Sunday, April 16, 2017

Corporate Accounting Book Solved - Amalgamation and External Reconstruction

Jain and Narang Book Solution
1. Calculation of Purchase Consideration (Net Payment):

Rs.
Equity Shareholder’s :
10,50,000 Equity Shares @ Rs. 10 each
Preference Shareholder’s:
33,000, 12% Preference Share @ Rs. 100 each

1,05,00,000

(+) 33,00,000
Purchase Consideration
1,38,00,000
Net Payment Method
Journal Entries (Merger Purchase)
In the books of A Ltd. (Transfer – Merger)
Date
Particulars
L/F
Amount
Dr.
Amount
Cr.
(i)
Business Purchase A/c                                                                 Dr.
To Liquidator of B Ltd. A/c
(Being the purchase consideration due to liquidator of B Ltd.)

1,38,00,000

1,38,00,000
(ii)
Fixed Assets A/c                                                                            Dr.
Current Assets A/c                                                                        Dr.
To 13% Debentures in B Ltd. A/c
To Current Liabilities A/c
To Business Purchase A/c
To Statutory Reserve A/c
To Surplus a/c
To General Reserve A/c (Balancing figure)
(Being the assets and liabilities of B Ltd. taken over.)

1,41,90,000
59,10,000


7,50,000
29,70,000
1,38,00,000
3,75,000
10,65,000
11,40,000
(iii)
13% Debentures in B Ltd. A/c                                                     Dr.
To 14% Debentures in A Ltd. A/c
(Being the 13% Debenture in B Ltd. is converted in 14% Debenture in A Ltd.)

7,50,000

7,50,000
(iv)
Liquidated of B Ltd. A/c                                                                Dr.
To Equity Share Capital A/c
To 12% Preference Share Capital A/c
(Being the final payment made to the liquidation of B Ltd.)

1,38,00,000

1,05,00,000
33,00,000


Balance Sheet of A Ltd.
As on 31st March, 2015
Particulars
Amount (Rs.)
                    I.           Equity & Liabilities:
a)      Shareholder’s Fund:
1)      Share Capital:
Equity Share Capital (2,40,00,000 + 1,05,00,000)
12% Preference Share Capital
2)      Reserve & Surplus:
Surplus (16,89,000 + 10,65,000)
General Reserve (1,38,30,000 + 11,40,000)
Statutory Reserve (11,70,000 + 3,75,000)
b)      Non-Current Liabilities:
1)      Long-term borrowing
14% Debenture
2)      Current Liabilities: (43,11,000 +  29,70,000)



3,45,00,000
33,00,000

27,54,000
1,49,70,000
15,45,000



7,50,000
72,81,000

Total (a + b + c)
6,51,00,000
                  II.            Assets:
a)      Non-Current Assets:
Fixed Assets (3,30,00,000 + 1,41,90,000)
b)      Current Assets: (1,20,00,000 + 59,10,000)


4,71,90,000
1,79,10,000
Total (a + b)
6,51,00,000

2. Calculation of Purchase Consideration:

X Ltd.
(in lacks)
Y Ltd.
(in lacks)
Assets Taken Over:
Goodwill
Land & Building
Plant & Machinery
Patents & Trade Mark
Stock
Sundry Debtors
Bills Receivable
Cash at Bank

10
25
20
-
20
10
-
5

8
19
25.50
5.25
15.00
5.00
2.00
0.25

Less: Liabilities Taken Over:
Bank Overdraft
Sundry Creditors
Bills Payable
90

-
10
5
80

5
12
3
Purchase Consideration
75
60

Journal Entries
In the books of XY Ltd. (Transfree)
Date
Particulars
L/F
Amount (Dr.)
Amount (Cr.)
(i)
Business Purchase A/c                                                                 Dr.
To Liquidator of X Ltd. A/c
To Liquidator of Y Ltd. A/c
(Being the purchase consideration due to liquidator of X Ltd and Y Ltd.)

135


75
60
(ii)
Goodwill A/c                                                                                  Dr.
Land & Building A/c                                                                      Dr.
Plant & Machinery A/c                                                                 Dr.
Stock A/c                                                                                         Dr.
Sundry Debtors A/c                                                                       Dr.
Cash at Bank A/c                                                                            Dr.
To Sundry Creditors A/c
To Bills Payable A/c
To Business Purchase A/c
(Being the assets & liabilities of X Ltd. taken over.)

