Financial Reporting and Ethics - The Institute of Chartered ...

FINANCIAL REPORTING AND ETHICSMoonAll assets at book value, except cash; buildings and machinery to be depreciatedat the rate of 10%. Debentures will be redeemed by the Moon Company LimitedRising StarAll assets at book value, except goodwill and stock. All liabilities, exceptcreditors will be satisfied by paying in the form of stock-in-trade by the RisingStar Company.The new company will pay purchase consideration as follows:(a)(b)To Moon Company Limited:(i) 7,000 ordinary shares of 10 each(ii) 2,000 preference shares of 10 eachTo Rising Star Company Limited:(i) 5,000 ordinary shares of 10 each(ii) 2,000 preference shares of 10 eachRequired:Prepare(a) Realisation Accounts of Moon and Rising Star Companies.(b) Shareholders’ Accounts for Moon and Rising Star Companies.(c) Cash account of Moon Company.(d) Goodwill Account of Rising Star Company.(5) Balance Sheet of Sunshine Company Limited as at 31 st January, 2009.SUGGESTED SOLUTION 3.3WorkingsThe net assets and the purchase consideration of the two old companies haveto be determined and compared for identification of goodwill or capital reserve.Moon Company LimitedAssetsBuildings N50,000 - N5,000 (depreciation) 45,000Machinery N 20,000 - N2000(depreciation) 18,000Stock 26,000Debtors 12,000101,000Less Creditors 6,000Net Assets 95,00030