In: Accounting
Anas corp. decides to purchase Hind Inc. on December 31, 2017. The purchase price that Anas Crop pays to buy Hind Inc is as follows: 10,000
Hind Inc's statement of financial position is as follows on December 31, 2017:
assets:
PP&E: 1
Inventories: 2
supplies: 3
Accounts receivable: 4
cash: 5
total assets: 15
Equity and Liabilities:
Share and capitals: 3
Retained earnings 1
current liabilities: 11
Total equity and liabilities: 15
Hind Inc's fair values on december 31, 2017 are as follows:
pp&e 11
inventories 12
supplies 1
accounts receivable 3
cash 4
share capital 5
retained earnings 7
current liabilities 9
(I AM NOT SUPER CONCERNED ABOUT NUMBERS I WANNA KNOW WHICH ACCOUNTS I USE)
Prepare the journal entry to record Anas corp's purchase on hind inc
account | debit | credit |
Answer | |||||
journal entry to record Anas corp's purchase on hind inc | |||||
particulrs | Debit | Credit | |||
For Businesss Purchase | |||||
1) | Business purchase account | 10000 | |||
To Hind Inc | 10000 | ||||
for assets and liabilities agreed to take over | |||||
2) | pp&e | 11 | |||
inventories | 12 | ||||
supplies | 1 | ||||
accounts recivable | 3 | ||||
cash | 4 | ||||
To current liabilities | 9 | ||||
To Business purchase | 10000 | ||||
note: | If the credits exceed the debits, the difference is Goodwill and should be debited as such | ||||
If the debits exceed the credits, the difference is capital profit and should be credited to capital reserve | |||||
on payment to Hind Inc | |||||
3) | Hind Inc | 10000 | |||
To Cash | 10000 | ||||