10
25
20
20
10
5






10
5
75
(iii)
Goodwill A/c                                                                                   Dr.
Land & Building A/c                                                                       Dr.
Plant & Machinery A/c                                                                  Dr.
Patents & Trade Mark A/c                                                            Dr.
Stock A/c                                                                                          Dr.
Sundry Debtors A/c                                                                        Dr.
Bills Receivable A/c                                                                        Dr.
Cash at Bank A/c                                                                             Dr.
To Bank Overdraft A/c
To Sundry Creditors A/c
To Bills Payable A/c
To Business Purchase A/c
(Being the assets & liabilities of X Ltd. taken over.)

8
19
25.50
5.25
15.00
5.00
2.00
0.25








5
12
3
60
(iv)
Liquidator of X Ltd. A/c                                                                 Dr.
Liquidator of Y Ltd. A/c                                                                 Dr.
To Equity Share Capital A/c
(Being the purchase consideration discharged)


75
60


135

Balance Sheet (XY Ltd.)
As on 31-3-2015
Particulars
S.N.
Amount (Rs.)
                    I.           Equity & Liabilities:
a)     Shareholder’s Fund:
1)   Share Capital
2)   Reserve & Surplus
b)     Non-Current Liabilities
c)      Current Liabilities:
1)   Short-term borrowings: Bank Overdraft
2)   Trade Payable







1


135
NIL
NIL

5
30
Total (a + b + c)

170
                  II.           Assets:
a)     Non-Current Assets:
1)   Fixed Assets:

b)     Current Assets:
1)   Inventories
2)   Trade Receivable
3)   Cash & Cash Equivalents


2


112.75


35
17
5.25
Total (a + b)

170
Working Note:
1. Trade Payables
Rs.
Sundry Creditors
Bills Payable
22
8

30
2. Fixed Assets
Rs.
Tangible Fixed Assets:
Land & Building
Plant & Machinery
Intangible Fixed Assets:
Goodwill
Patents & Trade Marks

44
45.50

18
5.25

112.75

Journal Entries
In the books of X Ltd. (Transferor)
Date
Particulars
L/F
Amount
Dr.
Amount
Cr.
(i)
Realisation A/c                                                                             Dr.
To Goodwill A/c
To Land & Building A/c
To Plant & Machinery A/c
To Stock A/c
To Sundry Debtors A/c
To Cash at bank A/c
(Being the sundry assets transferred to realisation account)

90

10
25
20
20
10
5
(ii)
Sundry Creditors A/c                                                                    Dr.
Bills Payable A/c                                                                            Dr.
To Realisation A/c
(Being the sundry liabilities transferred to realisation account)

10
5


15
(iii)
Equity Share Capital A/c                                                              Dr.
Reserve Fund A/c                                                                          Dr.
Surplus A/c                                                                                     Dr.
Workmen’s Compensation Fund A/c                                         Dr.
To Equity Shareholders A/c
(Being the equity share capital and reserves and surplus transferred to equity shareholders account)

50
20
3
2




75
(iv)
XY Ltd. A/c                                                                                      Dr.
To Realisation A/c
(Being the purchase consideration due from XY Ltd)

75

75
(v)
Equity Shares in XY Ltd. A/c                                                        Dr.
To XY Ltd. A/c
(Being the purchase consideration realised from XY Ltd.)

75

75
(vi)
Equity Shareholders A/c                                                              Dr.
To Equity Shares in XY Ltd. A/c
(Being the final payment made to the equity shareholders)

75

75

3. Calculation of Purchase Consideration:

Rs.
Equity Shareholder’s :
2,00,000 Equity Shares @ Rs. 10 each
Securities Premium (20,00,000 x 2.5)
Preference Shareholder’s:
10,000, 15% Preference Share @ Rs. 100 each

20,00,000
5,00,000

10,00,000
Purchase Consideration
35,00,000

Journal Entries
In the books of G Ltd. (Transfer Company)
Date
Particulars
L/F
Amount
Dr.
Amount
Cr.

Business Purchase A/c                                                                 Dr.
To Liquidator of B Ltd. A/c
(Being the purchase consideration due to liquidator of B Ltd.)

