Page 28 - DCOM205_ACCOUNTING_FOR_COMPANIES_II

Unit 1: Acquisition of Business

(c) Preliminary expenses amounting to ` 4,000 were disbursed by the firm to be notes
recovered from the company.
(d) As per purchase consideration, the partners were to be allotted at par 26,000 equity
shares of ` 10 each. They were also entitled to receive ` 40,000 in cash.

Submit the Balance Sheet as on 1 January, 2012 of the limited company assuming the
st
authorised capital to be ` 4,00,000 made up wholly of equity share of ` 10 each.
14. On 1 January, 2006 Naveen Limited purchased the business of Pankaj taking over his all
st
assets, except debtors of ` 2,80,000, which it undertook to collect on behalf of Mr. Pankaj
and out of this proceeds pay the creditors of Pankaj for ` 1,75,000, and an amount of
` 2,45,000 was realised from the debtors. Out of this amount ` 1,68,000 were paid to the
creditors in full settlement of their account. The company had to pay a contingent liability
of ` 12,250 on account of a claim against Pankaj for damages. The company also collected a
debt of ` 7,000 which was previously treated as bad by Pankaj. The company was to get a
commission of 5% on the amount collected and 2% on the amount paid. Pass the necessary
journal entries in the books of Naveen Limited.
15. On 1 January, 2005, K. Ltd. purchased the business of Puneet, taking over his all assets
st
except debtors of ` 80,000, which it undertook to collect on the behalf of Mr. Puneet and
out of this proceeds pay the creditors of Puneet for ` 50,000. An amount of ` 70,000 was
realised from the debtors. ` 48,000 was paid to creditors in full settlement of their account.
It had to pay a contingent liability of ` 3,500 on account of a claim against Puneet for
damages. The company collected a debt of ` 2,000 which was previously treated as bad by
Puneet. The company was to get a commission of 5% on the amounts collected and 2% on
amount paid. Pass the necessary journal entries in the books of K. Ltd.

answers: self assessment

1. Purchase Consideration 2. Credited
3. Net Assets 4. Net Assets
5. Realisation A/c 6. True
7. False 8. False

9. True 10. True
11. (b) Capital Reserve 12. (d) No. of shares given in Memorandum

13. (d) Mutual Agreement 14. (a) Goodwill
15. (c) ` 15,00,000

1.6 further readings

Books Bruner Robert F. and Perella, Joseph R. Applied Mergers and Acquisitions. Wiley
Finance.
Dr. Verma K. K. First Edition 2008, Corporate Accounting. Excel Books Pvt. Ltd.
New Delhi.
Harvard Business Review on Mergers and Acquisitions Boston: Harvard Business
School Pub. Corp., c2001.

lovely professional university 23