On 1 July 20X5,Helios Ltd acquired all the issued capital of Havers Pty Ltd (100 000 shares)for $10 per share.During the year ended 30 June 20X6,Helios Ltd received a dividend from Havers Ltd of $60 000; a dividend which had been declared by the directors of Havers Ltd in the year ended 30 June 20X5 and was not subject to ratification by the shareholders of Havers Ltd.During the year ended 30 June 20X6,Helios Ltd received an interim dividend of $40 000 from Havers Ltd and the directors of Havers Ltd declared a final dividend of $60 000.At 30 June 20X6,the directors estimated that the fair value of the shares in Havers Ltd was only $9 per share at that date,but the estimated fall in value was considered to be only temporary and the carrying amount of the investment had not been impaired. At the date of acquisition,1 July 20X5,the shareholders' equity of Havers Ltd was (amounts in thousands):

\begin{array}{ll}\text { Shareholders' equity }&\\\text { Issued capital}&\$200\\\text {Retained earnings }&400\\&---\\\text {Total shareholders' equity}&\$600\end{array}

At the date of acquisition,the carrying amounts of the net assets of Havers Ltd approximated fair value.If a consolidated balance sheet were to be prepared for Helios Ltd and its subsidiaries at the date of acquisition,the consolidation adjustment to eliminate the investment in the subsidiary would be:

A)

\begin{array}{ll}\text { Issued Capital } & \$ 200,000 \\\text { Retained Earnings } & 400,000 \\\text { Goodwill } & 400,000\\\text { Investment in Subsidiary }&\$1,000,000\end{array}

\begin{array}{ll}\text { Issued Capital } & \$ 200,000 \\\text { Retained Earnings } & 400,000 \\\text { Dividend Payable } & 60,000 \\\text { Goodwill } & 340,000\\\text { Investment in Subsidiary }&\$1,000,000\end{array}

\begin{array}{ll}\text { Issued Capital }&\$200,000\\\text { Retained Earnings } & 340,000 \\\text { Dividend Payable } & 60,000 \\\text { Goodwill } & 340,000 \\\quad \text { Investment in Subsidiary } &\$940,000\end{array}

D) None of the above

It Is Important to Distinguish Between Pre-Acquisition and Post-Acquisition Equity

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