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Calculate the acquisition cost of the machine

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Reference no: EM133126005

Question - Sam Ltd acquired a Machine from Pak Ltd for the following consideration:

Cash $125,000, Land in the books of Sam Ltd the land is recorded at its cost of $980,000. It has a fair value of $950,000.

Sam Ltd also agrees to assume the Pak Ltd bank loan liability of $75 000 as part of the Machine acquisition.

Required -

(a) Calculate the acquisition cost of the Machine and provide the journal entries that would appear in Sam ltd.'s books to account for the acquisition of the Machine.

(b) In your own words, explain if an entity can include an asset in its statement of financial position that it does not legally own? Justify your answer.

Reference no: EM133126005

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