Question

The company B takes over the business of company A. The value

agreed for various assets is Goodwill Rs.22,000, Land &

Building Rs.25,000, Plant & Machinery Rs.24,000, Stock

Rs.13,000, Debtors Rs.8,000. B Company does not take over cash

but agree to assume the liability of sundry creditors at Rs.5,000.

Calculate Purchase Consideration.​

Answer 1

Answer:

10000is the correct answer

Answer 2

Given : Value of Assets and liability

To Find : Purchase Consideration

Solution:

Agreed value of assets:

Goodwill                                      22,000

Land and building                       25,000

Plant & Machinery                       24,000

Stock                                             13,000

Debtors                                          8,000  

Total Assets                                  92,000

Less: Sundry creditors                  (5,000)  

Purchase Consideration               87,000  

⇒ It was given that company B took over the business of company A. This is called Absorption. It is when one firm completely takes over the other firm  including its assets and liabilities. One company of bigger size overpowers the company of smaller size in  Absorption.