Question

Millie and Rose each contribute $40,000 cash to purchase the business of Billy Wong on 1...

Millie and Rose each contribute $40,000 cash to purchase the business of Billy Wong on 1 February 2019 for $300,000. The assets and liabilities of the business are Furniture and Fittings $40,000 with accumulated depreciation $10,000, Accounts Receivable $45,000 and Accounts Payable $5,000. These values are accepted, except that the agreed value of Accounts Receivable is $40,000.

What is the journal entries to record the capital contributions of Millie and Rose and the acquisition of Billy Wong's business?

Business   Accounting   
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Answer #1

Journal entries are:-

1. Bank a/c Dr. $80,000

To Millie's Capital a/c $40,000

To Rose's Capital a/c $40,000

(Cash brought by millie and rose)

2. Business Purchase a/c Dr. $300,000

To Liquidators of Billy wong $300,000

(Business purchase by millie and rose)

3. Furniture and fittings a/c Dr. $40,000

Accounts receivables a/c Dr. $40,000

Goodwill a/c (Balancing figure) Dr. $235,000

To. Accumulated depreciation a/c $10,000

To. Accounts payble a/c $5,000

To. Business purchase a/c $300,000.

(Recording of assets amd liabilities)

4. Liquidators of Billy Wong a/c Dr. $300,000

To. Bank a/c $300,000

(Payment to Billy wong for purchase of business)

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