Objectives for Amalgamation

Objectives for Amalgamation

Objectives Q.1) Fill in the Blanks: i. On amalgamation, assets and liabilities of vendor firm are transferred to A/c. Ans: Realization ii. On amalgamation, fictitious assets of vendor firm are transferred to A/c A s: Part er s Capital

iii. On amalgamation, expenses on dissolution of vendor firm paid by purchasing firm are debited to a/c in the books of purchasing firm. Ans: Goodwill iv. At the time of amalgamation any profit or loss on Realization is transferred to a/c in the Ratio. A s: Part er s Capital ; Profit shari g

2 1 4 3 5 7 6 8

Across: 4. The liabilities taken over by the new firm are to the new fir s a ou t i the ooks of the old fir, o a alga atio. 5. Ve dor fir ope s Fir s a/ i its ooks o amalgamation. 8. Expenses for dissolution of vendor firm paid and borne by the purchasing firm are debited by the purchasing firm to a/c.

Down: 1. If any unrecorded asset of vendor firm is taken by its partner, his capital a/c is. 2. Purchase is the amount payable by the purchasing firm to the vendor firm for taking over its business. 3. method involves dissolution of vendor firms. 6. Assets are transferred to Partners Capital A/c. 7. The firm is dissolved on amalgamation.

Answers for Cross Word: Across: 4) Credited 5) Purchasing 8) Goodwill Down: 1) Debited 2) Consideration 3) Realization 6) Fictitious 7) Vendor

Problems for Assignment

Problems for Assignment Q.1) G Traders and H Traders were partnership firms and they decided to amalgamate. Their Balance Sheets were as under as on 31-12-2013. Liabilities G traders (Rs.) H traders (Rs.) Assets G traders (Rs.) H traders (Rs.) Creditors 12,000 18,000 Cash 16,000 17,000 Bills Payable 5,000 - Furniture 5,700 6,000 Loans: Investments 10,000 8,400 - F 10,000 - Debtors 9,000 4,600 - I - 8,000 Premises 30,000 - Reserves 10,000 4,000 Land & Building - 50,000 Capitals Machinery 15,000 - -F 35,000 - Goodwill 8,300 - -G 22,000 - -H - 36,000 -I - 20,000 94,000 86,000 94,000 86,000

The amalgamation was made on the following terms: 1) The new firm called GH Traders decided to value Goodwill of both firms at Rs. 12,000 each. 2) For G traders, the new firm took Investments and Debtors at book values, Premises at Rs. 53,000 and Machinery at Rs. 9,300. Furniture was not taken over by the new firm. 3) For H Traders, the new firm took furniture and Debtors at book values, Land & Building at Rs. 67,000. Investments were not taken over by the new firm.

4) The new firm agreed to take such cash after payments of loans made by each firm. 5) Trade creditors of each firm were taken over by the new firm. P epa e ealizatio a/ a d Pa t e s Capital a/ i the ooks of each firm and Valance Sheet in the books of the new firm.

Liabilities Q.2) The following were the Balance Sheets of M/s Amar & Co. and M/s Charan & Co. having Amar and Bandhu and Charan and Das as equal partners respectively. Amar & Co. (Rs.) Charan & Co.(Rs.) Assets Amar & Co. (Rs.) Charan & Co.(Rs.) Creditors 20,000 10,000 Cash at Bank 15,000 12,000 Bills Payable 5,000 - Investment 10,000 8,000 Bank O/D 2,000 10,000 Debtors 10,000 A s Loa 6,000 - Less: Provision 1,000 9,000 4,000 Capitals: Premises 30,000 - -Amar 35,000 - Land - 50,000 -Bandhu 22,000 - Furniture 12,000 6,000 -Das - 36,000 Machinery 15,000 - -Charan - 20,000 Goodwill 9,000 - General Reserve 8,000 3,000 Investment Fluctuation Fund 2,000 1,000 1,00,000 80,000 1,00,000 80,000

The firm decided to amalgamate and form a new firm M/s Amar das & Co. on the following terms & Conditions: The new firm to take over Investments at 10% depreciation, Land at Rs. 66,800 : Premises at Rs. 53,000 : machinery at Rs. 9,000 and to take over only the Trade Liabilities of both the firms, the Debtors being taken over at a book value subject to the existing provision. The new firm to Pay Rs. 12,000 to each firm for goodwill. Typewriter valued of Rs. 800 belonging to Charan & Co. and not appearing in the Balance Sheet was not taken over by the new firm.

All the four partners in the new firm to have Rs. 1,60,000 as Capital in equal shares. Assume immediate discharge of the bank overdraft of Charan & Co. Close the boooks of the firms and prepare the balance sheet of the new firm.

