Lal Co. Ltd. went into liquidation on 31 December 2010 and its whole undertaking was sold to Gupta co Ltd., the terms agreed to by the parties being:
- The discharge of debentures outstanding by the issue of Rs.95 of 9% debentures stock in Gupta Ltd. for each Rs.100 Lal Ltd. debentures
- The assumption by the transfer of all other liabilities of the transferor
- The exchange of five Rs.1 fully paid shares in Gupta Ltd. at an agreed value of Rs.1.25 a share, for every eight shares in Lal Ltd.
- Gupta Ltd. also undertook to pay the liquidator of Lal Ltd. a sum of money, on the basis of Rs.1 per share, to enable him to deal with fraction of shares; the number of shares represented by the addition of the fraction was 470.
Balance Sheet of Lal Ltd. as on 31 December 2010
|
Liabilities |
Assets |
||
|
Share Capital: |
Freehold |
3,00,000 |
|
|
4,00,000 Shares |
4,00,000 |
Properties |
|
|
of Rs.1 Each Fully |
Plant & |
1,00,000 |
|
|
Paid |
Machinery |
||
|
9% Debentures |
50,000 |
Investment |
2,500 |
|
Creditors |
7,500 |
on Accident |
|
|
Employees” Profit |
12,500 |
Compensation |
|
|
Sharing Fund |
Fund |
||
|
Fatal Accident |
2,500 |
Stock& Debtors |
75,000 |
|
Compensation |
Balance at Bank |
5.000 |
|
|
Fund |
|||
|
Profit & Loss A/c |
10,000 |
||
|
4,82,500 |
481503 |
Five days after the day of transfer, one of the discounted bills for Rs.500 fell due and was dishonored.
Show journal entries to close the book of Lal Ltd. Ignore the costs of liquidation: