On 1 July 20X6,P Limited acquired all the issued shares of S Limited for $50 000 when the equity of S Limited consisted of:
The pre-acquisition entry at 1 July 20X6 is:

Question

Quizplus · Accepted Answer

The pre-acquisition entry at 1 July 20X6 is to debit Investment in S Limited for $50 000 and credit Cash for $50 000 as the acquiring company, P Limited, paid cash to acquire all the issued shares of S Limited. Option B correctly reflects this journal entry. Option A incorrectly debits a liability account, Option C incorrectly credits Investment in P Limited, and Option D incorrectly debits the equity account of S Limited.

On 1 July 20X6,P Limited Acquired All the Issued Shares