Answer for example (2)

 Answer;

1-     Purchase price

Cash paid Direct out of pocket Costs.	160.000 10.000
	170.000

2-     Fair Values of the Net Assets

Assets		(-) Liabilities
Current assets	120.000	Current liabilities	90.000
Plant assets	150.000	Long – term debt Face value    60.000 (-) discount (10.000)	50.000
Intangible assets	50.000
Total Assets	320.000	Total Liabilities	140.000

Net assets = total assets – total liabilities

                 = 320.000 – 140.000 = 180.000

The change can be named as good will

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

170.000 – 180.000 = -10.000 “negative good will”

So, the amount of negative good will (10.000) reduction as shown;

The non- current Assets pro-rata as follows;

Non- current Assets	L.E.		After reduction
Plant assets	150.000	10.000 * (150/200) = 7.500	142.500
Intangible assets	50.000	10.000 * (50/200) = 2.500	57.500
Total Assets	200.000		190.000

Journal entries:

Date	Explanation	Dr	Cr
Sep 30	1.purshase price Investment in HIND Co.          Cash	170.000	170.000
Sep 30	2.Net Assets Current Assets Plant Assets Intangible Assets        Current liabilities        Long – term debt         Investment in HIND Co	120.000 142.500 47.500	90.000 50.000 170.000