Question

Following are the Balance Sheet of Galaxy Ltd. & Gemini Ltd. as on 31^st March, 2018.

Balance Sheet as on 31st March 2018

Liabilities	Galaxy, Ltd Rs.	Gemini Ltd Rs.	Assets	Galaxy, Ltd Rs.	Gemini Ltd Rs.
Share Capital	50,000	1,00,000	Fixed Assets	60,000
(Rs.10 each)			Loans to Gemini Ltd	5,000
Reserve Fund	20,000	30,000	Debtors	15,000	10,000
Foreign Projects			Stock	10,000	15,000
Reserve	5,000	_	Cash at Banlc	_	5,000
Creditors	15,000	15,000		_
Loan from Galaxy Ltd		5,000
	90,000	1,55,000		90,000	1,55,000_

Gemini Ltd. agreed to absorb Galaxy Ltd. on the following terms :

Gemini Ltd. shall give one share of. Rs. 10 each at Rs . 35 per share· for every 3 shares held in  Galaxy Ltd. the amount for the fraction of shares shall be paid in cash calculated as per the market  price of the share of Gemini Ltd.

Stock of Galaxy Itd includes goods worth Rs.7 ,500  purchased from Gemini Ltd. Which had a profit margin  of 20 % on cost.

Debtors of Gentlni Ltd includes Rs. 2,500 being the amount due from Galaxy Ltd. but the creditors of Galaxy Ltd. include Rs. 2,000 only being the amount due to Gemini Ltd. The difference between the debtors and creditors is due to cash in transit.

The shares of Genuni Ltd. are quoted in the market at 45 per share.
You are required to pass the journal entries in the books of Gemini Ltd. and the Balance Sheet  after absorption, assuming that the foreign projects reserve is still to be maintained for 3 years.
Assume that the amalgamation is in the nature of purchase.

Answer 1

Purchase Consideration :

One share in Gemini Ltd. for every 3 shares of Galaxy Ltd. :

`(5,000)/3=1,666`equity shares of Rs.10 [email protected] Rs. 35.each fully paid up

Cash - 0.67 share x Market Value of share of Gemini Ltd. (Rs. 45)  Purchase Consideration 

Rs 58,310
+        30 

___________
Rs . 58,340

Journal of Gemini Ltd.
(Amalgamation is in the nature of Purchase)

Date	Particulars	L.F	Dr . Rs.	Dr . Rs.
1.	Business Purchase A/c                   Dr		58,340
	To Liquidators of Galaxy Ltd. A/c			58,340
	(Being business of Galaxy Ltd. taken over)
2.	Fixed Assets A/c                           Dr		60,000
	Loans to Gemini Ltd. A/c              Dr		5,000
	Debtors A/c                                Dr		15,000
	Stock Ac                                      Dr		10,000
	To Creditors A/c			15,000
	To Business Purchase A/c			58,340
	To Capital Reserve A/c (Balance Fig.)			16,660
	(Being various assets &  liabilities of Galax ltd. taken over at  a reed-values)
3.	Liquidators of Galaxy Ltd. A/c        Dr		58,340
	To Equity Share Capital A/c			16,660
	(l,666 x 10)
	To Securities Premium A/c			41,650
	(1,666 x 25)
	To Cash/Bank A/c			30
	(Being payment of purchase consideration o liquidators of Galaxv Ltd.)
4.	Goodwill A/c                                 Dr		1,250
	To Stock Reserve A/c			1,250
	(Being profit element in stock of Galaxy , Ltd.)
5.	Loan from Galaxy Ltd. A/c            Dr		5,000
	To Loan to Gemini Ltd  A/c			5,000
6.	Creditors A/c             Dr.		2,000
	Cash in Transit A/c     Dr		500
	To Debtors A/c			2,500
	(Being inter-eompany debts. set-oft)
7.	Amalgamation Adjustment A/c        Dr.		5,000
	To Foreign Projects Reserve A/c			5,000
	(Being foreign  projects reserve maintained)

Gemini Ltd .
Balance sheet as on 1 April 2018

	Particulars	Notes No	Dr.	Cr.
1.	Equity and Liabilities
1.	Shareholders Funds
	(a) Share Capital	1	1,16,660
	(b) Reserves and Surplus	2	92,060	2,08,720
2.	Current Liabilities
	Trade Payable	3		33,000
	Total			2,41,720
2.	Assets
1.	Non-Curront Assts
	(a) Fixed Assets
	Tangible Assets	4
	(h) Other Not - Current Assets	5
2.	Current Assets
	(a) Inventories	6	23,750
	(b) Trade Receivables	7	22,500
	(c)cash and Cush Equivalent	8	5,470	51,720
	Total			2.41.720

Notes to Accounts

1.	Share Capital
	11,666 Equity shares of Rs.10 each fully paid.	1,16,660
	(of the abqve,l ,666 shares are issued for consideration other than cash)
2.	Reserve & Surplus
	Capital Reserve	16,660
	Less : Goodwill w/off	(1,250)
		15,410
	Security Premium	41,650
	Foreign Project Reserve	5,000
	Reserve Fund	30,000
		92,060
3.	Trade Payable
	Creditors	33,000
4.	Tangible Assets
	Fixed Assets	1,85,000
5.	Other Non-Current Assets
	Amalgamation Adjustment A/c	5,000
6.	Inventories
	Stock	25,000
	Less: Stock Reserve	(l,250)
		23,750
7.	Trade Receivable
	Debtors	22,500
8.	Cash and cash equivalent
	Bank	4,970
	Cash in Transit	500
		5,470