Preparation of Purchase of Business In Purchaser’s Books: Journal Entry - SS3 Accounting Lesson Note

Question:

Given the transactions below, prepare the purchase of business in purchaser’s books; journal entry for ABC TECH.

1. Purchased raw materials for production on credit for ₦50,000 from XYZ Suppliers.

2. Sold finished goods for cash for ₦70,000 to LMN Retailers.

3. Paid salaries and wages to employees for ₦20,000 in cash.

4. Received payment for the sale of goods on credit for ₦30,000 from DEF Wholesalers.

5. Purchased office equipment for ₦100,000 on credit from GHI Suppliers.

6. Paid rent for the office for ₦5,000 in cash.

7. Made a loan repayment of ₦10,000 in cash to JKL Bank.

Answer:

PURCHASE OF BUSINESS JOURNAL ENTRY FOR ABC TECH

FOR THE MONTH OF APRIL

In the above journal entry, ABC TECH purchased a business for ₦2,000,000, consisting of ₦800,000 goodwill and ₦1,200,000 in property, plant, and equipment. The company paid ₦800,000 in cash and recorded the purchase of a business in its books.