The following are the liabilities and assets of Amrita Ltd

Share With

The following are the liabilities and assets of Amrita Ltd
Liabilities		Assets
Share capital	60000	Goodwill	28000
Debentures	10000	Land & building	16000
Sundry creditors	6000	Plant & Machinery	28000
General reserve	4000	Stock	16000
Profit & Loss A/c	20000	Debtors	8000
		Cash	2000
		Preliminary expenses	2000
Total assets	100000	Totall liabilities and equity	100000

Bangalore Ltd takes over the business of Amrita Ltd. the value agreed for various assets and liabilities are:
Goodwill	36000
Land & Building	39000
Plant and Machinery	38000
Stock	27000
Debtors	8000
Debentures	10000
sundry creditors	6000

Requirement: 1. Calculate the purchase consideration and Regarding in book of Bangalore Ltd

pur-new-sol

Answer

Purchase consideration - Net Asset method

Net Asset = Agreed value of assets taken over by purchaing company - agreed value of liabilities assuemed by purchaing company

Here Purchasing compaany Banglore Ltd

Vendor Company - Amritha Ltd.

Purchaing company take over the business

Business means all assets and outside liabilities

All assets means assets other tham fictitious aassets . Here preliminery expenses is fictitious assets.

Purchase Consideration

Agrred Value of assets	Amount	Amount
Goodwill	36,000
Land aand Building	39,000
Plant and Machinery	38,000
Stock	27,000
Debtors	8,000
Cash	2,000
Total		150,000
Less Agreed Value of Liabilities
Debentures	10,000
Sundry Creditors	6,000
Total		16,000
Prucahse Consideration		134,000

Journal Entries in thee book of Banglore Ltd.

1	Business Purchase Account Dr	134,000
	To Liquidator of Amritha Ltd.		134,000
2	Goodwill Dr.	36,000
	Land aand Building Dr.	39,000
	Plant and Machinery Dr.	38,000
	Stock Dr.	27,000
	Debtors Dr.	8,000
	Cash Dr.	2000
	To Debenture Account		10,000
	To Sundry Creditors		6,000
	To Business Purchase		134,000
3	Liquidation of Amritha Ltd.	134,000
	To Share Capital		134,000

Related Questions