On 1 January 2010, Patel sells his business to Rao Ltd. The company took over the assets and liabilities for a purchase consideration of Rs.4,25,000 being paid equally in cash and shares of Rs.50 each fully paid up. Patel received Rs.75,000 on account in 2010 from the company but no other entries have been made. The balance sheet of Patel’s business on the date of sale was as follows:
|
Liabilities |
Assets |
||
|
Capital |
4,20,000 |
Fixed assets |
1,40,000 |
|
Trade Creditors |
1,80,000 |
Sundry Debtors |
3,00,000 |
|
Stock |
1,60,000 |
||
|
6,00,000 |
6,00,000 |
Fixed assets and stock were to be revalued at Rs.1,25,000 and Rs.1,40,000, respectively. In addition to matters arising out of the above, there were the following balances in the books of Rao Ltd. as on 31 December 2010:
|
Sundry Assets |
Sundry Expenses |
||
|
Patel Vendor |
3,45,000 |
Salary |
90,000 |
|
Debtors |
2,75,000 |
Shop Rent |
22,000 |
|
Fixed Assets |
1,40,000 |
Printing Charges |
16,000 |
|
StockTaken Over |
1,60,000 |
Telephone Charges |
27,000 |
|
Purchases |
2,25,000 |
Bonus to Staff |
18,000 |
|
Bank |
64,000 |
Audit Fees |
5,000 |
|
Share Capital |
1,80,000 |
||
|
Sales |
3,29,000 |
||
|
Sundry Creditors |
1,90,000 |
Stock on hand on 31 December 2010 Rs.2,00,000. Show the needed journal entries in the books of the company to give effect to the above arrangement and prepare the adjusted trial balance P&L A/c of the year ended 31 December 2010 and the balance sheet as at that date of Rao Ltd.