Case Study $3$

To ascertain your knowledge and skills in business combinations, Suzanne has requested that you complete the relevant journal entries for a major client, Dream Castles. She has also asked you specify what ethical considerations should be considered when valuing a business.

Dream Castles is a company formed by buying an existing business Getaway Places on $31$ August

$2018.$

Getaway Places had recorded Accounts Receivable at $$87,000$ in its latest Balance Sheet that was overstated and subsequently re$-$valued.

Assets and liabilities acquired at agreed fair values were as follows:

The purchase consideration was $$1,200,000$ payable in Cash $$800,000$ and, the issue of $400,000$ Ordinary Shares at $$1$ each.

Required

$($a$)$ Prepare the general journal entries in the books of Dream Castles to record the purchase of Getaway Places.