35,00,000

35,00,000

Land & Building A/c                                                                       Dr.
Plant & Machinery A/c                                                                  Dr.
Furniture A/c                                                                                  Dr.
Stock A/c                                                                                         Dr.
Debtors A/c                                                                                     Dr.
Cash at Bank A/c                                                                            Dr.
To 12% Debenture A/c
To Trade Creditors A/c
To Other Current Liabilities A/c
To Business Purchase A/c
To Investment A/c
To Surplus A/c
(Being the assets & liabilities of B Ltd. taken over.)

12,00,000
18,00,000
2,00,000
5,00,000
7,00,000
3,00,000






2,00,000
3,00,000
2,00,000
35,00,000
3,00,000
2,00,000


Liquidation of H. Ltd. A/c                                                              Dr.
To Equity Share Capital A/c
To Securities Premium A/c
To 15% Preference Share Capital A/c
(Being the final payment made to the liquidation of B Ltd.)

35,00,000

20,00,000
5,00,000
10,00,000

Balance Sheet (G Ltd.)
Particulars
Amount (Rs.)
                    I.            Equity & Liabilities:
a)      Shareholder’s Fund:
1)      Share Capital:
Equity Share Capital (50,00,000 + 20,00,000)
Preference Share Capital (20,00,000 + 10,00,000)
2)      Reserve & Surplus:
Securities Premium Reserve
General Reserve
Surplus (10,00,000 + 2,00,000)
Investment Allowance Reserve (7,00,000 + 3,00,000)

b)      Non-Current Liabilities:
12% Debenture (5,00,000 + 2,00,000)
c)       Current Liabilities:
Trade Creditors (5,00,000 + 3,00,000)
Other Current Liabilities : (4,00,000 + 2,00,000)



70,00,000
30,00,000

5,00,000
8,00,000
12,00,000
10,00,000


7,00,000

8,00,000
6,00,000
Total (a + b + c)
1,56,00,000
                  II.            Assets:
a)      Non-Current Assets:
Fixed Assets:
Land & Building (29,00,000 + 12,00,000)
Plant & Machinery (45,00,000 + 18,00,000)
Furniture (5,00,000 + 2,00,000)
b)    Current Assets:
Inventories (15,00,000 + 5,00,000)
Debtors (10,00,000 + 7,00,000)
Cash at Bank (5,00,000 + 3,00,000)



41,00,000
63,00,000
7,00,000

20,00,000
17,00,000
8,00,000
Total (a + b)
1,56,00,000

4. (i) Calculation of Purchase Consideration:

Deva Ltd.
Asura Ltd.
Equity Shareholder’s :
Equity Share Capital

Securities Premium

Cash
Preference Shareholder’s:
Equity Share Capital

Securities Premium


5,00,000
(50,000 x 10)
1,00,000
(50,000 x 2)
1,10,000
(50,000 x 22)
5,00,000
(5,000 x 10)
1,00,000
(50,000 x 2)

1,50,000

30,000
(1,500 x 2)
2,40,000
(30,000 x 80)
2,50,000
(25,000 x 10)
50,000
(25,000 x 2)
Purchase Consideration
13,10,000
7,20,000

Journal Entries
In the books of Devasura Ltd. (Transfree)
Date
Particulars
L/F
Amount
Dr.
Amount
Cr.

Business Purchase A/c                                                                 Dr.
To Liquidator of Deva Ltd. A/c
To Liquidator of Asura Ltd. A/c
(Being the purchase consideration due to liquidator of Deva and Asura Ltd.)

20,30,000

13,10,000
7,20,000

Land & Building A/c                                                                       Dr.
Plant & Machinery A/c                                                                  Dr.
Furniture & Fittings A/c                                                                 Dr.
Stock A/c                                                                                          Dr.
Debtors A/c                                                                                     Dr.
Cash at Bank A/c                                                                            Dr.
Cash in hand A/c                                                                            Dr.
Goodwill A/c (balancing figure)                                                   Dr.
To Sundry Creditors A/c
To Provision for bad debts A/c
To Business Purchase A/c
(Being the assets & liabilities of Deva Ltd. taken over.)

