The trial balance of the partnership of Woods Brothers trading as Woods Hardware as at:

        21 June 2010 disclosed:

Inventory	$145,000
Accounts receivable	225,000
Land at cost	50,000
Buildings at cost	80,000
Accumulated depreciation -buildings		$ 20,000
Fittings and equipment	60,000
Accumulated depreciation -fittings and equipment		25,000
Motor vehicles	40,000
Accumulated depreciation - motor vehicles		24,000
Accounts payable		181,000
Bank overdraft		100,000
Capital - John Woods		125,000
Capital - Thomas Woods		125,000
	600,000	600,000

At that date, Woods Industries Ltd was incorporated to acquire Woods Hardware as a going concern for a purchase consideration of $500,000. The purchase consideration was settled by the issue of fully paid ordinary shares.

The fair value of the assets acquired is:

Land	$ 300,000
Buildings	170,000
Fittings and equipment	NIL
Motor vehicles	5,000
Inventory	100,000
Accounts receivable	200,000

Required:

General journal entries, including cash, in the books of Woods Industries Ltd to record:

( a ) The purchases of the business (entries to comply with AASB3); and

( b ) The settlement of the purchase consideration.

Answer rating: 100% (QA)

Acquisition of an entity means ... View the full answer