21. AB & Co. and CD & Co. amalgamated with eftect from 1-4-2013.
AB & Co. had the following account balances on that date
Land & Building
2.80,000
Stock
3,00,000
Debtors
2,00,000
Cash & Bank
1,20,000
Investments
3,00,000
Creditors
7150.000
(1) All the assets and all the liabilities shall be taken over by the new firm.
(2) Land and Building shall be appreciated by 20%.
(3) Stock shall be increased by 3 50,000.
(4) Debtors shal be decreased by 310.000
(5) Goodwisha be valued at 300,000.
(6) Investment shall be taken over at 5 2.80 000.
The Purchase Consideration is
(a) 4,00,000
(b) 6,26,000
(c) 5.70.000
(d) 5,26,000
Answers
Answer:
Journal entries
Date
Particulars
Amt.(Dr.)
Amt.(Cr.)
1.
Revaluation A/c
Dr.
29500
To Land and Building A/c
17500
To Machinery A/c
12000
(being decrease in assets)
2.
Motor cycle A/c
Dr.
20000
To Revaluation A/c
20000
(being motor cycle now recorded in books
3.
Sundry creditors A/c
Dr.
10000
To Revaluation A/c
10000
(being decrease in value of creditors)
4.
Revaluation A/c
Dr.
5000
To Cash A/c (expenses)
3000
To C’s Capital A/c
2000
(being revaluation expenses and C’s remuneration recorded)
5.
Revaluation A/c
Dr.
2500
To Provision for debtors A/c
2500
(being provision on debtors created)
6.
A’s Capital A/c
Dr.
B’s Capital A/c
Dr.
C’s Capital A/c
Dr.
To Revaluation A/c
(being transfer of loss on revaluation in old ratio)
7.
A’s Capital A/c
Dr.
2500
B’s Capital A/c
Dr.
1500
C’s Capital A/c
Dr.
1000
To Advertisement Suspense A/c
5000
(being advertisement suspense written off)
8.
B’s Capital A/c
Dr.
13000
C’s Capital A/c
Dr.
52000
To A’s Capital A/c
65,000
(being adjustment for goodwill, general reserve and investment fluctuation reserve)
Revaluation A/c
Particulars
Amount
Particulars
Amount
To Land and Buildings A/c
17500
By Motor cycle A/c
20000
To Machinery A/c
12000
By Sundry creditors A/c
10000
To Cash A/c
3000
By Partner’s Capital A/c:
7000
To C’s Capital A/c
2000
A (5/10) : 3500
To Provision for debtors A/c
2500
B (3/10) : 2100
C (2/10) : 1400
37000
37000
Workings:
1. Calculation of gain and sacrifice:
A: 1/3 -5/10 = (5/30)
B: 1/3 – 3/10 = 1/30
C: 1/3 – 2/10 = 4/30
2. Goodwill = [(50000) + 250000+ 250000] / 3
= 150000 x 2 = 300000