Rose Ltd Acquired All the Equity of Jeannie Ltd on 1

Multiple Choice

Rose Ltd acquired all the equity of Jeannie Ltd on 1 July 20X3.At that time the fair value/financial position of Jeannie was as follows:
$$\begin{array} { l r } \text { Capital } & \$ 500000 \\\text { Reserves } & \$ 100000 \\\text { Retained profits } & \$ 150000 \\\text { Liabilities } & \$ 50000\end{array}$$
Rose paid $850 000 for the shares in Jeannie.
In the 20X3-4 financial year, Jeannie made $75 000 in profits.
Which of the following is the correct substitution elimination entry as at 30 June 20X4?

A)
$\begin{array} { l r } \text { Dr. Capital } & \$ 500000 \\ \text { Dr. Reserves } & 100000 \\ \text { Dr. Retained profits } & 150000 \\ \text { Dr. Goodwill } & 100000 \\\text { Cr. Investment}&&\$ 850000\end{array}$


B)
$\begin{array} { l r } \text { Dr. Capital } & \$ 500000 \\ \text { Dr. Reserves } & 100000 \\ \text { Dr. Retained profits } & 225000 \\ \text { Dr. Goodwill } & 25000 \\\text {Cr. Investment}&&\$ 850000\end{array}$


C)
$\begin{array} { l r r } \text { Dr. Capital } & \$ 500000 & \\\text { Dr. Reserves } & 100000 & \\\text { Dr. Retained profits } & 225000 & \\\text { Dr. Goodwill } & 100000 & \\\text { Cr. Investment } & & \$ 925000\end{array}$
D)
$\begin{array} { l r } \text { Dr. Capital } & \$ 500000 \\ \text { Dr. Reserves } & 100000 \\ \text { Dr. Retained profits } & 25000 \\ \text { Dr. Goodwill } & 100000 \\ \text { Cr. Investment}&&\$ 725000 \end{array}$