Question

(a) Explain the ways in which a company may expand by obtaining new assets. (1 mark)

(b) Jamuna River Ltd purchased a parcel of assets and liabilities comprising a business directly from Lyneham Pty Ltd. The parcel of assets, measured at net fair value, consisted of:

Balance of Accounts:

Plant

Land

Vehicles

Accounts receivable Accounts payable Total

($)___

150,000 240,000 120,000

30,000 (48,000) 492,000

2

Question 3 (Cont’d) Required:

Prepare journal entries to record the acquisition by Jamuna River Ltd, assuming that:

(i) The cost of acquisition was $600,000 cash.

(ii) The cost of acquisition was $432,000 cash.

Q

Answer 1

i)	plant a/c	$ 150,000.00
	Land a/c	$ 240,000.00
	vehicles a/c	$ 120,000.00
	accounts receivable a/c	$    30,000.00
	goodwill a/c	$ 108,000.00
	to accounts payable		$    48,000.00
	to cash		$ 600,000.00
	Excess payment is transferred to goodwill a/c

ii)	plant a/c	$ 150,000.00
	Land a/c	$ 240,000.00
	vehicles a/c	$ 120,000.00
	accounts receivable a/c	$    30,000.00
	to accounts payable		$    48,000.00
	to cash		$ 432,000.00
	to capital reserve		$    60,000.00
	short payment is transferred to capital reserve a/c