At Acquisition Date a Wholly Owned Subsidiary Had the Following

question 8

Multiple Choice

At acquisition date a wholly owned subsidiary had the following equity items: ? Retained earnings $14 000
? Share capital $30 000
? General reserve $6000
In the year following the acquisition the subsidiary transferred $10 000 from pre-acquisition retained earnings to general reserve. At the reporting date following the reserve transfer, the following consolidation adjustment is needed:

• A)\(\begin{array} { l c c c }
• \text { DR } &\text { Transfer to general reserve }& \$ 10,000 \\
• \mathrm { CR }& \text { General reserve }& \$ 10,000
• \end{array}\)
• B) \(\begin{array} { l l l l }
• \text { DR } & \text { General reserve } & \$ 10000 \\
• \text { CR } & \text { Shares in subsidiary } & \$ 10000
• \end{array}\)
• C) \(\begin{array}{lrr}
• \text { DR } & \text { Shares in subsidiary }&\$10,000 \\
• \text { CR } & \text { Retained earnings }&\$10,000
• \end{array}\)
• D)\(\begin{array} { l l l l l }
• \text { DR } & \text { General reserve } & \$ 10,000 & \\
• \text { CR } & \text { Transfer to general reserve } & \$ 10,000
• \end{array}\)

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Definitions:

Algorithm

A methodical, logical rule or procedure that guarantees solving a particular problem. Contrasts with the usually speedier—but also more error-prone—use of heuristics.

Trial and Error

A problem-solving method involving repeated, varied attempts which are continued until success is achieved or the agent stops trying.

Heuristic

A simple thinking strategy that often allows us to make judgments and solve problems efficiently; usually speedier but also more error-prone than algorithms.

Heuristics

Mental shortcuts or rules of thumb that simplify decision making, often used in problem-solving and judgment situations.