A Ltd. agreed to acquire the business of B Ltd. as on 31 December 2010. The balance sheet of B Ltd. on that date was as follows:
|
Liabilities |
Assets |
||
|
Share Capital of |
30,00,000 |
Goodwill |
5,00,000 |
|
Rs.10 Each |
Land and |
32,00,000 |
|
|
General Reserve |
8,50,000 |
Buildings |
|
|
Profit & Loss A/c |
5,50,000 |
Stock In Trade |
8,40,000 |
|
6% Debentures |
5,00,000 |
Debtors |
1,80,000 |
|
Creditors |
1,00,000 |
Cash |
2,80,000 |
|
50,00,000 |
50,00,000 |
The consideration payable by A Ltd. was agreed upon as follows:
- A cash payment equivalent to Rs.2.50 for every Rs.10 share in B Ltd.
- The issue of 4,50,000 Rs.10 shares fully paid in A Ltd. having an agreed value of Rs.15 per share.
- The issue of such an amount of fully paid 5% debentures of A Ltd. at 96% is sufficient to discharge the 6% debentures of B Ltd. at a premium of 20%. While computing the consideration, the directors of A Ltd. valued land & buildings at Rs.60,00,000, the stock at Rs.7,10,000 and the debtors at their face value subject to an allowance of 5% to cover doubtful debts. The cost of liquidation of B Ltd. came to Rs.25,000 which is to be paid by A Ltd.
Close the books of B Ltd. and give journal entries in the books of A Ltd.