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Candle Ltd Acquires All the Issued Capital of Wick Ltd

Question 50

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Candle Ltd acquires all the issued capital of Wick Ltd for a cash payment of $4 500 000 on 30 June 2014.The statement of financial position of Wick Ltd at purchase date is: $Candle Ltd acquires all the issued capital of Wick Ltd for a cash payment of $4 500 000 on 30 June 2014.The statement of financial position of Wick Ltd at purchase date is: The fair value of the net assets of Wick Ltd as at 30 June 2014 is $3 800 000.What is the consolidation entry to eliminate the investment in Wick Ltd? A) \begin{array} { | l | l | r | r | } \hline & & ( \$ 000 ) & ( \$ 000 ) \\ \hline \mathrm { Dr } & \text { Share capital } & 2500 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 500 & \\ \hline \mathrm { Dr } & \text { Goodwill } & 1500 & \\ \hline \mathrm { Cr } & \text { Investment in subsidiary } & & 4500 \\ \hline \end{array} B) \begin{array} { | l | l | r | r | } \hline & & ( \$ 000 ) & ( \$ 000 ) \\ \hline \mathrm { Dr } & \text { Non-current assets } & 800 & \\ \hline \mathrm { Cr } & \text { Revaluation surplus } & & 800 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Share capital } & 2500 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 500 & \\ \hline \mathrm { Dr } & \text { Revaluation surplus } & 800 & \\ \hline \mathrm { Dr } & \text { Goodwill } & 700 & \\ \hline \mathrm { Cr } & \text { Investment in subsidiary } & & 4500 \\ \hline \end{array} C) \begin{array} { | l | l | r | r | } \hline & & ( \$ 000 ) & ( \$ 000 ) \\ \hline \mathrm { Dr } & \text { Non-current assets } & 800 & \\ \hline \mathrm { Cr } & \text { Retained earnings } & & 800 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Share capital } & 2500 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 1300 & \\ \hline \mathrm { Dr } & \text { Goodwill } & 700 & \\ \hline \mathrm { Cr } & \text { Investment in subsidiary } & & 4500 \\ \hline \end{array} D) \begin{array} { | c | l | r | r | } \hline & & ( \$ 000 ) & ( \$ 000 ) \\ \hline \mathrm { Dr } & \text { Non-current assets } & 800 & \\ \hline \mathrm { Cr } & \text { Revaluation surplus } & & 560 \\ \hline \mathrm { Cr } & \text { Deferred tax liability } & & 240\\ \hline \mathrm { Dr } & \text { Share capital } & 2500 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 500 & \\ \hline \mathrm { Dr } & \text { Revaluation surplus } & 800 & \\ \hline \mathrm { Dr } & \text { Goodwill } & 700 & \\ \hline \mathrm { Cr } & \text { Investment in subsidiary } & & 4500 \\ \hline \end{array}$ The fair value of the net assets of Wick Ltd as at 30 June 2014 is $3 800 000.What is the consolidation entry to eliminate the investment in Wick Ltd?

A)
$\begin{array} { | l | l | r | r | } \hline & & ( \$ 000 ) & ( \$ 000 ) \\\hline \mathrm { Dr } & \text { Share capital } & 2500 & \\\hline \mathrm { Dr } & \text { Retained earnings } & 500 & \\\hline \mathrm { Dr } & \text { Goodwill } & 1500 & \\\hline \mathrm { Cr } & \text { Investment in subsidiary } & & 4500 \\\hline\end{array}$
B)
$\begin{array} { | l | l | r | r | } \hline & & ( \$ 000 ) & ( \$ 000 ) \\\hline \mathrm { Dr } & \text { Non-current assets } & 800 & \\\hline \mathrm { Cr } & \text { Revaluation surplus } & & 800 \\\hline & & & \\\hline \mathrm { Dr } & \text { Share capital } & 2500 & \\\hline \mathrm { Dr } & \text { Retained earnings } & 500 & \\\hline \mathrm { Dr } & \text { Revaluation surplus } & 800 & \\\hline \mathrm { Dr } & \text { Goodwill } & 700 & \\\hline \mathrm { Cr } & \text { Investment in subsidiary } & & 4500 \\\hline\end{array}$
C)
$\begin{array} { | l | l | r | r | } \hline & & ( \$ 000 ) & ( \$ 000 ) \\\hline \mathrm { Dr } & \text { Non-current assets } & 800 & \\\hline \mathrm { Cr } & \text { Retained earnings } & & 800 \\\hline & & & \\\hline \mathrm { Dr } & \text { Share capital } & 2500 & \\\hline \mathrm { Dr } & \text { Retained earnings } & 1300 & \\\hline \mathrm { Dr } & \text { Goodwill } & 700 & \\\hline \mathrm { Cr } & \text { Investment in subsidiary } & & 4500 \\\hline\end{array}$
D)
$\begin{array} { | c | l | r | r | } \hline & & ( \$ 000 ) & ( \$ 000 ) \\\hline \mathrm { Dr } & \text { Non-current assets } & 800 & \\\hline \mathrm { Cr } & \text { Revaluation surplus } & & 560 \\\hline \mathrm { Cr } & \text { Deferred tax liability } & & 240\\\hline \mathrm { Dr } & \text { Share capital } & 2500 & \\\hline \mathrm { Dr } & \text { Retained earnings } & 500 & \\\hline \mathrm { Dr } & \text { Revaluation surplus } & 800 & \\\hline \mathrm { Dr } & \text { Goodwill } & 700 & \\\hline \mathrm { Cr } & \text { Investment in subsidiary } & & 4500 \\\hline\end{array}$

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