Easts Limited acquired 100% of the shares in Tigers Limited on a cum div. basis for $200 000. At acquisition date, the subsidiary had a declared dividend of $10 000. The pre-acquisition entry must include the following line:

Question

Quizplus · Accepted Answer

The cum div. basis means that the dividend declared by the subsidiary has already been taken into account in the purchase price. Therefore, the shares in the subsidiary should be recorded at the purchase price of $190,000 ($200,000 - $10,000). Hence, the pre-acquisition entry should include the line CR Shares in subsidiary $190,000.

Easts Limited Acquired 100% of the Shares in Tigers Limited