Wholly Owned Subsidiary Has the Following Balances at Control Date

question 9

True/False

Wholly owned Subsidiary has the following balances at control date 20X1:
$$\begin{array} { l l } \text { Capital } & \$ 500000 \\\text { Asset revaluation reserve } & \$ 200000 \\\text { Retained profits } & \$ 100000\end{array}$$
Parent paid $900 000 for the shares of Subsidiary.The tax rate is 30%.
Subsidiary assets are at fair value except for inventory, which the Subsidiary measures at $20 000.Under group policy the amount would be $10 000.
In the consolidation there will be a deferred tax liability of $3000.

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Definitions:

Net Proceeds

The total amount received from a sale or transaction after deducting all related expenses and costs.

1% Commission

A fee or charge for services, typically in sales or financial transactions, that is equal to 1% of the transaction's total value.

Dividend Yield

A financial ratio that shows how much a company pays out in dividends each year relative to its share price.

Annual Dividend

The total payout a shareholder receives from a company's earnings over one year, distributed per share.