Q.3) The following are the Balance Sheet of Two Firms, namely M/s B a d C a d M/s P a d V as o 0-6-2013. Balance Sheet (As on 30-6-2013) (B & C) Liabilities Rs. Assets Rs. Creditors 30,000 Cash at Bank 22,500 Bills Payable 7,500 Investment 15,000 Bank O/D 3,000 Goodwill 13,500 B s Loa 9,000 Debtors 15,000 General Reserve 12,000 Less: R.D.D 1,500 13,500 Investment Fluctuation Fund 3,000 Furniture 18,000 Capital Accounts: Machinery 22,500 B 52,500 Premises 45,000 C 33,000 Land 45,000 1,50,000 1,50,000

Balance Sheet (As on 30-6-2013) (P & V) Liabilities Rs. Assets Rs. Creditors 15,000 Cash at Bank 12,000 Bank O/D 15,000 Investments 12,000 General Reserve 4,500 Debtors 12,000 Investment Fluctuation Fund 1,500 Furniture 9,000 Capital Accounts: Land 75,000 P 54,000 V 30,000 1,20,000 1,20,000

On 1-7-2013, the two firms decided to amalgamate on the following terms: 1) The new firm shall take over the investments after reducing their values by 10%. 2) Furniture of both the firms shall not be taken over by the new firm and were taken over by the partners in Profit sharing ratio. 3) The new firm shall take over the following assets: Land at Rs. 1,20,000 ; Premises at Rs. 67,500 ; Machinery at Rs. 13,500. ) The e fi to take o e o ly t ade lia ilities. B a d C paid the lia ilities ot take o e y the e fi hile P a d V

took over them in profit sharing ratio. 5) Each firm is paid Rs. 67,500 for Goodwill. 6) The e as u e o ded offi e e uip e t of P a d V alued at Rs. 1,200 which was not taken over. 7) The capital of the new firm was fixed at Rs. 2,40,000 to be divided equally among the partners. Pass e essa y Jou al E t ies i the ooks of B a d C i the ooks of P a d V i the ooks of e fi a d p epa e a new balance sheet after amalgamation.

Q.4) Following are the Balance Sheet of the two firms of M/S Drugs Traders and Medicine Merchants as on 31 st March 2013. Liabilities Drugs traders (Rs.) Balance Sheet Medicine traders (Rs.) Assets Drug traders (Rs.) Medicine traders (Rs.) Creditors 30,000 40,000 Cash in hand 12,200 5,700 Bank Overdraft 10,000 - Stock 30,800 40,300 Bills Payable - 20,000 Debtors 42,000 35,000 Outstanding Salaries - 2,000 Furniture 12,000 26,000 Continue.

Liabilities Capital a/c: Drugs traders (Rs.) Medicine traders (Rs.) Assets Bills Receivables C 80,000-3% National Saving Certificates Drug traders (Rs.) Medicine traders (Rs.) - 11,000-24,000 D 40,000 - Premises 63,000 - E - 45,000 F - 35,000 1,60,000 1,42,000 1,60,000 1,42,000 C & D share Profit & Loss in the ratio of 2:1 and E and F share profits and losses in the ratio of 3:1. They decided to amalgamate their business on the following terms: i. Bank overdraft & Outstanding Salaries should be paid by the respective firms.

ii. 3% National saving Certificate are not to be taken over by the new firm. iii. iv. The Goodwill of Drugs Traders is fixed at Rs.12,000 and the Goodwill of Medicine Merchants is fixed at Rs.24,000. The Stock of Drug traders is valued at 29,900 and Medicine Merchants at Rs.38,050. v. Reserve of 5% is to be made for doubtful Debts of both firms. vi. The Total capital of the new firm is Rs.2,40,000 divided between C,D,E and F in the ratio of 4:3:3:2. vii. The Goodwill a/c is to be written off in the books of the new firm. Pass the necessary Journal Entries in the books of Drug Traders, Medicine Merchants and the new firm.

Q.5) M/s A and B and M/s C and D are two partnership firms carrying on similar type of business, sharing A and B 8:7 and C and D 3:2 respectively. They agree to amalgamate their business as on 1-1-2013. Balance Sheet as on 31-12-2012 M/s A and B Liabilities Rs. Assets Rs. Creditors 25,600 Freehold Land 30,000 O/S expenses 2,800 Furniture 7,200 Current A/c: Machinery 10,000 A 4,000 Cash 19,600 B 2,400 Stock 23,600 Capital A/c: Debtors 28,400 A 48,000 Investments 6,000 B 42,000 1,24,800 1,24,800

Balance Sheet as on 31-12-2012 M/s C and D Liabilities Rs. Assets Rs. Creditors 22,400 Freehold Land 20,000 Bills payable 2,000 Furniture 5,600 Capital a/c: Machinery 6,800 C 44,000 Stock 26,800 D 31,200 Debtors 26,000 Cash 14,400 99,600 99,600 i. The terms of amalgamation are : M/s A M/s B Stock 22,800 24,800 Machinery 9,200 6,000 Furniture 8,000 10,000 Freehold land 38,000 30,000

ii. Provision to be made for doubtful Debts of M/s A and B for Rs. 1,600 and M/s C and D Rs.2,000. iii. iv. The Creditors of both the firms were taken by the new firm at discount of 2.5% and other liabilities are paid in full by the respective firm. A, to take o e the i est e ts at s.,800 v. The Goodwill of M/s A and B is to be taken at Rs.30,000 and that of M/s C and D Rs.20,000 vi. The capital of New firm is to be Rs. 2,00,000 and the capitals of A,B, C and D were to be in their profit sharing ratio which was to be 6:5:5:4 respectively. You are required to prepare Realisation a/c and Partner's Capital a/c in the books of both the firms and Balance Sheet of the New firm.