Sai Deep Industries Private Ltd. was incorporated on 1st February, 2019. It took over the proprietary business of Sai Deep, with effect from 1st January, 2019. The Balance Sheet of Sai Deep as at 31st December 2018 is as

CS Executive · Company Accounts & Auditing Practices · PYQS · June 2021
Sai Deep Industries Private Ltd. was incorporated on 1st February, 2019. It took over the proprietary business of Sai Deep, with effect from 1st January, 2019. The Balance Sheet of Sai Deep as at 31st December 2018 is as follows: Liabilities (₹) Assets (₹) Capital 8,63,000 Sundry debtors 51,400 Trade Creditors 34,000 Building 2,20,000 Loans 17,000 Machinery 6,00,000 Creditors for Expenses 5,000 Loss 47,600 9,19,000 9,19,000 It was agreed to pay ₹9,00,000 in equity shares to Sai Deep. The company decided to close its first year's accounts as at 31st December, 2019. The following are the further details furnished to you: Sales ₹6,00,000; Purchase ₹2,80,000; Salaries and Wages ₹80,000; General expenses ₹64,000; Freight ₹9,400; Interest paid ₹16,000; Inventories ₹44,000; Additions to building ₹76,000; Depreciation may be provided at 10% on assets including additions. The Gross Profit and all expenses are apportioned on the basis of Time Ratio. The Company has requested you to prepare: The Journal Entries for the take-over.

Answer & Explanation:

Journal Entries in the Books of Sai Deep Industries (Pvt) Ltd. Particulars Amount (₹) Amount (₹) Goodwill A/c (Balancing Figure) 84,600 Building A/c 2,20,000 Machinery A/c 6,00,000 Sundry Debtors A/c 51,400 To Loan A/c 17,000 To Trade Creditors A/c 34,000 To Creditor for Expenses A/c 5,000 To Sai Deep (Vendor) A/c 9,00,000 (Being Sundry assets and liabilities of Sai deep taken over) Sai Deep (Vendor) A/c 9,00,000 To Equity Share Capital A/c 9,00,000 (Being the issue of shares for satisfying purchase Consideration)

Topics: Company Accounts

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