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Madhu Limited Took Over Rakhi Limited on 31st March, 2018, on Which Day, the Summarised Balance Sheet of Rakhi Ltd. Was as Follows : - Financial Accounting(Financial Accounting and Auditing 9)

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Question

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
  Is there an error in this question or solution?
Solution Madhu Limited Took Over Rakhi Limited on 31st March, 2018, on Which Day, the Summarised Balance Sheet of Rakhi Ltd. Was as Follows : Concept: Absorption.
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