The following is summarized Balance Sheet of Pickles Ltd. as on 31/03/2025. Particulars Notes ₹ Equity and Liabilities 1 Shareholders' Funds A Share…

CA Intermediate · Advanced Accounting · PYQS · May 2025
The following is summarized Balance Sheet of Pickles Ltd. as on 31/03/2025. Particulars Notes ₹ Equity and Liabilities 1 Shareholders' Funds A Share Capital 1 11,00,000 B Reserves and Surplus 2 2,10,000 2 Non-Current liabilities A Long term borrowings 3 1,00,000 B Long term Provisions 4 60,000 3 Current liabilities A Trade Payables 1,75,000 B Other Current Liabilities 65,000 Total 17,10,000 Assets 1 Non-current Assets A Property, Plant and Equipment 5 7,50,000 B Intangible assets 6 75,000 2 Current Assets A Inventories 5,25,000 B Trade receivables 3,00,000 C Cash and Cash equivalents 60,000 Total 17,10,000 Notes to Accounts ₹ 1 Share Capital 6,000 Equity Shares of 100 each 6,00,000 5,000 6% Preference Shares of 100 each 5,00,000 11,00,000 2 Reserves and Surplus General reserve 1,00,000 Profit and Loss account 1,10,000 2,10,000 3 Long term borrowings 8% Debentures 1,00,000 4 Long term Provisions Retirement Gratuity Fund 60,000 5 Property, Plant and Equipment Land and Building 3,50,000 Plant and Machinery 3,00,000 Furniture and Fittings 1,00,000 7,50,000 6 Intangible Assets Patents 75,000 On 31/03/2025, Foods Ltd. acquires the business of Pickles Ltd. on the following terms: Foods Ltd. to take over all assets (except cash) and liabilities at their book values.Part of the Furniture and Fixtures is disposed off by Pickles Ltd. for 55,000 at cost.The retirement of employees was due on 31/03/2025. A portion of 35,000 from Retirement Gratuity Fund was earmarked towards the payment due to them.Foods Ltd. decided to pay for each Preference share in Pickles Ltd.,27 in cash and one 8% Preference share of 100in Foods Ltd.For each Equity share in Pickles Ltd., it was decided to pay 30in cash and one Equity share of Foods Ltd. for 145. (Face value of each share of Foods Ltd. is 100)Liquidation expenses of 22,500 paid by Pickles Ltd. were subsequently reimbursed by Foods Ltd.The fixed assets of Pickles Ltd were not revalued for the purpose of amalgamation. You are required to pass the necessary Journal entries and also prepare Realisation Account and cash account in the books of Pickles Ltd.

Suggested Answer and Working Notes:

Journal Entries in the Books of Pickles Ltd. Debit (₹) Credit (₹) Realisation A/c Dr. 16,50,000 To Land & Building A/c 3,50,000 To Plant & Machinery A/c 3,00,000 To Furniture & Fixtures A/c 1,00,000 To Patent A/c 75,000 To Inventories A/c 5,25,000 To Trade Receivables A/c 3,00,000 (Being assets transferred to Realisation A/c) 8% Debentures A/c Dr. 1,00,000 Trade Payables A/c Dr. 1,75,000 Other Current Liabilities A/c Dr. 65,000 Retirement Gratuity Fund A/c Dr. 35,000 To Realisation A/c 3,75,000 (Being liabilities transferred to Realisation A/c) Cash A/c Dr. 55,000 To Realisation A/c 55,000 (Being part of furniture sold) Foods Ltd. A/c Dr. 16,85,000 To Realisation A/c 16,85,000 (Being purchase consideration receivable) Cash A/c Dr. 3,15,000 Equity Shares in Foods Ltd A/c Dr. 8,70,000 Preference Shares in Foods Ltd A/c Dr. 5,00,000 To Foods Ltd. A/c 16,85,000 (Being consideration received) 6% Preference Share Capital A/c Dr. 5,00,000 Realization A/c Dr. 1,35,000 To Preference Shareholders A/c 6,35,000 (Being amount due to preference shareholders for capital and extra amount payable under the scheme of acquisition) Preference Shareholders A/c Dr. 6,35,000 To Cash A/c 1,35,000 To Pref. Shares in Foods Ltd A/c 5,00,000 (Being payment made to preference shareholders) Equity Share Capital A/c Dr. 6,00,000 General Reserve A/c Dr. 1,00,000 Profit & Loss A/c Dr. 1,10,000 Retirement Gratuity fund Dr. 25,000 To Equity Shareholders A/c 8,35,000 (Being various accounts representing capital, reserve, profit and loss account and others transferred to equity shareholder account) Equity Shareholders A/c 11,65,000 To Cash A/c 2,95,000 To Equity Shares in Foods Ltd A/c 8,70,000 (Being payment made to equity shareholders) Foods Ltd A/c Dr. 22,500 To Cash A/c 22,500 (Being liquidation expenses paid) Cash A/c Dr. 22,500 To Foods Ltd A/c 22,500 (Being reimbursement by Foods Ltd.) Realisation A/c Dr. 3,30,000 To Equity Shareholders A/c 3,30,000 (Being Profit on realization is transferred to equity shareholders) Realisation Account (Journal Entries Particulars Amount (₹) Particulars Amount (₹) To Land & Building 3,50,000 By Debentures 1,00,000 To Plant & Machinery 3,00,000 By Trade Payables 1,75,000 To Furniture & Fixtures 1,00,000 By Other Current Liabilities 65,000 To Patent 75,000 By Ret. Gratuity Fund 35,000 To Inventories 5,25,000 By Cash (Sale of Furniture) 55,000 To Trade Receivables 3,00,000 By Foods Ltd (PC) 16,85,000 To Preference shareholder 1,35,000 To Equity Shareholder A/c (Profit on realization) 3, 30,000 21,15,000 21,15, 000 Cash Account Particulars Amount (₹) Particulars Amount (₹) To Balance b/d 60,000 By Foods Ltd. A/c (Expenses) 22,500 To Realisation A/c (Furniture Sale) 55,000 By Pref. Shareholders A/c 1,35,000 To Foods Ltd. A/c (Reimbursement) 22,500 By Equity Shareholders A/c 2,95,000 To Foods Ltd (Cash Part of PC) (1,35,000 + 1,80,000) 3,15,000 4,52,500 4,52,500 Working Notes: 1. Purchase Consideration ₹ Form (i) Preference Shares:27 per share 1,35,000 Cash Preference shares 5,00,000 6,35,000 Preference shares (ii) Equity shares:30 per share 1,80,000 Cash 6,000 equity shares in Food Ltd. @145 8,70,000 10,50,000 Equity shares 16,85,000

Topics: Amalgamation of Companies

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