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Absorption

Problem 1: Navbharat Company Ltd. acquired assets of continental Co.Ltd. on following conditions. 1. To pay s. 1!! in cash for each share in continental Co. ". To pay s. #!! in cash for each debenture of the continental company which the debenture holders will accept in full settlements of their debts $. $ shares of s. 1!! each at the mar%et price of s. 1#! per share in e&change of 1 share in continental company. Balance sheet of Continental Company Liabilities 'hare Capital #!!! shares os s. (!! each 1$!! debentures of s. (!! each 'undry creditors )mployees saving account *nsureance +und P,L -.c Rs. $!!!!!! #(!!!! "(!!!! "!!!!! "/(!!! 1"(!!! 4(!!!!! Assets Land and 0uildings furniture Plant 1or%2in2progress 'toc% 'undry debtors 0an% Rs. 11!!!!!! "(!!!! 13!!!!! 31(!!! 13(!!! "/!!!! 3!!!! 4(!!!!!

5endor Company discharge its Liabilities Pass necessary 6ournal entries in the boo%s of the continental company

Problem ": +ollowing are the balance sheets of ahul Co. Ltd. and 7ogesh Co. Ltd. as on $1 st 8arch "!!/ Liabilities )quity sharr capital of s. 1! each 39 preference share capital at s. 1! each :9 debentures of s. 1!! each ;eneral eserve ahul Co. Ltd. (!!!!! 1!!!!! 1!!!!! "!!!! 7ogesh Co.Ltd. -ssets ahul Co. 7ogesh Co. Ltd. Ltd. $!!!! 1!!!! "!!!!! 1!!!!! (1!!!! $1(!!! $!!!! 1!!!! 1!!!! (!!!

;oodwill "!!!!! 0uildings <ther -ssets 1!!!!! Cash at 0an% Preliminary e&penses 1!!!!! 1!!!!

'undry Creditors

#!!!! $!!!! /3!!!!! 44!!!! ahul Co. Ltd. absorbs 7ogesh Ltd. under following terms:

/3!!!!

44!!!!

1. )quity share holders are to be given # equity shares of s. 1! each of ahul Ltd. issued at s. 1( each against each four shares surrendered. ". 3 9 preference share holders are to be paid at (9 premium by 39 preference shares of s. 1! each of ahul Ltd. issued at par. $. : 9 debenture holders are to be paid at 39 premium by :9 debentures of ahul Ltd. issued at 1!9 discount. 4. s. (!!! Cash is retained by yogesh Ltd. for liquidation e&penses

(. 0uilding of yogesh Ltd. are ta%en over for s. 1(!!!! 'how reali=ation -.c> equity shareholders -.c> preference shareholders -.c> and debentures holders -.cin the boo%s of 7ogesh Ltd. and pass the ?ournal entries regarding business purchase in the boo%s of ahu Ltd.

Problem $: The following is the balance sheet of the Nagpur Company Ltd. as on $1 st 8arch "!!/ which is absorbed by the 8umbai Company Ltd. on the under noted terms. 1. @ebentures to be distributed at a premium of (9 by the issue of (9 debentures in the 8umbai company ltd. ". -ll assets and liabilities of the Nagpur company should be accepted on the boo% value $. Liquidation charges s. (!!! will be borne by the 8umbai Co. 4. The shareholders are to be paid two fully paid shares of s. 1! each valued at a mar%et price of s. 11 per share in e&change of every three of Nagpur Company Ltd. Balance sheet of the Nagpur Company Ltd. Liabilities Share capital 4(!!!! shares of s. 1! each 1!!! @ebentures of s. 1!!! each ;eneral eserve +und 'undry Creditors )mployees saving ban% Loan on mortgage P , L -.c Rs. 4(!!!!! 1!!!!!! 1(!!!! 1(!!!! $!!!!! "(!!!! "!!!!! Assets Land and 0uildings Plant and machinery 'hares of subsidiary company *nvestments 'toc% 'undry @ebtors Cash at 0an% Cash2in2hand Rs. "/!!!!! "!!!!!! 3!!!!! "(!!!! 1(!!!! 4!!!!! "4(!!! (!!!

#((!!!! ;ive ?ournal entries in the boo%s of Nagpur Company and 8umbai Company

#((!!!!

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