The following is the balance sheet of ABC Ltd. on 31 December 2010:
|
Liabilities |
Assets |
||
|
Capital: |
Land & Buildings |
4,80,000 |
|
|
80,000 Share of |
8,00,000 |
Plant & |
6,00,000 |
|
710 Each |
Machinery |
||
|
Debentures |
4,00,000 |
Work-In-Progress |
1,20,000 |
|
Sundry Creditors |
1,20,000 |
Stock |
2,40,000 |
|
Reserve Fund |
1,00,000 |
Furniture & |
10,000 |
|
Workmen”s |
40,000 |
Fittings |
|
|
Compensation |
Sundry Debtors |
1,00,000 |
|
|
Fund |
Cash at Bank |
50,000 |
|
|
Dividend |
40,000 |
Cash In Hand |
400 |
|
Equalintion |
|||
|
Fund |
|||
|
P&L |
20,400 |
||
|
Appropriation |
|||
|
A/c |
|||
|
Depreciation |
|||
|
Provision: |
|||
|
Land & Buildings |
80,000 |
||
|
16,00,400 |
16,00,400 |
The Company is absorbed by XYZ Ltd. on the above date. The consideration for the absorption is the discharge of the debentures at a premium of 5%, taking over the trade liability and a payment of Rs.7 in cash and one share of Rs.5 in XYZ Ltd. at the market value of Rs.8 per share in exchange for one share in ABC Ltd. The cost of liquidation of Rs.2,000 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.