Question

A private company was incorporated to take over the partnership firm. The partnership firm had the following account balances; Building 75,000; Plant & Machinery 60,000; Delivery Van 18,000; Investments 26,000; Stock 21,000; Debtors 30,000; Cash 15,000; Creditors 20,000; Bills Payable 10,000. All the assets and liabilities shall be taken over by the new firm at agreed value. Building 98,000; Machinery 56,000; Delivery Van 20,000; Investments 25,000; Stock 20,000; Debtors 35,000; Cash 16,000; Creditors 18,000; Bills Paybale 10,000. The Purchase Consideration isImmersive Reader

Answer 1

Purchase consideration is the sum payable by purchasing company to vendor company.

Explanation:

purchase consideration = fair value of assets - payable value of liabilities.

Goodwill is not taken into the consideration for calculating the purchase consideration unless and until its fair market value is given. purchasing company can pay the expenses regarding the process which is actually borne by vendor company.

purchase consideration=

  building =        98000

  machinery =    56000

  delivery van = 20000

  investment =   25000

  stock      =       20000

  debtors  =       35000

  cash      =        16000

  b/p        =       (10000)

  creditors =     (18000)

 purchase =    242000

 consideration