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 3

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 1 July 2008 is:

• A)\(\begin{array} { l l l l }
• \text { Shares in S Limited } & \mathrm { Dr } & 50000 & \\
• \text { Opening Retained earnings } & \mathrm { Cr } & & 15000 \\
• \text { Share capital } & \mathrm { Cr } & & 35000
• \end{array}\)
• B)\(\begin{array} { l l l l }
• \text { Opening Retained earnings } & \mathrm { Dr } & 15000 & \\
• \text { Share capital } & \mathrm { Dr } & 35000 & \\
• \text { Shares in S Limited } & \mathrm { Cr } & & 50000
• \end{array}\)
• C)\(\begin{array} { l l l l }
• \text { Opening Retained earnings } & \mathrm { Dr } & 10000 & \\
• \text { Share capital } & \mathrm { Dr } & 35000 & \\
• \text { Shares in S Limited } & \mathrm { Cr } & & 45000
• \end{array}\)
• D)\(\begin{array} { l l l l }
• \text { Opening Retained earnings } & \mathrm { Dr } & 15,000 & \\
• \text { Share capital } & \mathrm { Dr } & 35,000 & \\
• \text { Dividend paid } & \mathrm { Cr } & 5,000 \\
• \text { Shares in S Limited } & \mathrm { Cr } & 45,000
• \end{array}\)

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Definitions:

Stock Price

The current market value of a publicly traded company's shares, reflecting investor perceptions of its future financial prospects.

Exercise Price

The price at which the holder of an option can buy (or sell) the underlying asset, as specified in the option contract.

Exchange Ratio

The rate at which one financial instrument or asset can be exchanged for another, often used in mergers and acquisitions to determine the amount of shares to be exchanged.

Theoretical Value

An estimate of an asset's value derived from financial models or formulas rather than its current market price.