4,65,000
5,60,000
79,000
81,500
56,000
87,000
6,400
52,900








75,000
2,800
13,10,000

Land & Building A/c                                                                       Dr.
Plant & Machinery A/c                                                                  Dr.
Furniture & Fittings A/c                                                                Dr.
Stock A/c                                                                                         Dr.
Debtors A/c                                                                                     Dr.
Cash at Bank A/c                                                                            Dr.
Cash in hand A/c                                                                            Dr.
Goodwill a/c                                                                                   Dr.
To 5% Debenture in Asura Ltd. A/c
To Sundry Creditors A/c
To Provision for bad debts A/c
To Business Purchase A/c
(Being the assets & liabilities of Asura Ltd. taken over.)

2,55,000
3,58,000
34,000
52,000
24,600
22,500
3,900
48,230








42,000
35,000
1,230
7,20,000

5% Debenture in Asura Ltd A/c                                                   Dr.
To 7% Debenture A/c
(Being the 5% Debentures in Asura Ltd converted into 7% Debentures)

42,000

42,000

Bank A/c                                                                                          Dr.
To Equity Share Capital A/c
To Securities Premium A/c
(Being the 30,000 equity shares @ Rs.10 each issued at a premium of Rs.2.50 per share)

3,75,000

3,00,000
75,000

Liquidator of Deva Ltd. A/c                                                          Dr.
Liquidator of Asura Ltd. A/c                                                         Dr.
To Equity Share Capital A/c
To Securities Premium A/c
To Bank A/c
(Being the final payment made to the liquidator of Deva and Asura B Ltd.)

13,10,000
72,000


14,00,000
2,80,000
3,50,000

Journal Entries
In the books of Deva Ltd. (Transferor)
Date
Particulars
L/F
Amount
Dr.
Amount
Cr.
(1)
Realisation A/c                                                                              Dr.
To Land & Building A/c
To Plant & Machinery A/c
To Furniture & Fittings A/c
To Stock A/c
To Debtors A/c
To Cash at Bank A/c
To Cash in Hand A/c
(Being the assets transferred to realisation account)

13,34,900

4,65,000
5,60,000
79,000
81,500
56,000
87,000
6,400
(2)
Equity Shareholders A/c                                                                Dr.
To Discount on issue of shares A/c
(Being the discount on issue of shares transferred to equity shareholders account)

55,100

55,100
(3)
Creditors A/c                                                                                  Dr.
To Realisation A/c
(Being the liabilities transferred)

75,000

75,000
(4)
Equity Share Capital A/c                                                               Dr.
General Reserve A/c                                                                      Dr.
Surplus A/c                                                                                      Dr.
To Equity Shareholders A/c
(Being the equity share capital and reserves and surplus transferred to equity shareholders account)

5,00,000
2,00,000
1,15,000



7,59,900
(5)
6% Preference Share A/c                                                              Dr.
To Preference Shareholders A/c
(Being the preference share capital transferred to preference shareholders account)

5,00,000

5,00,000
(6)
Devasura A/c                                                                                   Dr.
To Realisation A/c
(Being the purchase consideration due from Devasura ltd.)

13,10,000

13,10,000
(7)
Devasura A/c                                                                                 Dr.
To Equity Share Capital A/c (5,00,000 + 5,00,000)
To Securities Premium A/c
To Cash A/c
(Being the purchase consideration received from Devasura ltd.)

13,10,000

10,00,000
2,00,000
1,10,000
(8)
Preference Shareholders A/c                                                       Dr.
Realisation A/c                                                                                Dr.
To Equity Share Capital A/c
To Securities Premium A/c
(Being the final payment made to the preference shareholders)

5,00,000
1,00,000


5,00,000
1,00,000
(9)
Equity Shareholders A/c                                                               Dr.
To Realisation A/c
(Being the loss on realisation transferred.)

49,900

49,900
(10)
Equity Shareholders A/c                                                               Dr.
To Equity Share A/c
To Security Premium A/c
To Cash A/c
(Being the final payment made to the equity shareholders)

7,10,000

5,00,000
1,00,000
1,10,000

5. Net Assets Method

Rs.
Assets taken over:
Freehold Premises (25,000 x 10% = 2,500 + 25,000)
Furniture
Motor Van
Stock (13,200 x 20% = 2,640 + 13,200)
Bills Receivable
Debtors
Cash

27,500
3,500
12,800
15,840
5,400
18,700
1,400

Less: Liabilities taken over:
Bank Loan
Bills Payable
Creditors
85,140

20,000
6,700
10,800
Purchase Consideration
47,640

Journal Entries
In the books of Ding Dong Ltd.
Date
Particulars
L/F
Amount
Dr.
Amount
Cr.

