Excelsior Limited acquired 100% of the shares in Arthur Limited on a cum.div. basis for $100 000. At acquisition date the subsidiary had a declared dividend of $5000. The pre-acquisition entry must include the following line:
A) DR Shares in subsidiary $105 000;
B) DR Shares in subsidiary $100 000;
C) DR Shares in subsidiary $95 000;
D) DR Shares in subsidiary $5 000.

Question

Quizplus · Accepted Answer

The purchase price of $100,000 includes the $5,000 dividend, so the actual cost of the shares is $95,000.

Excelsior Limited Acquired 100% of the Shares in Arthur Limited