Stormy Ltd Has Purchased All the Issued Capital of Cloud

Multiple Choice

Stormy Ltd has purchased all the issued capital of Cloud Ltd at the beginning of the current period.At the end of the period Cloud Ltd declares a dividend of €50 000 that is identified as being paid out of pre-acquisition profits.What entries would Stormy Ltd and Cloud Ltd make in their own books? (Assume Stormy Ltd accrues the dividends of subsidiaries when they are declared.)

A) $\begin{array}{|c|l|r|r|}\hline \text { Stormy Ltd }\\\hline \mathrm{Dr} & \text { Dividend receivable } & 50,000 & \\\hline \mathrm{Cr} & \text { Dividend income } & & 50,000 \\\hline & & & \\\hline \text { Cloud Ltd }\\\hline \mathrm{Dr} & \text { Dividend declared } & 50,000 & \\\hline \mathrm{Cr} & \text { Dividend payable } & & 50,000\\\hline\end{array}$
B) $\begin{array}{|c|l|r|r|}\hline \text { Stormy Ltd }\\\hline \mathrm{Dr} & \text { Dividend receivable } & 50,000 & \\\hline \mathrm{Cr} & \text { Dividend income } & & 50,000 \\\hline & & & \\\hline \text { Cloud Ltd }\\\hline \mathrm{Dr} & \text { Pre-acquisition retained earnings } & 50,000 & \\\hline \mathrm{Cr} & \text { Dividend payable } & & 50,000\\\hline\end{array}$
C) $\begin{array}{|c|l|r|r|}\hline \text { Stormy Ltd }\\\hline \mathrm{Dr} & \text { Investment in Cloud Ltd } & 50,000 & \\\hline \mathrm{Cr} & \text { Dividend income } & & 50,000 \\\hline & & & \\\hline \text { Cloud Ltd }\\\hline \mathrm{Dr} & \text { Pre-acquisition retained earnings } & 50,000 & \\\hline \mathrm{Cr} & \text { Dividend payable } & & 50,000\\\hline\end{array}$
D) $\begin{array}{|l|l|r|r|}\hline \text { Stormy Ltd }\\\hline \mathrm{Dr} & \text { Dividend receivable } & 50,000 & \\\hline \mathrm{Cr} & \text { Dividend income } & & 50,000 \\\hline & & & \\\hline \text { Cloud Ltd }\\\hline \mathrm{Dr} & \text { Dividend declared } & 50000 & \\\hline \mathrm{Cr} & \text { Dividend payable } & & 50000 \\\hline\end{array}$