Homework answers / question archive / Kanga Pty Ltd  is a retailer based in Glen Waverley, VIC

Kanga Pty Ltd  is a retailer based in Glen Waverley, VIC

Accounting

Share With

Kanga Pty Ltd  is a retailer based in Glen Waverley, VIC. The owner has an intention to sell their business in December 2020. They are inviting potential buyers to file an expression of interest with how much they intend to pay for the business. The highest offer came from an overseas investor offering to acquire the business for $1.5 million. The owner of Kanga Pty. Ltd. has not accepted the offer yet as he is still waiting for a higher offer. Their total net assets is only $500,000 which means there is a potential extra value of $1 million. (6 Marks) Required: (i) Using the definition of the term "asset" per the Conceptual Framework, explain whether the extra value of $1,000,000 can be considered as an asset to Kanga Pty. Ltd. (3 Marks) (ii) The owner thinks that he should include the extra value of $1 million on their balance sheet. Explain if the extra value of $1 million meets the recognition criteria of an asset for Kanga Pty. Ltd. (2 Marks) (iii) Given your answers in part (i) and part (ii), state whether or not the extra value of $1 million can appear on the Kanga's balance sheet. (1 Mark)