Question 4 The Albatross Trading Co. Ltd. was formed with a capital of R500 000 to take over the business of Seagull Ltd. for R250 000 payable in ordinary shares and Gannet Ltd. for R95 000 payable in ordinary shares plus R10 000 in cash. The summarised balance sheet of the two companies is as follows: Liabilities Assets Share capital Distributable reserves Income statement Creditors R 200 000 Goodwill 50 000 Land & buildings 7 500 Plant & machinery 10 200 Stock Debtors Cash R267 700 R 25 000 120 000 51 000 29 500 18 000 24 200 R287 700 GANNET LTD. Liabilities Assets Share capital Distributable reserves Income statement Mortgage on property Creditors R 100 000 5 000 2 500 10 000 9 500 Goodwill Land & buildings Plant & machinery Stock Debtors Cash R 10 000 50 000 32 500 18 000 12 000 4 500 R127 000 R127 000 . . The liquidation expenses, payable by Albatross Ltd., amounted to R1 000 in the case of Seagull Limited, and R750 for Gannet Ltd., while the formation expenses were R2 500. The assets of Seagull Ltd. and Gannet Ltd. were revalued and the mortgage of Gannet Ltd. paid off. The new total asset values brought into the books of the new company were: land and buildings - R168 000; plant and machinery - R82 500; stock - R47 000; and debtors - R29 500. Draw up: the closing entries in old companies; and the opening entries and a balance sheet for the new company. (20)