Madhu Limited took over Rakhi Limited on 31st march, 2018, on which day, the summarised balance Sheet of Rakhi Ltd. was as follows :
Summarised Balance Sheet
As on 31st March, 2018
| Liabilities | Rs. | Assets | Rs. |
| Equity Shares of 10/- each | 10,00,000 | Goodwill | 60,000 |
| 5 % Preference shares 100/- each | 4,00,000 | Cash & Bank Balance | 80,000 |
| Creditors | 1,00,000 | Inventory | 3,10,000 |
| Bills Payable | 60,000 | Plant & Machinery | 4,10,000 |
| Debtors | 1,10,000 | ||
| Land and Building | 5,00,000 | ||
| Preliminary Expenses | 35,000 | ||
| Profit and Loss A/c | 55,000 | ||
| (Dr. Balance) | |||
| 15,60,000 | 15,60,000 |
The business was taken over by Madhu limited on the following terms and condition .
1. For every 10 equity shares of Rakhi limited, Madhu Ltd. issued 11 fully paid equity shares of Rs .10 each· and paid Rs.15 in cash.
2. Preference ·shareholders of Rakhi Limited were paid, equal number of 6% preference shares of Rs.100/- each by Madhu Limited at a premium of 8% .
3. All assets und Liabilities Were taken over at book value except Cash & Bank Balance to the extent of Rs. 14,000 which was left for meeting realization expenses.
you are required to :
(a) Calculate Purchase Consideration &
(b) Prepare necessary ledger accounts to close the Books of Rakhi Ltd., assuming acquisition is in nature of purchase.
Solution
Calculation of Purchase Consideration
| Rs. | ||
| 1. | Equity Shares in Madhu Ltd. | |
| `(11/10xx1,00,000)=1,10,000`Equity Shares of Rs.10 each | 11,00,000 | |
| 2. | Payment in Cash `(15/10xx1,00,000)` | |
| 3. | 6% Preference Shares in Madhu Ltd. 4,000 Preference Shares of Rs.100 each at a Premium of 8% · | |
| Preference Capital 4,00,000 | ||
| Add: Premium 8% 32,000 | 4,32,000 | |
| Total | 16.82,000 |
Ledger of Rakhi Ltd.
Realisation A/c
| Particulars | Rs. | Particulars | Rs. |
| To Goodwill | 60,000 | By Creditors | l,00;000 |
| To Cash (80,000 - 14,000) | 66,000 | By Bills Payable | 60,000 |
| To Inventory | 3,10,000 | By Madhu Ltd. A/c (P/C) | 16,82,000 |
| To Plant & Machinery | 4,10,000 | ||
| To Debtors | 1,10,000 | ||
| To Land & Building | 5,00,000 | ||
| To Cash A/c (Expenses) | 14,000 | ||
| To Preference Shareholders A/c | 32,000 | ||
| To Equity Shareholders A/c (Profit) | 3,40,000 | ||
| 18.42,000 | 18.42,000 |
Equity Shareholder A/c
| Particulars | Rs. | Particulars | Rs. |
| To Preliminary Expense A/c | 35,000 | By Equity Share Capital | 10,00,000 |
| To Profit and Loss A/c | 55,000 | By Realisation A/c | 3,40,000 |
| To Equity Shares in Madhu Ltd. | 11,00,000 | ||
| To Cash A/c | 1,50,000 | ||
| 13.40,000 | 13.40,000 |
5 % Preferenec Shareholders A/c
| Particulars | Rs. | Particulars | Rs. |
| To 6% Preference Shares in Madhu Ltd. A/c | 4,32,000 | By 5% Preference Share Capital A/c | 4,00,000 |
| By Realisation A/c | 32,000 | ||
| 4.32,000 | 4.32.000 |
Madho Ltd. A/c
| Particulars | Rs. | Particulars | Rs |
| To Realisation A/c | 16,82,000 | By Equity Shares in Madhu Ltd. | 11,00,000 |
| By C.ash A/c | 1,50,000 | ||
| By 6% Preference Shares in Madhu Ltd. | 4,32,000 | ||
| 16,82,000 | 16,82,000 |
Equity Share in Madhu Ltd. A/c
| Particulars | Rs. | Particulars | Rs. |
| To Madhu Ltd. A/c | 11,00,000 | By Equity Shareholders A/c | 11,00,000 |
| 11,00,000 | 11,00,000 |
6% Preference Shares in Madhu Ltd. A/c
| Particulars | Rs. | Particulars | Rs. |
| To Madhu Ltd. A/c | 4,32,000 | By 5% Preference Shareholders A/c | 4,32,000 |
| 4,32,000 | 4,32,000 |
Cash A/c
| Particulars | Rs | Particulars | Rs. |
| To Balance b/d | 80,000 | By Realisation A/c | 66,000 |
| To Madhu Ltd. A/c | 1,50,000 | By Realisation A/c (Expenses) | 14,000 |
| _ | By Equity Shareholders A/c | 1,50,000 | |
| 2,30,000 | 2,30,000 |
