Question

Question 3

Brown and James are the sole members in Tendesius cc, a business enterprise which organizes fun and walks. They have an equal share in the profits and loses and they each contributed N$2 500 to start the corporation in 2015. On 1 March 2018, fun and walks (Pty) Limited made an offer to take over Tendesius cc. At that date the members loan was payable to James. Brown did not want to take up the offer so he asked to be paid out.

The financial statement of Tendesius cc at 28 February was as follows :
Land and building at cost N$12500 motor vehicle at costN$5000 depreciation N$2000 carrying amount N$3000 inventory N$22500
Account payable N$7500
Bank 9000
Total assets N$54 500
Members funds N$35 000
Members contributions 5000
Undrawn profits 30000, members loan 15000,
Account payable 4500, total equity and liabilities 54 500
Fun and walks (Pty) Limited offered to pay Tendesius cc N$100 000 to take over the business as going concern. The payment was structured as follows :
N$42500 in cash to brown for his share of business. N$ 42500 by a fresh issue of ordinary share Fun and walks (Pty) Limited at N$1 each to pay James for his share of the business. N$15000 by an issue of debentures of N$100 each in Fun and walks (Pty) Limited to repay the members loan to James in the cc.
The land and building taken over were considered to be worth N$37500.
The statement of financial position ofFun and walks (Pty) Limited at 28 February 2018 was as follows : Land and building N$100 000, motor vehicles at cost N$40 000 depreciation 15000 carrying amount 25000
Inventory 1500,account payable 25000, bank 60000. Total assets N$225000
Capital and reserves N$140000,ordinary share capital N$100 00, accumulated profit N$40000, 10% debentures N$50 000 shareholders loan N$20 000, account payable N$15 000. Total equity and liabilities N$225000.
Prepare the journal entries of Fun and walks (Pty) Limited to record the takeover of Tendesius cc.
Prepare a statement of financial position of Fun and walks (Pty) Limited as at 01 March 2018.

Answer 1