At Acquisition Date, a Wholly Owned Subsidiary Had the Following $\quad$

question 49

Multiple Choice

At acquisition date, a wholly owned subsidiary had the following equity items. Retairled earmirgs $\quad$$\quad$$\$ 27,500$
BHare capital $\quad$$\quad$$\quad$$\$ 40,000$ In the year following the acquisition, the subsidiary transferred $5 000 from pre-acquisition retained earnings to a general reserve account. At the reporting date following the reserve transfer, which of the following consolidation adjustments is needed?
I. Dr Retained earnings $5 000
Cr General reserve $5 000
II. Dr General reserve $5 000
Cr Transfer to general reserve $5 000
III. Dr General reserve $5 000
Cr Shares in subsidiary $5 000
IV. Dr Shares in subsidiary $5 000
Cr Retained earnings $5 000

• A) I.
• B) II.
• C) III.
• D) IV.

---

Definitions:

Investing Activity

Transactions involving the acquisition or disposal of long-term assets and investments not considered cash equivalents, reflected in a company's cash flows.

Loss

A financial situation in which total costs exceed total revenues, leading to a negative net income.

Indirect Method

A cash flow reporting technique that starts with net income and adjusts for cash-based transactions.

Operating Activities

Business activities related directly to the production, sale, and delivery of a company's products or services, often reflected in its cash flow.