The owners of Emily Limited sold the business to Georgia Limited. At acquisition date, the business had an item of plant which cost $70 000 and had accumulated depreciation of $24 000. The liquidation journal entry is which of the following?

Question

Quizplus · Accepted Answer

When assets are sold during liquidation, the carrying amount of the asset (cost less accumulated depreciation) is removed from the books through a journal entry. In this case, the carrying amount of the plant is $70,000 - $24,000 = $46,000. Georgia Limited would record the purchase of the plant at its fair value, which is not given in the question. Therefore, the correct journal entry to remove the asset from Emily Limited's books is DR Liquidation $46,000 and DR Accumulated Depreciation $24,000, and CR Plant $70,000.

The Owners of Emily Limited Sold the Business to Georgia