Question

Creprie Ltd acquired all the shares in Bretonne Ltd on 30 June 2020. At the date of acquisition Bretonne Ltd had a dividend payable of $42,000. The shares are acquired cumulative div. The dividend is paid on 8 July 2020. Which of the following statements is correct?

		As Creperie Ltd does not receive the dividend when it is paid, no consolidation adjusting entry is required to eliminate the dividend payable and dividend receivable account at the date of acquisition.
		As Creprie Ltd receives the dividend when it is paid, no consolidation entries are required to eliminate dividend payable and dividend receivable at 30 June 2020.
		As Creprie Ltd receives the dividend when it is paid, a consolidation adjusting entry is required to credit the dividend receivable at 30 June 2020.
		As Creprie Ltd receives the dividend when it is paid, a consolidation adjusting entry is required to debit the dividend payable at 30 June 2021.

Answer 1

As Creperie Ltd receives the dividend when it is paid, a consolidation adjusting entry is required to credit the dividend receivable at 30 June 2020.

Cumulative dividend means inclusive of dividend, sp creperie Ltd receives the dividend when it is paid.

In consolidation, dividend receivable adjustment entries need to be passed to eliminate dividends declared as it should not be included in consolidated statements.