Business Purchase A/c                                                                  Dr.
To M/s Desai Bros. A/c
(Being the purchase consideration due to M/s Desai Bros.)

47,640

47,640

Furniture Premises A/c                                                                Dr.
Furniture A/c                                                                                  Dr.
Motor Van A/c                                                                               Dr.
Stock A/c                                                                                         Dr.
Bills Receivable A/c                                                                       Dr.
Debtors A/c                                                                                    Dr.
Cash A/c                                                                                          Dr.
To Bank Loan A/c
To Bills Payable A/c
To Creditors A/c
To Business Purchase A/c
(Being assets & liabilities of M/s Desai taken over.)

27,500
3,500
12,800
15,840
5,400
18,700
1,400







20,000
6,700
10,800
47,640


M/s Desai Bros. A/c                                                                       Dr.
To Equity Share Capital A/c
To Bank A/c
(Being the final payment made to the M/s Desai Bros.)

47,640

30,000
17,640
Balance Sheet of Ding Dong Ltd.
Particulars
Amount (Rs.)
                    I.            Equity & Liabilities:
a)      Shareholder’s Fund:
1)      Share Capital
2)      Reserve & Surplus
b)     Non-Current Liabilities: Bank loan
c)      Current Liabilities:
Short-term borrowings: Overdraft (17,640 – 1,400)
Trade Payable:
Bills Payable
Creditors


30,000
NIL
20,000

16,240

6,700
10,800
Total (a + b + c)
83,740
                  II.            Assets:
a)      Non-Current Assets:
1)      Fixed Assets:
Furniture Premises
Furniture
Motor Van
b)     Current Assets:
Inventories
Trade Receivable:
Debtors
Bills Receivable



27,500
3,500
12,800

15,840

18,700
5,400
Total (a + b)
83,740

6.
Journal entries (Purchase Method)
In the books of Alpha Ltd.
Date
Particulars
L/F
Amount
Dr.
Amount
Cr.

Business Purchase A/c                                                                  Dr.
To Liquidator of Beta Co. Ltd. A/c
(Being the purchase consideration due to liquidator of Beta Co. Ltd.)

2,94,000

2,94,000

Building a/c                                                                                    Dr.
Plant & Machinery A/c                                                                 Dr.
Stock of goods A/c                                                                        Dr.
Sundry Debtors A/c                                                                      Dr.
To Business Purchase A/c
To Capital Reserve A/c
(Being the assets & liabilities of Beta Co. Ltd. taken over.)

2,00,000
80,000
30,000
42,000




2,94,000
58,000

Liquidator of Beta Co. Ltd. A/c                                                   Dr.
To Equity Shareholders Capital A/c
To Bank A/c
(Being the final payment made to the Beta Co. Ltd.)

2,94,000

1,80,000
1,14,000
Balance Sheet (Alpha Ltd.)
As on 31-3-2015
Particulars
Amount (Rs.)
                    I.            Equity & Liabilities:
a)      Shareholder’s Fund:
1)   Share Capital
Equity Share Capital (24,000 shares @ Rs. 7.50 per share)
2)   Reserve & Surplus
Capital Reserve
b)     Current Liabilities:
Short-term borrowings: Bank Overdraft



1,80,000

58,000

1,14,000
Total (a + b + c)
3,52,000
                  II.            Assets:
a)      Non-Current Assets:
1)      Fixed Assets:
Land & Building
Plant & machinery
b)     Current Assets:
1)      Inventories
2)      Trade Receivable



2,00,000
80,000

30,000
42,000
Total (a + b)
3,52,000

7. Calculation of Purchase Consideration (Net Payment):

Rs.
Equity Shareholder’s :
2,000 Equity Shares @ Rs. 1 each
Preference Shareholder’s:
5,000, 5% Preference Share @ Rs. 1 each

2,000

5,000
Purchase Consideration
7,000
Journal entries (Purchase)
In the books of Lucky Ltd.
Date
Particulars
L/F
Amount
Dr.
Amount
Cr.

