ACCA · Question 08 · Preparing Basic Financial Statements
Section A
Sarah runs a successful sole trader bakery. On 1 January 20X6, she incorporates the business into a limited company, Sarah's Bakes Ltd. She transfers all her business assets and liabilities to the new company in exchange for 100,000 ordinary shares of $1 each. The net assets transferred were valued at $150,000. What is the correct entry in the books of Sarah's Bakes Ltd to record the issue of shares?
Answer options:
Debit Net Assets $150,000; Credit Share Capital $150,000
Debit Net Assets $150,000; Credit Share Capital $100,000; Credit Retained Earnings $50,000
Debit Net Assets $150,000; Credit Share Capital $100,000; Credit Share Premium $50,000
Debit Share Capital $100,000; Debit Share Premium $50,000; Credit Net Assets $150,000
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