Question

Following are the Balance Sheets of ABC Limited and PQR Limited on 31st March., 2018 

Liabilities	ABC  Ltd. Rs	PQR Ltd. Rs	Assets	ABC Ltd. Rs.	PQR Ltd. Rs
Equity Shares Capital	12,00,000	18,00,000	Goodwill	90,000	1,50,000
(Shares of Rs 100 each Fully paid)			Premises	9,75,000	10,50,000
7%Preference Shares of Rs.100 each	6,75,000	9,00,000	Plant & Machinery	9,00,000	12,30,000
General Reserve	1,05,000	1,20,000	Stock	2,70,000	3,75,000
Profit & Loss Account	67,500	93,000	Sundry	2,10,000	5,02,500
Statutory Reserve	40,500	72,000	Debtors
10% Debentures	2,25,000	1,26,000	Bank	18,000	36,000
Sundry Creditors	1,50,000	2,32,500
Total	24.63.000	33,43,500	Total	24,63,000	33,43,500

On the above date, PQR Limited takes over ABC Limited on the following terms and conditions :

1. All Assets and Liabilities are taken over at book value except the following which were revalue C: as follows :

Premises Rs. 8,50,000 and Plant and Machinery Rs. 7 ,00,000

2. Shareholders of ABC Limited to be issued 10,000 equity shares oft 100 each  at 10% prem.ium.

3. 7% preference shareholders of ABC Limit  to be discharged at 10% premium by issuing 8% preference shares oft 100 each (at par).

4. Debentures of ABC Limited , to be converted into equivalent number of debentures of PQR Limited .

5. Sundry-Debtors of PQR Limited include Rs. 25000 due from ABC Limited

6. Cost of liquidation am9unting to Rs. 4,000 were borne by PQR Limited.

you are required to :

(i) Calculate Purchase Consideration.

(ii) Pass Journal entries in the books of PQR Limited.

Answer 1

PQRLtd.
Purchase Consideration

7% Preference Shareholders
8% Preference Shares of Rs. 100 each		7,42,500"
(6,75,000 + 10%) ∴ (6,75,000 + 67,500)
Equity Shareholders
10,000 Equity Shares of Rs 100 each	10,00,000
Add : Premium	1,00,000	11,00,000
		18,42,500

In the Books of PQR Ltd.

Journal Entries

Date	Particulars	Dr.Rs.	Cr.Rs.
1.	Business Purchase A/c        Dr.	18,42,500
	To Liquidator of ABC Ltd.		18,42,500
2.	Goodwill A/c                      Dr	1,69,500
	Premises A/c                    Dr	8,50,000
	Plant & Machinery              Dr	7,00,000
	Stock A/c                          Dr	2,70,000
	Debtors A/c                      Dr	2,10,000
	Bank A/c                          Dr	18,000
	To 10% Debentures		2,25,000
	To Creditors A/c		1,50,000
	To. Business Purchase A/c		18,42,500
3.	Liquidators of ABC Ltd.	18,42,500
	To 8% Preference Share Capital A/c		7,42,500
	To Equity Share Capital A/c		10,00,000
	To Security Premium A/c		1;00,000
4.	Amalgamation Adjustment A/c                                            Dr	40,500
	To Statutory Reserve A/c		40,500
5.	10% Debentures in ABC Ltd. A/c                                      Dr.	2,25,000
	To 10% Debentures Ale		2,25,000
6.	Creditors in PQR Ltd A/c       Dr	25,000
	To Debtors in ABC Ltd. A/c		25,000
7.	Goodwill A/c                        Dr	4,000
	To Bank		4,000