The new company will record all the assets and liabilities at the values it has decided to take over. If the purchase consideration payable is more than the net assets acquired, it represents goodwill. Conversely, if the purchase consideration payable is less than the net assets acquired, it represents capital reserve. For assets and liabilities taken over Assets Account Dr. (Acquired Value) Goodwill Account Dr. (Balancing figure) To Liabilities Account (Assumed Value) To Share Capital Account (Face value of shares issued) To Securities Premium Account (if any) x28 33.4 Conversion of Partnership into a Limited Company 7,20,000 Illustration 1 Ranjit, Manjit and Paramjit are equal partners of M/s. Hindal & Co. The Balance Sheet of the firm as on 31.12.2017 was as follows: Liabilities Assets Capital Account: Fixed Assets : Ranjit 50,000 Land 50,000 Manjit 1,00,000 Building 70,000 Paramjit (Debit Balance) (30,000) 1,20,000 plant and Machinery 2,00,000 3,20,000 Loan from Bank 5,00,000 Current Assets : Creditors 1,00,000 Stock 3,00.000 Debtors 1,00,000 4,00,000 7,20,000 On that date, it is decided to convert the partnership into Limited Company called Hindal Limited on the following (1) Land to be revalued at 1,50,000. (2) Plant and Machinery to be revalued at $2,50,000. (3) Depreciation amounting to 20,000 to be written off on building. (4) A provision of 10% of book value to be made for obsolete stocks. (5) A provision for doubtful debts to be made at 10% of the debtors. (6) A discount of 6% would be earned on creditors when paid out. The new company will issue 12,000 equity shares of 10 each credited as fully paid up, such share capital being valued at 1,50,000 and the balance payable is to be discharged by issue of 10% debentures of 100 each. Show the necessary Ledger Accounts to close the books of Hindal & Co and show the opening Balance Sheet of the new Company. All partners are solvent and have sufficient cash resources as may be necessary to settle the respective accounts, shares and debentures are divided equaly among the partners. terms