Business Purchase A/c                                                                  Dr.
To Liquidator of Unlucky Ltd.  A/c
(Being the purchase consideration due to liquidator of Unlucky Ltd.)

7,000

7,000

Land & Building A/c                                                                       Dr.
Debtors A/c (10,000 – 1,000)                                                       Dr.
Stock A/c Dr.
To Creditors A/c
To Overdraft A/c
To Provision for Bad debt
To Business Purchase A/c
To Capital Reserve A/c
(Being the assets & liabilities of Unlucky Ltd. taken over.)

15,000
10,000
5,000



10,000
10,000
1,000
7,000
2,000

Capital Reserve A/c                                                                        Dr.
To Bank A/c
(Being the liquidation expenses paid)

5,000

5,000

Land & Building A/c                                                                       Dr.
To Capital Reserve A/c
(Being the profit on revaluation of land and building transferred to capital reserve)

15,000

15,000

Liquidator of Unlucky Ltd. A/c                                                     Dr.
To Equity Share Capital A/c
To 5% Preference Share Capital A/c
(Being the final payment made to the Unlucky Ltd.)

7,000

2,000
5,000
Balance Sheet (Lucky Ltd.)
As on 31-3-2015
Particulars
Amount (Rs.)
                    I.           Equity & Liabilities:
a)     Shareholder’s Fund:
1)      Share Capital
Equity Share Capital
Preference Share Capital
2)      Reserve & Surplus
Capital Reserve (3,000 + 2,000 – 5,000 + 15,000 – 10,000)
General Reserve
b)    Non-Current Liabilities:
c)     Current Liabilities:
1)       Short-term borrowings: Overdraft
2)       Trade Payable: Creditors



65,000
5,000

32,000
30,000
NIL

10,000
12,000
Total (a + b + c)
1,54,000
                  II.           Assets:
a)     Non-Current Assets:
1)     Fixed Assets:
Tangible
Land & Building
Plant & machinery
Intangible: Capital Reserve
b)      Current Assets:
Inventories
Trade receivables (10,000+10,000 – 1,000)
Cash and cash equivalents (30,000 – 5,000)




55,000
35,000
5,000

15,000
19,000
25,000
Total (a + b)
1,54,000

Journal entries (Purchase)
In the books of Unlucky Ltd. (Transferor)
Date
Particulars
L/F
Amount
Dr.
Amount
Cr.

Realisation A/c                                                                               Dr.
To Goodwill A/c
To Land & Building A/c
To Copy rights A/c
To Debtors A/c
(Being the sundry assets transferred to realisation A/c.)

40,000

10,000
15,000
5,000
10,000

Creditors A/c                                                                                  Dr.
Overdraft A/c                                                                                 Dr.
To Realisation A/c
(Being the sundry liabilities transferred to realisation A/c.)

10,000
10,000


20,000

5% Preference Share Capital A/c                                               Dr.
To Preference Shareholder’s A/c
(Being the preference share capital transferred to Preference Shareholders.)

10,000

10,000

Equity Share Capital A/c                                                              Dr.
To Equity Shareholders a/c
(Being the equity share capital transferred to Equity Shareholders A/c.)

20,000

20,000

Equity Shareholders A/c                                                              Dr.
To Surplus A/c
(Being the negative balance is surplus A/c transferred to equity shareholders A/c.)

10,000

10,000

Lucky Ltd. A/c                                                                                Dr.
To Realisation A/c
(Being the Purchase Consideration due from Lucky Ltd.)

7,000

7,000

Equity Share in Lucky Ltd. A/c                                                      Dr.
Preference Share in Lucky Ltd. A/c                                              Dr.
To Lucky Ltd. A/c
(Being the purchase consideration received from Lucky ltd.)

2,000
5,000


7,000

Preference Shareholders A/c                                                     Dr.
To Preference Share in Lucky Ltd. A/c
To Realisation A/c
(Being the final payment made to Preference Shareholders A./c.)

