I. Dodgems statement of financial position as at 31 December 2011 was as follows: An opportunity had

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I. Dodgem’s statement of financial position as at 31 December 2011 was as follows:

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An opportunity had arisen for Dodgem to acquire the business of A. Swing who is retiring.

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Dodgem agreed to take over Swing’s premises, plant, inventory, trade accounts receivable and trade accounts payable. For the purpose of his own records Dodgem valued the premises at £35,000, plant at £6,000 and inventory at £8,000. The agreed purchase price was £50,000 and in order to finance the purchase Dodgem had obtained a fixed loan for 5 years from his bank, for one half of the purchase price on the condition that he contributed the same amount from his own private resources in cash. The purchase price was paid on 1 January 2012. Dodgem also decided to scrap some of his oldest plant and machinery which cost £9,000 with depreciation to date £8,000. This was sold for scrap for £300 cash on 1 January 2012. On the same date he bought one new plant for £4,000, paying in cash. Required:

(a) The purchase of business account in I. Dodgem’s books.

(b) I. Dodgem’s statement of financial position as at 1 January 2012 after all the above transactions have been completed.

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Frank Woods Business Accounting

ISBN: 9780273759287

12th Edition

Authors: Frank Wood. Sangster, Alan

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