Page 82 - DCOM205_ACCOUNTING_FOR_COMPANIES_II

Unit 4: Amalgamation: Accounting Treatment

11. The Balance Sheets of AXE Co. Limited and WYE Co. Limited as on 31 March, 2011 were notes
st
as follows:
Liabilities AXE Ltd. WYE Ltd. Assets AXE Ltd. WHY Ltd.
` ` ` `
Share Capital: Goodwill – 35,000
2,500 Preference Shares of Patents 1,25,000 –
` 100 each fully paid 2,50,000 – Land & Buildings 7,00,000 –
7,500 Equity Shares Plant & Machinery 7,50,000 –
of ` 100 each. 7,50,000 Motor Vehicles 75,000 1,40,000
25,000 Equity shares Furniture 35,000 12,500

of ` 10 each. – 2,50,000 Investments 55,000 –
General Reserve 4,00,000 – Stock 1,00,000 1,35,000
P&L A/c 4,50,000 1,60,000 Debtors 50,000 82,500
Creditors 60,000 25,000 Bank 20,000 30,000
19,10,000 4,35,000 19,10,000 4,35,000
A new company XYZ Limited was formed to acquire the assets and liabilities of AXE
Limited and WYE Limited. The terms of acquisition of business were as under:
(a) XYZ Limited to have an authorised capital of ` 30,00,000 divided into 2,50,000 equity
shares of ` 10 each and 5,000, 11% Preference Shares of ` 100 each.
(b) Business of AXE Limited was valued at ` 20,00,000 and settlement was made by the
issue of equity shares of ` 20 each.
(c) Business of WYE Limited was valued at ` 5,00,000 to be satisfied by issue of 25,000
equity shares of ` 20 each.

(d) XYZ Limited made a public issue of 4,000, 11% Preference Shares of ` 100 each at par
and 50,000 equity shares of ` 20 each.
(e) Cost of formation of XYZ Limited amounted to ` 36,000.

(f) Cost of liquidation of AXE Limited amounted to ` 8,200 and WYE Limited ` 3,550
and the same was paid by XYZ Limited.
Give journal entries to close the books of AXE Limited and WYE Limited and show the
opening Balance Sheet of XYZ Limited.
12. The following is the balance sheet of Alpha Limited on 31 March, 2011:
st
Liabilities ` Assets `
Capital: Buildings 3,00,000
60,000 Equity shares Machinery 4,50,000
of ` 10 each 6,00,000 Work-in-Progress 90,000
Debentures 3,00,000 Stock 1,80,000
Creditors 90,000 Furniture 7,500
Reserve Fund 75,000 Debtors 75,000
Dividend Equalisation Fund 60,000 Cash 37,800
P&L A/c 15,300
11,40,300 11,40,300

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