Sharma and Varma were carrying on business in partnership sharing profits and losses in the ratio 3:2. They sell their business to a limited company on 31 March 2011 and on that date their balance sheet stood as follows:
|
Liabilities |
Assets |
||
|
Capital Accounts |
Plant & Machinery |
3,60,000 |
|
|
Sharma 4,80,000 |
Land & Building |
2,40,000 |
|
|
Varma 3.60.000 |
840,000 |
Investment |
1,20,000 |
|
Reserve Fund |
1,20,000 |
Stock |
2,40,000 |
|
Creditors |
2,40,000 |
Debtors |
1,80,000 |
|
Cash and Bank |
60,000 |
||
|
12,00,000 |
12,00,000 |
A limited company having an authorized capital of Rs.30,00,000 in equity shares of Rs.100 each purchased the above business under the following terms:
- Goodwill was valued at Rs.2,40,000.
- Depreciation on plant & machinery was @ 10% and appreciation of land & buildings was by 20%.
- A provision of doubtful debts @ 5% on debtors was allowed.
- Investment was taken over by Varma at an agreed value of Rs.96,000.
- Total purchase consideration was to be satisfied by the issue of fully paid equity shares of Rs.100 each. Show the journal entries and the revised balance sheet assuming that the same set of books is continued.