10,000

5,000
5,000

Equity Shareholders a/c                                                              Dr.
To Equity Share in Lucky Ltd. A/c
To Realisation A/c (Loss on realisation)
(Being the final payment made to the equity shareholders after adjusting loss on realisation)

10,000

2,000
8,000

Realisation A/c
Particulars
Amount (Rs.)
Particulars
Amount (Rs.)
To Goodwill A/c
To Land & Building A/c
To Debtors A/c
To Closing Stock
10,000
15,000
10,000
5,000
By Creditors A/c
By Overdraft A/c
By Lucky Ltd. A/c
By preference Shareholders A/c
By Equity Shareholders A/c
(Loss on Realisation)
10,000
10,000
7,000
5,000
8,000

40,000

40,000

8.
Journal Entries
In the books of XYZ Ltd.
Date
Particulars
L/F
Amount
Dr.
Amount
Cr.
(1)
Business Purchase A/c                                                                  Dr.
To Liquidator of ABC Ltd.
(Being the purchase consideration due to liquidator of ABC Ltd.)

3,00,000

3,00,000
(2)
Land & Building A/c                                                                       Dr.
Plant & Machinery A/c                                                                 Dr.
Work-in-progress A/c                                                                   Dr.
Stock A/c                                                                                         Dr.
Furniture & Fittings A/c                                                                Dr.
Debtors A/c                                                                                     Dr.
Cash at Bank A/c                                                                            Dr.
Cash in hand A/c                                                                            Dr.
Goodwill A/c (balancing figure)
To Debentures A/c
To Creditors A/c
To Provision for depreciation A/c
To Business Purchase A/c
(Being the assets and liabilities of ABC Ltd. Taken over)

1,20,000
1,50,000
30,000
60,000
2,500
25,000
12,500
100
49,900









1,00,000
30,000
20,000
3,00,000
(3)
Goodwill A/c                                                                                   Dr.
To Cash A/c
(Being Liquidation Expenses paid.)

500

500
(4)
Liquidator of ABC Ltd. A/c                                                            Dr.
To Equity Share Capital A/c
To Securities Premium Reserve A/c
To Bank A/c
(Being purchase consideration discharged.)

3,00,000

1,00,000
60,000
1,40,000

Journal Entries
In the books of ABC Ltd.
Date
Particulars
L/F
Amount
Dr.
Amount
Cr.
(1)
Realisation A/c                                                                               Dr.
To Land & Building A/c
To Plant & Machinery A/c
To Work-in-progress A/c
To Stock A/c
To Furniture & Fittings A/c
To Debtors A/c
To Cash in hand A/c
To Cash at Bank A/c
(Being the assets transferred.)

4,00,100

1,20,000
1,50,000
30,000
60,000
2,500
25,000
12,500
100
(2)
Debentures A/c                                                                            Dr.
Creditors A/c                                                                                 Dr.
Depreciation Provision A/c                                                         Dr.
To Realisation A/c
(Being the liabilities transferred.)

1,00,000
30,000
20,000



1,50,000
(3)
Equity Share Capital A/c                                                             Dr.
Reserve Fund A/c                                                                         Dr.
Workmen’s Compensation Fund A/c                                       Dr.
Dividend Equalization Fund A/c                                                Dr.
Surplus A/c                                                                                    Dr.
To Equity Shareholders A/c
(Being the equity share capital and reserves and surplus transferred to equity shareholders account)

2,00,000
25,000
10,000
10,000
5,100





2,50,100
(4)
XYZ Ltd. A/c                                                                                   Dr.
To Realisation A/c
(Being purchase consideration due.)

3,00,000

3,00,000
(5)
Equity Shares in XYZ Ltd. A/c                                                        Dr.
Bank A/c                                                                                           Dr.
To XYZ Ltd. A/c
(Being purchase consideration discharged.)

1,60,000
1,40,000



3,00,000
(6)
Realisation A/c                                                                              Dr.
To Equity Shareholders A/c
(Being the profit on realisation transferred to the equity shareholders account)

49,900

49,900
(7)
Equity Shareholders A/c                                                              Dr.
To Equity Shares in XYZ Ltd. A/c
To Bank A/c
(Being Equity Shareholders discharged.)

3,00,000

1,60,000
1,40,000

Working Note: Calculation Purchase Consideration

To Whom
In the Form of
No. of Shares
Issue Price
Amount
(Rs.)
Equity Shareholders
Equity Share
Cash
20,000
8
1,60,000
1,40,000
(20,000 x 7)




3,00,000

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