The financial position of two companies Hari Ltd. and Vayu Ltd. as at 31st March, 2023 was as under: Particulars Notes Hari Ltd. Vayu Ltd. Equity…

In the Books of Hari Ltd. Journal Entries Dr. Particulars ₹ Business Purchase A/c Dr. 5,30,000 To Liquidators of Vayu Ltd. Account 5,30,000 (Being business of Vayu Ltd. taken over) Goodwill Account Dr. 50,000 Building Account Dr. 1,50,000 Machinery Account Dr. 1,60,000 Inventory Account Dr. 1,57,500 Trade receivables Account Dr. 1,00,000 Bank Account Dr. 20,000 To Retirement Gratuity Fund Account 20,000 To Trade payables Account 80,000 To Provision for Doubtful Debts Account 7,500 To Business Purchase A/c 5,30,000 (Being Assets and Liabilities taken over as per agreed valuation). Liquidators of Vayu Ltd. A/c Dr. 5,30,000 To 9% Preference Share Capital A/c 1,10,000 To Equity Share Capital A/c 4,00,000 To Securities Premium A/c 20,000 (Being Purchase Consideration satisfied as above). Balance Sheet of Hari Ltd. (after absorption) as at 31st March, 2023 Particulars Notes ₹ Equity and Liabilities 1 Shareholders' funds A Share capital 1 16,10,000 B Reserves and Surplus 2 90,000 2 Non-current liabilities A Long-term provisions 3 70,000 3 Current liabilities A Trade Payables 2,10,000 Total 19,80,000 Assets 1 Non-current assets A Property, Plant and Equipment 4 11,10,000 B Intangible assets 5 1,00,000 2 Current assets A Inventories 4,07,500 B Trade receivables 6 2,92,500 C Cash and cash equivalents 70,000 Total 19,80,000 Notes to accounts ₹ 1 Share Capital Equity share capital 1,40,000 Equity Shares of 10each fully paid (Out of above 40,000 Equity Shares were issued in consideration other than for cash) 14,00,000 Preference share capital 2,100 9% Preference Shares of 100each (Out of above 1,100 Preference Shares were issued in consideration other than for cash) 2,10,000 Total 16,10,000 2 Reserves and Surplus Securities Premium 20,000 General Reserve 70,000 Total 90,000 3 Long-term provisions Retirement Gratuity fund 70,000 Total 70,000 4 Property, Plant and Equipment Buildings 4,50,000 Machinery 6,60,000 Total 11,10,000 5 Intangible assets Goodwill 1,00,000 6 Trade receivables 3,00,000 Less: Provision for Doubtful Debts 7,500 2,92,500 Working Notes: Purchase Consideration: Particulars ₹ Goodwill 50,000 Building 1,50,000 Machinery 1,60,000 Inventory 1,57,500 Trade receivables 92,500 Cash at Bank 20,000 6,30,000 Less: Liabilities: Retirement Gratuity Fund (20,000) Trade payables (80,000) Net Assets/ Purchase Consideration 5,30,000 To be satisfied as under: 10% Preference Shareholders of Vayu Ltd. 1,00,000 Add: 10% Premium 10,000 1,100 9% Preference Shares of Hari Ltd. 1,10,000 Equity Shareholders of Vayu Ltd. to be satisfied by issue of 40,000 Equity Shares of Hari Ltd. at 5% Premium 4,20,000 Total 5,30,000