Answer for example (1)

 Answer;

1- Purchase price

Cash paid Direct out of pocket Costs.	500.000 50.000
	550.000

2-Fair Values of the Net Assets

Assets		(-) Liabilities
Current assets	280.000	Current liabilities	90.000
Plant assets	460.000	Long – term debt	280.000
Other assets	150.000
Total Assets	890.000	Total Liabilities	370.000

Net assets = total assets – total liabilities

                 = 800.000 – 370.000 = 520.000

The change can be named as good will

Purchase price – F.V. OF the net Assets.

550.000 – 520.000 = +30.000 “positive good will”

Date	Explanation	Dr	Cr
March 31	1.purshase price Investment in ZARA Co.          Cash	550.000	550.000
March 31	2.Net Assets Current assets Plant assets Other assets        Current liabilities        Long – term debt         Investment in ZARA Co	280.000 460.000 150.000	90.000 280.000 550.000