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Following Are the Balance Sheet of Galaxy Ltd. and Gemini Ltd. as on 31st March, 2018. - Financial Accounting(Financial Accounting and Auditing 9)

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Following are the Balance Sheet of Galaxy Ltd. & Gemini Ltd. as on 31st 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.

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Solution

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
Concept: Absorption
  Is there an error in this question or solution?
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