Fan Ltd Acquired a 60 Per Cent Interest in Dance

question 4

Multiple Choice

Fan Ltd acquired a 60 per cent interest in Dance Ltd on 1 July 2002 for a cash consideration of $780,000.At that date the fair value of the net assets of Dance Ltd was represented by: On 30 June 2005 Fan Ltd sold all its shares in Dance Ltd for $880,000.At this date the fair value of the net assets of Dance Ltd was represented by:
The retained earnings of $350,000 include operating profit after tax of $20,000 from the current period.Impairment of goodwill was assessed at $5,400,the impairment having been incurred evenly across the last three years.The investment has not been marked to market during the period that the shares were held.What is the elimination entry required for the consolidated accounts?

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Definitions:

Sustainable Growth Rate

The maximum rate at which a company can grow its sales, earnings, and dividends without increasing its financial leverage.

Debt to Equity Ratio

The ratio showing the variance in financing methods between debt and equity for a company’s assets.

Dividend Payout Ratio

The fraction of net income a firm pays to its shareholders as dividends, expressed as a percentage of the company's total earnings.

Retention Ratio

A financial metric indicating the percentage of a company's net income that is not distributed as dividends but rather retained for reinvestment in the business.