On 1 July 2014,Peter Limited acquired all the issued shares of Kerri Limited for $100 000 when the equity of Kerri Limited consisted of:
Share capital $70 000
Retained earnings 30 000
The pre-acquisition entry at 1 July 2014 is:

Question

Quizplus · Accepted Answer

The pre-acquisition entry at 1 July 2014 would be to debit the investment account (for the cost of $100,000) and credit the cash account (for the same amount). Option A is incorrect as it debits the retained earnings account, which would not be affected by the acquisition. Option C is incorrect as it only records the share capital of Kerri Limited, and ignores the retained earnings. Option D is incorrect as it incorrectly records a credit to the investment account.

On 1 July 2014,Peter Limited Acquired All the Issued Shares