Converting to a company Journal
Lamy Ltd was incorporated on 1 July, to acquire the business of Happy Trading as a going concern. The consideration for the sale of the business is 43,000 shares issued at $1 each and 50 7% debentures of $100 each, maturing in ten years time.
The assets and liabilities of Happy Trading were:
Freehold Premises $40,000
Plant and Equipment $30,000
Accumulated Depreciation 5,000
Inventory 12,500
Accounts Receivable 75,000
Allowance for doubtful debts 500
Accounts Payable 18,000
Bank Overdraft 2,000
Parker Ltd assesses the fair value of assets acquired to be:
Freehold Premises 75,000
Plant and Equipment 15,000
Inventory 12,500
Accounts Receivable 6,000
All liabilities of Happy Trading were accepted at book value by Lamy Ltd
Required
Prepare the general journal entries in the books of Parker Ltd to record:
(I) The acquisition and the assets and liabilities of Happy Trading by Lamy Ltd including appropriate entries to record any goodwill or excess over cost on acquisition.
(ii) The payment of the purchase consideration for Happy Trading by Lamy Ltd
