Reference no: EM133609085
Question: Your client "Just Right" has been advised that they should convert to a company. Explain the process of a conversion from a partnership to a company. Research and consider the accounting standards AASB 116 and AASB 3. Your response should include at least 4 key elements.
Spoton Pty Ltd was incorporated on 1 July 2021 to acquire a business partnership, trading as "Just Right", as a going concern. The consideration for the purchase of the business was 45,000 shares issued at $1 each and $15,000 cash.
The assets of Just Right were:
$
Freehold premises 40,000
Plant & equipment 30,000
Accumulated depreciation 5,000
Inventory 12,500
Accounts receivable 7,500
Allowance for doubtful debts 500
Accounts payable 18,000
Bank overdraft 2,000
Spoton Ltd assessed the fair value of assets to be:
$
Freehold premises 50,000
Plant & equipment 20,000
Inventory 12,500
Accounts receivable 6,000
All liabilities of Just Right were accepted at book value by Spoton Ltd
Required:
b) Prepare the general journal entries in the books of Spoton Ltd to fully record the acquisition of, and payment for, the assets and liabilities of Just Right.
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