Radio Ltd Acquired All the Issued Capital of Wave Ltd

question 32

Multiple Choice

Radio Ltd acquired all the issued capital of Wave Ltd on 1 July 2014 for cash consideration of $2 million.The fair value of the net assets of Wave Ltd at that date was $1.8 million as follows: $$\begin{array} { | l | r | } \hline \text { Share capital } & \$ 1000000 \\\hline \text { Retained earnings } & 800000 \\\hline \text { Total equity } & \$ 1800000 \\\hline\end{array}$$ During the period ending 30 June 2015,Wave Ltd declare a dividend of $300 000 that is identified as being paid out of pre-acquisition profits.Goodwill had been determined to have impaired by $20 000 during the period.What consolidation journal entries would be required to prepare group accounts for the period ended 30 June 2015?

• A) \[\begin{array} { | c | l | r | r | }
• \hline \text { Dr } & \text { Share capital } & 1000000 & \\
• \hline \mathrm { Dr } & \text { Retained earnings } & 500000 & \\
• \hline \mathrm { Dr } & \text { Goodwill } & 500000 & \\
• \hline \mathrm { Cr } & \text { Investment in Wave Ltd } & & 2000000 \\
• \hline & & & \\
• \hline \mathrm { Dr } & \text { Impairment loss } & 250000 & \\
• \hline \mathrm { Cr } & \text { Accumulated impairment loss } & & 250000 \\
• \hline & & & \\
• \hline \mathrm { Dr } & \text { Dividend payable } & 300000 & \\
• \hline \mathrm { Cr } & \text { Investment in Wave Ltd } & & 300000 \\
• \hline & & & \\
• \hline \mathrm { Dr } & \text { Dividend declared } & 300000 & \\
• \hline \mathrm { Cr } & \text { Dividend receivable } & & 300000 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | c | l | r | r | }
• \hline \text { Dr } & \text { Share capital } & 1000000 & \\
• \hline \mathrm { Dr } & \text { Retained earnings } & 800000 & \\
• \hline \mathrm { Cr } & \text { Investment in Wave Ltd } & & 1800000 \\
• \hline & & & \\
• \hline \mathrm { Dr } & \text { Retained earnings } & 20000 & \\
• \hline \mathrm { Cr } & \text { Accumulated impairment loss } & & 20000 \\
• \hline & & & \\
• \hline \mathrm { Dr } & \text { Dividend payable } & 300000 & \\
• \hline \mathrm { Cr } & \text { Dividend receivable } & & 300000 \\
• \hline & & & \\
• \hline \mathrm { Dr } & \text { Dividend declared } & 300000 & \\
• \hline \mathrm { Cr } & \text { Dividend income } & & 300000 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | c | l | r | r | }
• \hline \text { Dr } & \text { Share capital } & 1000000 & \\
• \hline \mathrm { Dr } & \text { Retained earnings } & 500000 & \\
• \hline \mathrm { Cr } & \text { Investment in Wave Ltd } & & 1500000 \\
• \hline & & & \\
• \hline \mathrm { Dr } & \text { Impairment loss } & 20000 & \\
• \hline \mathrm { Cr } & \text { Retained earnings } & & 20000 \\
• \hline & & & \\
• \hline \mathrm { Dr } & \text { Dividend payable } & 300000 & \\
• \hline \mathrm { Cr } & \text { Dividend receivable } & & 300000 \\
• \hline & & & \\
• \hline \mathrm { Dr } & \text { Dividend declared } & 300000 & \\
• \hline \mathrm { Cr } & \text { Dividend income } & & 300000 \\
• \hline
• \end{array}\]
• D) \(\begin{array}{|l|l|r|l|}
• \hline \mathrm{Dr} & \text { Share capital } & 1,000,000 & \\
• \hline \mathrm{Dr} & \text { Retained earnings } & 800,000 & \\
• \hline \mathrm{Dr} & \text { Goodwill } & 200,000 & \\
• \hline \mathrm{Cr} & \text { Investment in Wave Ltd } & & 200,0000 \\
• \hline & & & \\\hline \mathrm{Dr} & \text { Impairment loss - goodwill } & 20,000 & \\
• \hline \mathrm{Cr} & \text { Accumulated impairment loss\_goodwill } & & 20,000 \\
• \hline & & & \\
• \hline \mathrm{Dr} & \text { Dividend payable } & 300,000 & \\
• \hline \mathrm{Cr} & \text { Dividend receivable } & & 300,000 \\
• \hline & & & \\
• \hline \mathrm{Dr} & \text { Dividend declared } & 300,000 & \\
• \hline \mathrm{Cr} & \text { Dividend income } & & 300,000 \\
• \hline
• \end{array}\)

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Definitions:

Interpersonal Conflict

Interpersonal conflict occurs between two or more individuals in opposition to each other.

Observable Culture

This term refers to elements of an organization's culture that can be directly witnessed, such as the way employees dress, office layout, and company rituals, providing insights into the organizational values and norms.

Cultural Analysis

The examination of a group's values, beliefs, and behaviors to understand its culture.

Observable Culture

Observable culture refers to the aspects of an organization's culture that can be seen, heard, or experienced directly, such as rituals, dress codes, or language.