairment of goodwill
A)I,II,III and IV
B)I,III and IV only
C)II and III only
D)III and IV only.

Question

Quizplus · Accepted Answer

Transfers from pre-acquisition retained earnings can cause a change in the pre-acquisition entry after the acquisition date. Impairment of goodwill can also lead to a change in the pre-acquisition entry. However, transfers from post-acquisition retained earnings and dividends paid from pre-acquisition reserves are not related to the pre-acquisition entry and do not affect it. Therefore, options I and II can be eliminated. Thus, the correct option is D, which includes III and IV as correct choices.

In Relation to Pre-Acquisition of a Subsidiary Entity,which of the Following