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QI. The balance sheet of the vendor company is as follows; Liabilities Shs. Assets Shs. Share capital: Land and Building 250,000 Equity shares of shs.
QI. The balance sheet of the vendor company is as follows; Liabilities Shs. Assets Shs. Share capital: Land and Building 250,000 Equity shares of shs. 10 each 500,000 General Reserve 200,000 Plant and machines 170,000 Profit and Loss 100,000 Investments 50.000 9% Debentures 100,000 Stock 120,000 Trade payables and 70,000 Trade Debtors 140,000 other current liabilities Cash and bank balance 200,000 Preliminary expenses 40,000 970,000 970,000 The vendor company is taken over by the purchasing company on the agreement that the Land and building to be increased by 20%, Plant and machinery increased by 40%, stock of shs. 40,000 is obsolete and debtors of shs. 20,000 is a bad debt. The market value of the investment is shs.65,000. It was agreed to issue 4 equity share for every 5 held of sh 10 cach, valued at shs.15. It was also agreed to pay shs. 4 per share in cash. Required: Calculate purchase consideration by using a) Net payment Method b) Net assets Method c) Show the ledger accounts in the books of the old company (Vendor) and Journal entries in the books of the new company (Purchasing company)
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