Small Ltd were approached by the owners of Medium Supplies to join forces and created a bigger company called Large Supplies Ltd. It was agreed that Small Ltd would acquire the assets and liabilities of Medium for $1,900,000 and create a new company on 1 July 2015. The acquisition would be funded through the issue of new shares in Small Ltd to the vendors. Prior to the acquisition and conversion, Medium Supplies' trial balance was:

Small had the assets of the Medium independently valued prior to acquisition and conversion of the business to a company. The fair value of the assets was determined as:

$

Cash at bank 27,300

Accounts receivable 99,000

Inventory 90,000

Land & buildings 2,000,000

Plant & machinery 550,000

The business? liabilities were accepted at the balances listed in the trial balance.

Required:

Prepare, in General Journal format, entries to record the above in Large Supplies Ltd?s books and the general journal entries required, if Small Ltd paid $2,000,000 for the business

Transcribed Image Text:

Cash at bank Accounts receivable Inventory Land & buildings Plant & machinery Allowance for doubtful debts Accumulated depreciation - buildings Accumulated depreciation - plant & machinery Accounts payable Mortgage Capital General reserve Debit $ 27,300 105,000 96,950 1,820,000 707,000 2,756,250 Credit $ 3,280 49,000 107,800 86,170 760,000 1,610,000 140,000 2,756,250 Cash at bank Accounts receivable Inventory Land & buildings Plant & machinery Allowance for doubtful debts Accumulated depreciation - buildings Accumulated depreciation - plant & machinery Accounts payable Mortgage Capital General reserve Debit $ 27,300 105,000 96,950 1,820,000 707,000 2,756,250 Credit $ 3,280 49,000 107,800 86,170 760,000 1,610,000 140,000 2,756,250

Answer rating: 100% (QA)

Journal Entries for Large Limited Purchase consideration 1900000 Note 1 Calculation of Capital ... View the full answer