Amalgamation - Principles Of Accounting
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http://principlesofaccounting2.com/ http://principlesofaccounting2.com/ Amalgamation When two traders decide to merge their separate business to form a partnership then it is known as Amalgamation of two sole traders. The entries and balance sheet are prepared in the books of partnership concern. Q 1. Following are the balance sheets of two sole traders who decided to amalgamate their business. You are required to prepare the amalgamated balance sheet of their business. Balance Sheet of Mr. Brown. Assets Premises Fixtures Stock Debtors Bank Loan
$ Liabilities 20 000Capital 35 000Creditors 14 000
$ 70 000 18 000
16 000 3 000 88 000
88 000 Balance Sheet of Mr. Owen. Assets
$
Premises Fixtures
Liabilities 30 000Capital 25 000Creditors 5 000
Stock Debtors
10 000 12 000
Land
$ 68 000 16 000
/ http://www.principlesofaccounting2.com/ 2 000 84 000
Cash in hand
84 000
Q 2. T. Terry is a businessman carrying on a small business. His balance sheet as on 01.01.2003 is as follows:
Assets
$
Machinery Furniture
Liabilities 75 000Creditors 40 000Capital 25 000 5 000
Stock Debtors
21 000 18 000
Land Building
$ 15 000 1 72 300
3 300 1 87 300
Bank
1 87 300
B. Berry is another sole trader carrying on a similar business and his balance sheet as on 01.01.2003 is as follows: Assets
$
Building Furniture Machinery Stock Debtors
Liabilities 35 000Creditors 2 000Capital 25 000 18 000
$ 12 600 84 700
15 300 2 000
Cash
97 300
97 300
On 01.01.2003 they decided to amalgamate their separate business and form a partnership. For the purpose of which partnership assets and liabilities are revalued as follows: T. Terry
B. Berry
http://principlesofaccounting2.com/ http://principlesofaccounting2.com/ Land
Building
Machinery
Increase by 5000
10% depreciation
20% depreciation
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—-
5% depreciation
15% depreciation
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Furniture
Book Value
Stock
Less 10%
Debtors
Book Value
Book Value Less 10% 1300 Provision for bad debts
Cash, bank and creditors for both the sole traders are at book value. You are required to: a. Calculate the Capital for each partner. b. Prepare the balance sheet of the Partnership.
Q 3. Mr. X and Mr. Y are two sole traders carrying on similar business concerns. Their balance sheet as on 01.01.2001 was as follows:
http://principlesofaccounting2.com/ http://principlesofaccounting2.com/ Balance Sheet of Mr. X Assets
$ Liabilities 80 000Creditors 45 000Bank Overdraft 28 000Capital 6 000
Premises Buildings Machinery Fittings
$ 15 500 14 000 1 65 000
8 500 22 000
Stock Debtors
1 500 3 500
Cash in hand Cash at bank
1 94 500
1 94 500
Balance Sheet of Mr. Y Assets
$ Liabilities 38 000Creditors 21 000Bank Loan 3 100Capital 49 000
Land Furniture Fittings
$ 18 000 21 000 1 10 000
/ http://www.principlesofaccounting2.com/ Machinery Stock
16 000 15 900
Debtors Cash in hand
2 000 4 000
Cash at bank
1 49 000
1 49 000
On 01.01.2001, they decided to amalgamate their sole trading business into a partnership concern. They revalued assets and liabilities as follows:
Mr. X
Mr. Y
Premises
Less 10% depreciation
Land
————————–
Buildings
Less 10% depreciation
Machinery
Less 12% depreciation
———————Increased by 20000 ——————– Less 10% depreciation
Furniture
Book value
Book value
Fittings
Book value
Book value
Stock
Decrease by 5%
Decrease by 5%
Debtors
Book value less 2000 as
bad debts. Creditors
Book value less 900 as
Bad debts. Less 1500 from book value.
Less 1500 from book value.
The amount of cash in hand and cash at bank for both the sole traders are at book value. You are required to: (a)
Calculate the capital for each partner.
(b)
Prepare the balance sheet of the partnership.
http://principlesofaccounting2.com/ http://principlesofaccounting2.com/ Q 4.
The following balance sheet appeared in the books of Neena as at 31.12.2002. Liabilities
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$
Assets
$
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Amalgamation - Principles Of Accounting
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72 000Premises 25 000Machinery
Capital Creditors
29 000 25 000
Furniture Stock
14 000 12 000
Debtors Cash at bank
10 000 5 000
Cash in hand 97 000
2 000 97 000
Balance sheet of Beena as at 31.12.2002 was as follows:
http://principlesofaccounting2.com/ http://principlesofaccounting2.com/ Liabilities
$ Assets 60 000Machinery 25 000Furniture
Capital
Creditors
$ 30 000
Stock
20 000 15 000
Debtors Cash in hand
12 000 1 000
Cash at bank 85 000
7 000 85 000
Both of them decided to amalgamate on the following conditions: 1. The assets and liabilities were revalued as followsNeena
Debtors
Beena
9 800
Premises
30 000
Machinery
20 000
Furniture
12 000
Stock
11 500
11 500 —28 000 17 000 15 500
/ http://www.principlesofaccounting2.com/ Creditors
26 000
27 000
All the other items are at Balance sheet values.
2.
The business purchase price was fixed at Neena $ 68000 and Beena
$ 60000.
1. The Goodwill is recorded in the books. You are required to show the balance sheet of Neena and Beena.
Q 5.
The following balance sheets were available on 31.12.2002.
Balance Sheet of X $
Liabilities
Assets
$ 40 000 15 000
52 500Premises 16 000Furniture 4 000Stock
Capital Creditors Bank Overdraft
9 000 8 000
Debtors Cash in hand 72 500
500 72 500
Balance Sheet of Y Liabilities
$ Assets 35 700Furniture 27 000Stock 5 000Debtors
Capital Creditors Bank Loan
$ 35 000 12 000
Cash at bank
15 000 5 000
Cash in hand 67 700
700 67 700
X and Y decided to amalgamate their business on the following conditions on 01.01.2003. 1. Assets and Liabilities are revalued as follows: X Premises
45 000
Y —-
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12 000
Stock
10 000
11 500
Debtors
7 000
14 200
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30 000
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Creditors
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17 000
26 000
1. Bank Overdraft for X and Bank loan for Y will be taken at book value.
1. X’s Goodwill was considered value less and Y’s Goodwill was valued at $ 400.
The amalgamation procedure was completed on 01.01.2003. You are required to amalgamate the balance sheet of X and Y as at 01.01.2003. Incoming search terms:
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