Lola and Corry are the partners of Lo & Co Partnership. They decided to convert their partnership business into…

Lola and Corry are the partners of Lo & Co Partnership. They decided to convert their partnership business into…

Question:

Don't use plagiarized sources. Get Your Custom Assignment on
Lola and Corry are the partners of Lo & Co Partnership. They decided to convert their partnership business into…
From as Little as $13/Page

Transcribed Image Text:

Lola and Corry are the partners of Lo & Co Partnership. They decided to convert their partnership
business into a company. On 1 June 2019 the new company, Loco Corporation was incorporated
to purchase all assets (excluding bank) and liabilities of Lo & Co Partnership.
Following is the account balance of Lo & Co Partnership as at 31 May 2019.
Land
Equipment
Accumulated Depreciation-Equipment
Plant and machinery
Bank
Trade Receivables
Inventories
Capital, Lola
Capital, Corry
Accrued Expenses
Trade Payables
Unearned revenue
RM380,000
255,000
77,000
210,000
28,000
59,000
70,000
Equipment
Plant and machinery
400,000
300,000
Additional information:
1. On liquidation of Lo & Co Partnership, Loco Corporation was to discharge the purchase price
by issuing 800,000 fully paid ordinary shares at RM1.20 in Loco Corporation.
2. Lola and Corry purchased 10,000 ordinary shares respectively at RM1 for cash in Loco
Corporation when the company was formed.
3. The fair values of the assets taken over as follow:
Land
69,000
93,400
62,600
RM420,000
150,000
195,000
(a) Calculate the purchase price and goodwill.
(b)
(c)
Prepare journal entries to close the book of Lo & Co Partnership.
Prepare the statement of Financial Position for Loco Corporation.
Show all your workings.
4. The company notice that value of inventory maintains as per book value and the allowance for
doubtful account was recorded of RM4,000 during the acquisition of Lo & Co Partnership.
5. The liquidation expenses of RM3,000 was to be paid by Lo & Co Partnership.
6. Lola and Corry share profits and losses 4:3 and they agreed to accept any cash remaining as
part settlement of the amount due to them on liquidation of the company (based on profit
sharing ratio).
Required
(5 marks)
(13 marks)
(7 marks)

Expert Answer:

Answer rating: 100% (QA)

a Calculation of purchase price and goodwill Purchase Price Fair Value of Assets Taken Over Fair Val
View the full answer