M/S XYZ Ltd. agreed to acquire the business except cash of M/S KLM Ltd. as on 31 March 2011. The summarized balance sheet of M/S KLM Ltd. as on that date was as follows:
|
Liabilities |
Assets |
||
|
Share Capital: |
Goodwill |
1,50,000 |
|
|
90,000 Shares of |
9,00,000 |
Land & Building |
3,00,000 |
|
10 Each |
Plants & |
6,60,000 |
|
|
General Reserve |
3,00,000 |
Machinery |
|
|
Profit and Loss |
1,20,000 |
Stock-in-Trade |
2,40,000 |
|
Account |
Sundry Debtors |
90,000 |
|
|
12% Debentures |
1,50,000 |
Cash at Bank |
90,000 |
|
Creditors |
60,000 |
||
|
15,30,000 |
15,30,000 |
The consideration payable by M/S XYZ Ltd. was agreed as follows:
- A cash payment of Rs.5 for each share of Rs.10 in M/S KLM Ltd.
- The issue of 1,80,000 shares of Rs.10 each was fully paid at an agreed value of Rs.15 per share.
- The issue of such as amount of 14% debentures of M/S XYZ Ltd. at 4% discount is sufficient to discharge 12% debentures of M/S KLM Ltd. at a premium of 20%. While computing the agreed consideration the management of M/S XYZ Ltd. valued land and building at Rs.9,00,000; plant & machinery at Rs.10,50,000; stock in trade at Rs.2,10,000 and debtors at their face value subject to an allowance of 4% to cover doubtful debts.
Prepare realization account and equity shareholders account in the books of M/S KLM Ltd. and pass acquisition entries in the books of M/S XYZ Ltd.