On 1 July 20X3,a Parent Entity,Delta Ltd Acquired 20% of the Share

question 5

Multiple Choice

On 1 July 20X3,a parent entity,Delta Ltd acquired 20% of the share capital of Rimfire Ltd and the power to exert significant influence over that company's decision-making processes for a cash outlay of $1 800 000.At relevant dates,the shareholders' equity of Rimfire Ltd at 30 June was (amounts in thousands) : $\begin{array}{lrr}&200X3&20X7\\\text { Shareholders' equity }\\\text { Share capital } & \$ 2000 & \$ 2000 \\\text { Retained earnings } & 4000 & 6000\\\text { Total shareholders' equity }&\$6000&\$8000\end{array}$
I.No dividends have been paid by Rimfire Ltd out of pre-acquisition profits.
II.At 30 June 20X6,Delta Ltd held inventories that had been supplied by Rimfire Ltd at a markup of $100 000.
III.During the year ended 30 June 20X7,Rimfire Ltd earned a profit for the year of $600 000 (after income tax of $200 000) and paid a dividend of $250 000.
IV.The income tax rate was 30%.
V.Any goodwill on acquisition has not been impaired since acquisition.
In the consolidated balance sheet at 30 June 20X7 of the group controlled by Delta Ltd,the investment in Rimfire Ltd would be reported at an amount of:

• A) $2 150 000.
• B) $2 164 000.
• C) $2 200 000.
• D) None of the above.