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SOLUTION
SOLUTION
For the above question, we will first prepare necessary ledger accounts namely Realisation A/c (to transfer the book value of assets and liabilities along with purchase consideration and charge expenses on realisation, if any). This account will help us figure out the right amount of profit or loss to be transferred to Partner's Capital A/c. This transfer will either increase (profits) or decrease (loss) the net worth of the partners.
The total of the credit side of Partner's Capital A/c show us the current net worth (ownership) of the partners which has to be settled by way of certain discharge (consideration). This discharge can be in the form of equity shares, preference shares or even cash.
In this case, we are dividing equity shares and preference shares among Lad and Wad in their adjusted capital ratio. The net balance of credit minus debit of partner's capital account gives us adjusted capital (current net worth). This has to be calculated for all the partners. Also, this is the ratio in which we are supposed to divide equity shares and preference shares among the partners. Please refer the exact calculation in the end of this sum.
SOLUTION
SOLUTION
When we are are asked to ascertain purchase consideration, we have to calculate purchase consideration applying the most appropriate method.
In this case, we have been given agreed take over values of assets and liabilities and that makes it possible to ascertain the amount of Purchase Consideration by applying Net Asset Method.
Here, we have prepared our necessary ledgers to close the books of the firm. Realisation A/c has been prepared first to ascertain profit or loss so as to transfer it to Partner's Capital A/c.
We also need to prepare new company's account as the Purchase Consideration is receivable from them. So, the new company will always have a debit balance in the books of the firm until purchase consideration is fully received. One receiving the Purchase Consideration, the new company's A/c get automatically closed.
Cash A/c is also to be prepared in case there are cash adjustments. The firm in this case is receiving a part of it's Purchase Consideration by way of cash, hence it becomes necessary to prepare Cash A/c to figure out the final balance of Cash A/c, which can be handed over to the partners as a part of conversion.
SOLUTION
SOLUTION
SOLUTION
SOLUTION
Note: All assets and liabilities are being taken over at book value except equipment, which is agreed for Rs. 1,60,000/-.
SOLUTION
SOLUTION
SOLUTION
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