The following is the balance sheet of Bhama Ltd. on 31 March 2011:
|
Liabilities |
Assets |
||
|
12,000 Shares of |
12,00,000 |
Land & Buildings |
6,00,000 |
|
100 Each |
Plant & |
9,00,000 |
|
|
Debentures |
6,00,000 |
Machinery |
|
|
Sundry Creditors |
1,80,000 |
Work-In-Progress |
1,80,000 |
|
Reserve Fund |
Stock |
3,60,000 |
|
|
Dividend |
1,50,000 |
Furniture & |
15,000 |
|
Equalization |
Fittings |
||
|
Fund |
Sundry Debtors |
150.000 |
|
|
Profit and Loss |
1,20,000 |
Cash at Bank |
75,000 |
|
Appropriation |
30,600 |
Cash In Hand |
|
|
A/c |
|||
|
22,80,600 |
22,80,600 |
The Company is absorbed by Rita Ltd. on the above date. The consideration for the absorption is the discharge of debentures at a premium of 5% taking over the liability in respect of the sundry creditors and payment of Rs.70 in cash and one share of Rs.50 in Rita Ltd. at the market value of Rs.80 per share in exchange for one share in Bhama Ltd. The cost of liquidation of Rs.30,000 is to be met by the purchasing company.
Pass journal entries in the books of both the companies. Show how the purchase price is arrived at.