Question

PRE AND POST ACQUISITION DIVIDENDS

On 1 July 2023, Gordon Ltd acquired all the issued shares (cum div.) of Henry Ltd for $528000.
At that date, the financial statements of Henry Ltd showed the following information.
Share capital	220000
General reserve	110000
Retained earnings	154000
Dividend payable	44000
All the assets and liabilities of Gordon Ltd were recorded at amounts equal to their fair
values at the acquisition date. The dividend payable reported at 1 July 2023 by Henry Ltd
was paid on 15 August 2023. Henry Ltd paid a further dividend of $55000 on 2 February 2024
from post-acquisition profits.

3. Prepare the consolidation worksheet entries for Gordon Ltd's group at 30 June 2024.

4. How would the entries for 2 and 3 above change if the shares were bought on an ex dividend basis?

Answer 1

consolidation worksheet entries for Gordon Ltd's group at 30 June 2024.

1 july 2023	dr share capital dr genereal reserve dr retained earnings dr dividend payable cr investment in subsidiary cr dividend recievable (aquired all the issued shares of henry ltd)	220000 110000 154000 44000	484000 44000
15 aug 2023	Dr dividend revenue Cr dividend paid (the divident payable on i july was paid.)	44000	44000
2 feb 2024	Dr bank Cr dividend from subsidiary company (Henry Ltd paid a further dividend of $55000 on 2 February 2024 from post aquisitioon profit)	55000	55000

Dr dividend from subsidiary company Cr profit and loss account (transfer of dividend from subsidiary company to profit and loss account.

55000

55000

How would the entries for 2 and 3 above change if the shares were bought on an ex dividend basis?

1 july 2023	dr share capital dr genereal reserve dr retained earnings cr investment in subsidiary (aquired all the issued shares of henry ltd)	220000 110000 154000	484000
15 aug 2023	there wiil be no entry
2 feb 2024	Dr bank Cr dividend from subsidiary company (Henry Ltd paid a further dividend of $55000 on 2 February 2024 from post aquisitioon profit)	55000	55000

Dr dividend from subsidiary company Cr profit and loss account (transfer of dividend from subsidiary company to profit and loss account.

55000

55000