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absorbtion.doc | Equity (Finance) | Financial Accounting

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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 #!!! sha
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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 CompanyLiabilitiesRs.AssetsRs. 'hare Capital #!!! shares os s. (!! each1$!! debentures of s. (!! each'undry creditors)mployees saving account*nsureance +undP,L -c$!!!!!!#(!!!! (!!!! !!!!! /(!!!1 (!!!Land and 0uildings furniturePlantor%2in2progress'toc% 'undry debtors0an% 11!!!!!! (!!!!13!!!!!31(!!!13(!!! /!!!!3!!!!4(!!!!!4(!!!!!5endor Company discharge its LiabilitiesPass necessary 6ournal entries in the boo%s of the continental companyProblem :+ollowing are the balance sheets of ahul Co. Ltd. and 7ogesh Co. Ltd. as on $1 st  8arch !!/Liabilitiesahul Co. Ltd.7ogesh Co.Ltd.-ssetsahul Co. Ltd.7ogesh Co. Ltd.)quity sharr capital of s. 1! each39 preference share capital at s. 1! each9 debentures of s. 1!! each;eneral eserve(!!!!!1!!!!!1!!!!! !!!! !!!!!1!!!!!1!!!!!1!!!!;oodwill0uildings<ther -ssetsCash at 0an% Preliminary e&penses$!!!! !!!!!(1!!!!$!!!!1!!!!1!!!!1!!!!!$1(!!!1!!!!(!!!  'undry Creditors#!!!!$!!!!/3!!!!!44!!!!/3!!!!44!!!!ahul Co. Ltd. absorbs 7ogesh Ltd. under following terms: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.LiabilitiesRs.AssetsRs.Share capital 4(!!!! shares of s. 1! each 1!!! @ebentures of s. 1!!! each;eneral eserve +und'undry Creditors)mployees saving ban% Loan on mortgageP , L -c4(!!!!!1!!!!!!1(!!!!1(!!!!$!!!!! (!!!! !!!!!Land and 0uildingsPlant and machinery'hares of subsidiary company*nvestments'toc% 'undry @ebtorsCash at 0an% Cash2in2hand /!!!!! !!!!!!3!!!!! (!!!!1(!!!!4!!!!! 4(!!!(!!!  #((!!!!#((!!!!;ive ?ournal entries in the boo%s of Nagpur Company and 8umbai Company
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