Question

The B.alance Sheet of D Ltd is as follows :

Balance Sheet as·on 31-12-2017

Liabilities	Rs.	Assets	Rs.
2,500, 6 `1/2%` Pref. Shares of Rs.20 each fully paid	50,000	Patents	24,500
3,000 Equity Shares of Rs.20 each fully paid	60,000	Buildings	60,000
5% Debentures 10,000		Cash	500
(+)Interest        2,000	12,000	Debtors	12,000
Creditors	8,000	Stock	18,000
		Profit and Loss A/C	15,000
	1,30,000		1,30,000

 Terms of Reconstruction :
(1) 1 share of Rs. 10 fully paid in the New Company to be. issued for every three equity shares in old company.

(2) 3 shares of Rs.10 fully paid 'in the New ·company to be issued for every five preference shares in the old company.

(3) Debentureholders to be paid by new Co. called X Ltd. in full.
(4) The creditors to receive 80 %  of the sums due to them in fully paid shares of 10 each in full settlement in new company.

(5) Patents and Profit and Loss Ne to be written-off.

(6) Arrears of preference dividend to be cleared  by issuing one Rs.10 fully paid equity share in 'X Ltd.' for every twenty shares held.

(7) Any balance available is used for writing down the building.
Pass Journal Entries ofD Ltd. and Balance Sheet or X Ltd. as on 31-12-2017.

Answer 1

Solution: Working Notes:

(1) Calculation of Purchase Consideration :

Equity Shares of D Ltd. `(3,000xx1/3)(1,000 \text{at Rs} 10 )` = 10,000

(+) Preference Shares of D Ltd`(2,500xx3/5)` =  15,000
(1,5000 at Rs. 10)   = 15000

(+) Arrears of preference Dividend `(2,5000xx1/20)` (125 at Rs 10)=  1,250

(+) Creditors `(80/100xxRs 8,000)` = 6,400

Rs=32,650

Journal of D Limited

Date	Particulars	l.f	Debit Rs	Credit RS
31-12-2017	Business Purchase A/c  Dr		32,650
	To Liquidators ofD Ltd			32,650
	(Being the purchase consideration for the business of D Ltd. as per the agreement)
31-12-2017	Building A/c              Dr.		14,150
	Sundry Debtors A/c    Dr.		12,000
	Stock A/c                  Dr.		18,000
	Cash A/c                    Dr.		500
	To 5% Debentures A/c			10,000
	To Interest Payable A/c			2,000
	To Business Purchase A/c			32,650
	(Being various assets and liabilities taken over from D.Ltd. as per the agreement)
31-12-2017	Liquidators of D Ltd. A/c Dr.		32,650
	To Share Capital A/c			32,650
	(Being the runount. of shares issued in  satisfaction of purchase consideration)

Balance Sheet of 'X' limited as on 31 -12- 2017

Liabilities	Rs	Assets	Rs
Share Capital :		Fixed Assets  :
Authorised, Issued & Subscribed :		Buildings (At cost)	14,150
3,265 shares at Rs. 10 each fully paid	32,650	Current Assets :
5% Debentures·	10,000
Sundry Debentureholders for Interest	.2,000	Stock (At cost)	18,000
		Debtors	12,000
		Cash	500
			44,650