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Homework answers / question archive / In 20x5, P Ltd paid $200 million to acquire 100% of S Ltd when S Ltd's net assets were represented by share capital of $150 million and retained profit of $50 million

In 20x5, P Ltd paid $200 million to acquire 100% of S Ltd when S Ltd's net assets were represented by share capital of $150 million and retained profit of $50 million

Accounting

In 20x5, P Ltd paid $200 million to acquire 100% of S Ltd when S Ltd's net assets were represented by share capital of $150 million and retained profit of $50 million. On this date, S Ltd's inventory which was carried at cost of $80 million was deemed to have a fair value of $120 million. During 20x8, S Ltd sold the inventory to a third party for $180 million. The accounting policy of P Ltd, S Ltd, and the group was to account for inventory at the lower of cost and net realizable value. The relevant consolidation adjusting entries for 20x8 consolidated financial statements should be:
-Dr Share capital $150 million; Dr Retained profit $50 million; Dr Inventory $40 million; Cr Negative goodwill (P&L) $40 million; Cr Investment $200 million, and Dr Cost of goods sold $40 million; Cr Inventory $40 million.
-None of the listed choices.
-Dr Share capital $150 million; Dr Retained profit $50 million; Cr Investment $200 million.
-Dr Share capital $150 million; Dr Retained profit $50 million; Dr Inventory $40 million; Cr Goodwill $40 million; Cr Investment $200 million, and Dr Cost of goods sold $40 million; Cr Inventory $40 million.
-Dr Share capital $150 million; Dr Retained profit $10 million; Dr Inventory $40 million; Cr Investment $200 million; and Dr Cost of goods sold $40 million; Cr Inventory $40 million.

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