Use the Following Information to Answer Questions
on 1 $\begin{array} { l l } \text { Share Capital } & \$ 35,000 \\\text { Retained Earnings } & \$ 15,000\end{array}$

question 10

Multiple Choice

Use the following information to answer questions
On 1 July 2008, P Limited acquired all the issued shares of S Limited for $50 000 when the equity of S Limited consisted of:
$\begin{array} { l l } \text { Share Capital } & \$ 35,000 \\\text { Retained Earnings } & \$ 15,000\end{array}$
During the year ended 30 June 2009, S Limited paid an interim dividend of $5 000 from profits earned before 1 July 2008.
-The pre-acquisition elimination entry at 30 June 2009 is:

• A)\(\begin{array} { c l l l }
• \text { Opening Retained earnings } & \mathrm { Dr } & 10,000 & \\
• \text { Share capital } & \mathrm { Dr } & 35,000 & \\
• \text { Shares in S Limited } & \mathrm { Cr } & 45,000
• \end{array}\)
• B)\(\begin{array} { l l l l }
• \text { Opening Retained earnings } & \mathrm { Dr } & 15,000 & \\
• \text { Share capital } & \mathrm { Dr } & 35,000 & \\
• \text { Shares in S Limited } & \mathrm { Cr } & 50,000
• \end{array}\)
• C)\(\begin{array} { l l r l }
• \text { Opening Retained earnings } & \mathrm { Dr } & 10,000 & \\
• \text { Share capital } & \mathrm { Dr } & 35,000 & \\
• \text { Dividends payable } & \mathrm { Dr } & 5,000 & \\
• \quad \text { Shares in S Limited } & \mathrm { Cr } & 50,000
• \end{array}\)
• D)\(\begin{array} { l l l l }
• \text { Opening Retained earnings } & \mathrm { Dr } & 15,000 & \\
• \text { Share capital } & \mathrm { Dr } & 35,000 & \\
• \text { Shares in S Limited } & \mathrm { Cr } & & 45,000 \\
• \text { Dividends paid } & \mathrm { Cr } & & 5,000
• \end{array}\)

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Definitions:

Maximize Profits

Maximizing profits is the goal of most firms, achieved by increasing revenue while minimizing costs, leading to the highest possible financial return from their operations.

MR = MC

An economic principle stating that optimal output level is reached when marginal revenue equals marginal cost, guiding profit-maximizing strategies for firms.

Economic Losses

Refers to the decrease in financial wealth of an entity, which can occur through various means such as business operations, market downturns, or unforeseen events leading to financial damage.

AVC

Average Variable Cost, which is the total variable costs divided by the quantity of output produced.