Lola and Corry are the partners of Lo & Co Partnership. They decided to convert their...

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Lola and Corry are the partners of Lo & Co Partnership. They decided to convert their partnership business into a company. On 1 June 2019 the new company, Loco Corporation was incorporated to purchase all assets (excluding bank) and liabilities of Lo & Co Partnership. Following is the account balance of Lo & Co Partnership as at 31 May 2019. Land Equipment Accumulated Depreciation-Equipment Plant and machinery Bank Trade Receivables Inventories Capital, Lola Capital, Corry Accrued Expenses Trade Payables Unearned revenue RM380,000 255,000 77,000 210,000 28,000 59,000 70,000 Equipment Plant and machinery 400,000 300,000 Additional information: 1. On liquidation of Lo & Co Partnership, Loco Corporation was to discharge the purchase price by issuing 800,000 fully paid ordinary shares at RM1.20 in Loco Corporation. 2. Lola and Corry purchased 10,000 ordinary shares respectively at RM1 for cash in Loco Corporation when the company was formed. 3. The fair values of the assets taken over as follow: Land 69,000 93,400 62,600 RM420,000 150,000 195,000 (a) Calculate the purchase price and goodwill. (b) (c) Prepare journal entries to close the book of Lo & Co Partnership. Prepare the statement of Financial Position for Loco Corporation. Show all your workings. 4. The company notice that value of inventory maintains as per book value and the allowance for doubtful account was recorded of RM4,000 during the acquisition of Lo & Co Partnership. 5. The liquidation expenses of RM3,000 was to be paid by Lo & Co Partnership. 6. Lola and Corry share profits and losses 4:3 and they agreed to accept any cash remaining as part settlement of the amount due to them on liquidation of the company (based on profit sharing ratio). Required (5 marks) (13 marks) (7 marks) Lola and Corry are the partners of Lo & Co Partnership. They decided to convert their partnership business into a company. On 1 June 2019 the new company, Loco Corporation was incorporated to purchase all assets (excluding bank) and liabilities of Lo & Co Partnership. Following is the account balance of Lo & Co Partnership as at 31 May 2019. Land Equipment Accumulated Depreciation-Equipment Plant and machinery Bank Trade Receivables Inventories Capital, Lola Capital, Corry Accrued Expenses Trade Payables Unearned revenue RM380,000 255,000 77,000 210,000 28,000 59,000 70,000 Equipment Plant and machinery 400,000 300,000 Additional information: 1. On liquidation of Lo & Co Partnership, Loco Corporation was to discharge the purchase price by issuing 800,000 fully paid ordinary shares at RM1.20 in Loco Corporation. 2. Lola and Corry purchased 10,000 ordinary shares respectively at RM1 for cash in Loco Corporation when the company was formed. 3. The fair values of the assets taken over as follow: Land 69,000 93,400 62,600 RM420,000 150,000 195,000 (a) Calculate the purchase price and goodwill. (b) (c) Prepare journal entries to close the book of Lo & Co Partnership. Prepare the statement of Financial Position for Loco Corporation. Show all your workings. 4. The company notice that value of inventory maintains as per book value and the allowance for doubtful account was recorded of RM4,000 during the acquisition of Lo & Co Partnership. 5. The liquidation expenses of RM3,000 was to be paid by Lo & Co Partnership. 6. Lola and Corry share profits and losses 4:3 and they agreed to accept any cash remaining as part settlement of the amount due to them on liquidation of the company (based on profit sharing ratio). Required (5 marks) (13 marks) (7 marks)

Answer rating: 100% (QA)

a Calculation of purchase price and goodwill Purchase Price Fair Value of Assets Taken Over Fair Val... View the full answer