Question 2

Pico Ltd has been formed for the express purpose of purchasing the manufacturing business of Fanning surf Manufacturing. The balance sheet of Fanning Manufacturing as at 30 June 2018 is as disclosed below:

Fanning Surf Manufacturing

Balance Sheet as at 30 June 2018

Current Liabilities	$		Current Assets	$	$
Creditors Control	27,000		Bank		24,000
			Debtors Control	98,000
			Less Allow for D Debts	(5,000)	93,000
			Stock		166,000
			Total Current Assets		283,000
Non-current Liabilities			Non-current Assets
Mortgage	120,000		Factory Building		250,000
			Plant & Equipment	195,000
			Less Acc Depn	(88,000)	107,000
			Fixtures & Fittings	87,000
			Less Acc Depn	(40,000)	47,000
			Office Equipment	48,000
			Less Acc Depn	(28,000)	20,000
			Total Non-current Assets		424,000
Proprietorys equity
Capital M Fanning	560,000
TOTAL	707,000		TOTAL ASSETS		707.000

ADDITIONAL INFORMATION

1. All the assets and all the liabilities were purchased at book value, except for the factory building and debtors control. The factory building had an agreed value of $300,000 and debtors control $89,000.

2. The purchase consideration was the allotment of 500 000 $1 ordinary shares in Pico Ltd and a cash payment of $120 000 to be paid on 31 July 2018.

Required:

Prepare general journal entries to record the acquisition of Fanning Manufacturing by Pico Ltd and the payment of the purchase consideration