Alpha Ltd. decided to wind-up with effect from 31st March, 2015 and was to be taken over by Gama Ltd. on the basis of following balance sheet of Alpha Ltd. as on that date: Balance Sheet of Alpha Ltd. as on 31st March, 2

CS Executive · Company Accounts & Auditing Practices · PYQS · June 2016
Alpha Ltd. decided to wind-up with effect from 31st March, 2015 and was to be taken over by Gama Ltd. on the basis of following balance sheet of Alpha Ltd. as on that date: Balance Sheet of Alpha Ltd. as on 31st March, 2015 Particulars ₹ I. EQUITY AND LIABILITIES (1) Shareholders' funds (a) Share capital (1,20,000 shares of ₹10 each fully paid) 12,00,000 (b) Reserves and surplus Profit prior to incorporation 42,000 Surplus 5,22,000 (2) Current liabilities (a) Trade payables 2,26,000 (b) Bills payable 40,000 (c) Provision for income-tax 2,20,000 TOTAL 22,50,000 II. ASSETS (1) Non-current assets Fixed assets 9,64,000 (2) Current assets (a) Inventories 7,75,000 (b) Trade receivables 1,52,000 (c) Bills receivables 30,000 (d) Cash and bank 3,29,000 TOTAL 22,50,000 Gama Ltd. took over the assets at following values: Fixed assets: ₹12,80,000 Inventories: ₹7,70,000 Bills receivable: ₹30,000 Trade receivables realised: ₹1,40,000 Bills payables and income-tax liabilities were settled at ₹30,000 and ₹2,22,000 respectively. Trade payables were finally settled with the cash remaining after meeting liquidation expenses of ₹20,000. Purchase consideration was satisfied by Gama Ltd. as: ₹5,10,000 by allotment of fully paid 10% preference shares of ₹100 each and the balance in equity shares of ₹10 each at ₹8 per share paid-up. You are required to prepare necessary accounts in the books of Alpha Ltd.

Answer & Explanation:

Working Notes: 1. Purchase Consideration: Assets taken over by Gama Ltd.: Fixed assets: ₹12,80,000 Inventories: ₹7,70,000 Bills receivable: ₹30,000 Total Purchase Consideration = ₹12,80,000 + ₹7,70,000 + ₹30,000 = ₹20,80,000 2. Discharge of Purchase Consideration: (i) 10% preference shares = ₹5,10,000 (by issue of 5,100 shares of ₹100 each) (ii) Equity shares = ₹20,80,000 - ₹5,10,000 = ₹15,70,000 (by issue of 1,96,250 shares of ₹10 each: ₹8 paid up) 3. Cash available for Trade Payables: Opening Cash and Bank balance = ₹3,29,000 Add: Trade Receivables realised = ₹1,40,000 Total Cash available = ₹4,69,000 Less: Payments: Bills Payable settled = ₹30,000 Income Tax settled = ₹2,22,000 Liquidation Expenses = ₹20,000 Total Payments = ₹2,72,000 Cash remaining for Trade Payables = ₹4,69,000 - ₹2,72,000 = ₹1,97,000 In the Books of Alpha Ltd. Realisation A/c Dr. Particulars Amount (₹) Cr. Particulars Amount (₹) To fixed assets 9,64,000 By Bills Payable 40,000 To Inventories 7,75,000 By Sundry Creditors 2,26,000 To Sundry Debtors 1,52,000 By Provision for Income Tax 2,20,000 To Bills Receivable 30,000 By Gama Ltd. 20,80,000 To Bank: Bills Payable 30,000 Income Tax 2,22,000 Liquidation Expenses 20,000 Trade Payable 1,97,000 To Equity Shareholder (Loss on Realisation) 3,16,000 Total 27,06,000 Total 27,06,000 Cash & Bank A/c Dr. Particulars Amount (₹) Cr. Particulars Amount (₹) To Balance b/d 3,29,000 By Liquidation Exp. 20,000 To Sundry Debtors (realised) 1,40,000 By Bills Payable 30,000 By Income Tax 2,22,000 By Sundry Creditors (Balancing fig) 1,97,000 Total 4,69,000 Total 4,69,000 Equity Shareholders A/c Dr. Particulars Amount (₹) Cr. Particulars Amount (₹) To 10% preference shares (allotted by Gama) 5,10,000 By Equity Share Capital A/c 12,00,000 To Equity shares in Gama Ltd. (allotted) 15,70,000 By Profit prior to Incorporation 42,000 By profit and loss (Surplus) 5,22,000 By Realisation A/c (Profit) 3,16,000 Total 20,80,000 Total 20,80,000

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