With a view to effect economy in working, Modern Mills Ltd. agreed to take over the business of the Ancient Mills Ltd. from 1 November 2010. The following is the balance sheet/S of the Modern Mills Ltd. as on that date:
|
Liabilities |
Assets |
||
|
Paid-up Capital: |
Land & Buildings |
5,40,000 |
|
|
36,000 Shares of |
18,00,000 |
Plans & |
3,75,000 |
|
Z 50 Each |
Machinery |
||
|
Reserve Fund |
3,60,000 |
Stock |
7,50,000 |
|
Reserve for |
30,000 |
Debtors |
8,70,000 |
|
Doubtful Debts |
Cash at Bank |
75,000 |
|
|
Creditors |
|||
|
Profit and Loss |
2,25,000 |
||
|
A/c |
1,95,000 |
||
|
26,10,000 |
26,10,000 |
The purchasers took over all the assets and liabilities of the vendor company except a sum of Rs.30,000 to provide for cost of liquidation and payment to any dissent shareholders. The purchase price was to be discharged by the allotment to the shareholders of the vendor company of the share of Rs.100 (Rs. 90 paid up) of the modern Mills Ltd. for every two shares in Ancient Mills Ltd. The expenses of liquidation amount to Rs.9,000. Dissentient shareholders of 300 shares are paid out at Rs.70 per share, i.e. Rs.21,000.
Pass the necessary journal entries in the books of the respective companies to give effect to the above transactions.