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Fresco Ltd Acquires All the Issued Capital of Indoor Ltd

Question 59

Multiple Choice

Fresco Ltd acquires all the issued capital of Indoor Ltd for a cash payment of $1 000 000 on 30 June 2015.The statement of financial position of Indoor Ltd at purchase date is: $Fresco Ltd acquires all the issued capital of Indoor Ltd for a cash payment of $1 000 000 on 30 June 2015.The statement of financial position of Indoor Ltd at purchase date is: Assuming the assets of Indoor Ltd are at fair value,what is the entry to eliminate the investment in Fresco Ltd? A) \begin{array} { | l | l | r | r | } \hline & & ( \$ 000 ) & ( \$ 000 ) \\ \hline \mathrm { Dr } & \text { Share capital } & 900 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 282 & \\ \hline \mathrm { Dr } & \text { Accounts payable } & 80 & \\ \hline \mathrm { Dr } & \text { Loans } & 1950 & \\ \hline \mathrm { Cr } & \text { Excess } & & 2212 \\ \hline \mathrm { Cr } & \text { Investment in Indoor Ltd. } & & 1000 \\ \hline \end{array} B) \begin{array} { | l | l | r | r | } \hline & & ( \$ 000 ) & ( \$ 000 ) \\ \hline \mathrm { Dr } & \text { Share capital } & 900 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 282 & \\ \hline \mathrm { Dr } & \text { Accounts payable } & 80 & \\ \hline \mathrm { Dr } & \text { Loans } & 1950 & \\ \hline \mathrm { Cr } & \text { Excess. } & & 2212 \\ \hline \mathrm { Cr } & \text { Investment in Indoor Ltd } & & 1000 \\ \hline \end{array} C) \begin{array} { | l | l | r | r | } \hline & & ( \$ 000 ) & ( \$ 000 ) \\ \hline \text { Dr } & \text { Investment in Indoor Ltd } & 1000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 282 & \\ \hline \mathrm { Dr } & \text { Share capital } & 900 & \\ \hline \mathrm { Cr } & \text { Excess } & & 2182 \\ \hline & & & \\ \hline \end{array} D) \begin{array} { | l | l | r | r | } \hline & & ( \$ 000 ) & ( \$ 000 ) \\ \hline \mathrm { Dr } & \text { Share capital } & 900 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 282 & \\ \hline \mathrm { Cr } & \text { Excess } & & 182 \\ \hline \mathrm { Cr } & \text { Investment in Indoor Ltd } & & 1000 \\ \hline & & & \\ \hline \end{array}$
Assuming the assets of Indoor Ltd are at fair value,what is the entry to eliminate the investment in Fresco Ltd?

A)
$\begin{array} { | l | l | r | r | } \hline & & ( \$ 000 ) & ( \$ 000 ) \\\hline \mathrm { Dr } & \text { Share capital } & 900 & \\\hline \mathrm { Dr } & \text { Retained earnings } & 282 & \\\hline \mathrm { Dr } & \text { Accounts payable } & 80 & \\\hline \mathrm { Dr } & \text { Loans } & 1950 & \\\hline \mathrm { Cr } & \text { Excess } & & 2212 \\\hline \mathrm { Cr } & \text { Investment in Indoor Ltd. } & & 1000 \\\hline\end{array}$
B)
$\begin{array} { | l | l | r | r | } \hline & & ( \$ 000 ) & ( \$ 000 ) \\\hline \mathrm { Dr } & \text { Share capital } & 900 & \\\hline \mathrm { Dr } & \text { Retained earnings } & 282 & \\\hline \mathrm { Dr } & \text { Accounts payable } & 80 & \\\hline \mathrm { Dr } & \text { Loans } & 1950 & \\\hline \mathrm { Cr } & \text { Excess. } & & 2212 \\\hline \mathrm { Cr } & \text { Investment in Indoor Ltd } & & 1000 \\\hline\end{array}$
C)
$\begin{array} { | l | l | r | r | } \hline & & ( \$ 000 ) & ( \$ 000 ) \\\hline \text { Dr } & \text { Investment in Indoor Ltd } & 1000 & \\\hline \mathrm { Dr } & \text { Retained earnings } & 282 & \\\hline \mathrm { Dr } & \text { Share capital } & 900 & \\\hline \mathrm { Cr } & \text { Excess } & & 2182 \\\hline & & & \\\hline\end{array}$
D)
$\begin{array} { | l | l | r | r | } \hline & & ( \$ 000 ) & ( \$ 000 ) \\\hline \mathrm { Dr } & \text { Share capital } & 900 & \\\hline \mathrm { Dr } & \text { Retained earnings } & 282 & \\\hline \mathrm { Cr } & \text { Excess } & & 182 \\\hline \mathrm { Cr } & \text { Investment in Indoor Ltd } & & 1000 \\\hline & & & \\\hline\end{array}$

Correct Answer:

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