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Problem 1 - (Calculation of Purchase Consideration and Business Purchase

Karan & Company acquired the business of M/s. Raheza Brothers. Karan valued the assets taken over at Rs. 275,000, excluding the bank balance. In payment, Karan issued 10,000 equity shares of Rs. 10 each and 250 debentures of Rs. 100 each, totaling Rs. 275,000. Karan agreed to pay the creditors and bills payable of Rs. 50,000 as part of the acquisition.

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Problem 1 - (Calculation of Purchase Consideration and Business Purchase

Karan & Company acquired the business of M/s. Raheza Brothers. Karan valued the assets taken over at Rs. 275,000, excluding the bank balance. In payment, Karan issued 10,000 equity shares of Rs. 10 each and 250 debentures of Rs. 100 each, totaling Rs. 275,000. Karan agreed to pay the creditors and bills payable of Rs. 50,000 as part of the acquisition.

Uploaded by

RAHUL GHOSALE
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Problem 1- (Calculation of Purchase Consideration and Business Purchase

Account)

Karan & Company Limited acquired the business of M/s. Raheza Brothers. The
balance sheet of M/s. Raheza Brothers as on 31st December 2011 was as below:

The values put on the assets taken over excluding bank were:

Goodwill-25,000

Machinery- 80,000

Patents- 60,000

Debtors- 40,000

Stock- 60,000

The company did not agree to take loans but agreed to pay the creditors and
bills payable. In payment of consideration the company issued 10,000 equity shares
of Rs.10 each and 250 debentures of Rs.100 each. Pass journal entries of
acquisition of business in the books of the company and its balance sheet.

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