Keystone Machinery Pty Ltd, is buying a business from Boss Machinery Ltd, who has been operating as a sole trader. The purchase consideration is $110,000 cash and 25,000 shares of $1 each. Boss financial records at the date of sale on 30 June 2022 showed the following:

Table 3 - Business Acquisition

	Debit $	Credit $
Cash at bank	60,000
Accounts receivable	12,000
Vehicle at Cost	60,000
Accumulated depreciation - vehicle		25,000
Plant & equipment	80,000
Accumulated depreciation - plant & equipment		20,000
Accounts payable		15,000
Mortgage		25,000

 

The company took over all the assets and liabilities of the business, except the mortgage and cash on 1 July 2022. The purchase consideration was settled on 31 July 2022.  

The fair value of the assets was determined as:

Table 4 - Fair value

	$
Accounts receivable	9,000
Plant and Equipment	65,000
Vehicles	30,000

 

On 31 August 2022 Keystone Machinery Ltd decided to issue a prospectus inviting applications for 400,000 ordinary shares at an issue price of $1.00.On application, $0.40 was payable for these shares, with a second instalment of $0.60 payable after allotment. The prospectus stated that any excess application money would be transferred to instalments.

By the closing date of 30 September 2022, applications for 420,000 ordinary shares were received. Allotment occurred on 31 October 2022. By 30 November 2022, all the instalment payments had been made, except for $2,000.

You are required to: 

1. write the general journal entries for acquiring the business from Boss Ltd
2. write the general journal entries to record the discharge of the purchase consideration
3. write all the general journal entries related to the receipt of all monies and shares issued by Keystone Machinery Ltd on 31 August 2022

Answer rating: 100% (QA)

General Journal Entries for acquiring the business from Boss Machinery Ltd Date 1 July 2022 1 To rec... View the full answer