Question

On 1 january 2018, Abc Co purchased assets of XYZ Co at auction for $1,560,000. An independent appraisal of the fair value of the assets acquired is listed below:

Land $171,600

Building $514, 800

Equipment $600,000

Inventories $429,000

On 1 september 2018, ABC Co exchanged land and cash of $8000 for a plant. The land had a book value of $55,000 and a fair value of $60,000. The exchange has commercial susbtance.

On 31 November 2018, ABC co sold equipment for $60,000. The old equipment cost $77,000 and had a book value of $55,000

Required:

I) Prepare the journal entry to record the purchase of the assets in 1 January 2018( show all the working)

II) Prepare the journal entry to record the exchange of assets in 1 September 2018( show all the working)

III) Prepare the journal entry to record the disposition of equipment in 31 November 2018( show all the working)

Answer 1

Part 1
	Particulars	Fair Value of Assets	Acquisition Value of Assets
	Land	$                   1,71,600	$                  1,55,982
	Buidling	$                   5,14,800	$                  4,67,945
	Equipment	$                   6,00,000	$                  5,45,391
	Investments	$                   4,29,800	$                  3,90,682
	Total	$                 17,16,200	$                15,60,000
Date	Account explanation	Debit	Credit
Jan 1,2018	Land	$                   1,55,982
	Buidling	$                   4,67,945
	Equipment	$                   5,45,391
	Investments	$                   3,90,682
	Cash		$                15,60,000
	(to assets purchased for cash)
Part 2
Date	Account explanation	Debit	Credit
Sept 1,2018	Plant($8,000+$60,000)	$                      68,000
	Cash		$                       8,000
	Land		$                     55,000
	Gain on sale of Land($60,000-$5,000)		$                       5,000
	(to plant acquired in exchange of cash and Land)
Part 3
Date	Account explanation	Debit	Credit
Nov 31,2018	Cash	$                      60,000
	Accumulated Depreciation-Equipment($77,000-$55,000)	$                      22,000
	Equipment		$                     77,000
	Gain on sale of Equipment($60,000-$55,000)		$                       5,000
	(to equipment sold at profit)