If H Ltd. buys 100% shares of S Ltd. for ₹1,00,000 cash, how will the…
2019
If H Ltd. buys 100% shares of S Ltd. for ₹1,00,000 cash, how will the acquisition be recorded in H Ltd.’s books of accounts?
- A.
Debit investment in S Ltd., credit cash account
- B.
Debit investment in S Ltd., credit S Ltd. minorities account
- C.
The equity capital of the subsidiary
- D.
Debit cash account, credit investment in S Ltd.
Attempted by 15 students.
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Correct answer: A
Key point: When H Ltd. pays cash to buy 100% of S Ltd., H Ltd. records the transaction as an investment in a subsidiary. Debit: Investment in S Ltd. — increases an asset (Investment in S Ltd. A/c Dr. ₹1,00,000).