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Suggested answers May 2019 - Advance accounting Old Course IPCC



Computation of Purchase consideration

The Purchase consideration was discharged in the form of three euqity shares of  Namo Ltd. For every two equity shares held in Raga Ltd.

Purchase consideration = 9000 X 3/2 = 13,500

(i) In the books of Namo Ltd. Journal Entries
Business Purchase A/C         13,500.00
To Liquidator     13,500.00
Plant and machinery           7,500.00
Furnitures           2,550.00
Inventory           6,061.50
Trade receivables           1,530.00
Cash at Bank               913.50
Receivables               120.00
Foreign project reserve           465.00
General Reserve           300.00
Profit and loss account        1,162.50
(Cost of isssue of debenture adjusted against PL)
12% Debentures        1,500.00
Trade Payables           694.50
Provisions        1,053.00
Business puchase     13,500.00
        18,675.00     18,675.00
Liquidator         13,500.00
Equity share caiptial     13,500.00
Profit and Loss                    1.50
Bank                1.50
(Liquidation expenses paid)
12% Debentures           1,500.00
13% Debtentures        1,500.00
(Discharge of debentures by issuing new)
Bills payable               120.00
Receivables           120.00
(Cancellation of mutual owning on account of bills)
(ii) Balance sheet after Merger
Equity and Liability
Shareholder's Funds
A.  Share Capital         36,000.00     36,000.00
(Of the above shares, new shares have been issued for consideration other than cash)
B. Reserves and Surplus
General Reserve         14,550.00
Security Premieum           4,500.00
Foreign project reserve               465.00
Profit and loss account           5,466.00     24,981.00
Non Current Liability
Long term Borrowings
Debtentures           1,500.00        1,500.00
Current Liability
Trade Payables           2,374.50
Short term provisions           3,798.00        6,172.50
    68,653.50
Non Current Assets
Property Plant and Equipment
Land and buildings           9,000.00
Plant and machinery         28,500.00
Furnitures           6,006.00     43,506.00
Current Assets
Inventory         17,854.50
Trade receivables           4,710.00
Cash at Bank           2,583.00     25,147.50
    68,653.50
                    -  

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