Advanced AccountingQuestion 5343 of 305
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2. Prepare Balance Sheet of Nice Ltd. after absorption as at 31 March, 2024. (14 Marks) ADVANCED ACCOUNTING Answer Journal Entries in the Books of Nice Ltd. Dr. Cr. ` in ‘000 ` in ‘000 Business Purchase Account Dr. 10,620 To Liquidator of Well Ltd. 10,620 (Consideration payable for the business taken over from Well Ltd.) Property, Plant and Equipment (120% of ` 16,380) Dr. 19,656 Inventory (110% of ` 870) Dr. 957 Trade receivables Dr. 1,950 Goodwill A/c (Balancing figure) Dr. 137 To Trade payables 4,850 To Debenture Holders Account 1,000 To Loan from bank (4,525-270) 4,255 To Short term borrowings 1,975 To Business Purchase Account 10,620 (Incorporation of various assets and liabilities taken over from Well Ltd. at agreed values and difference of net assets and purchase consideration debited to Goodwill A/c)) Liquidator of Well Ltd. Dr. 10,620 To Equity Share Capital (75,000x 100) 7,500 To 9% Preference Share Capital 1,620 To Securities premium (7,5000x 20) 1,500 (Discharge of consideration for Well Ltd.’s business) Debenture holders A/c Dr. 1,000 To 9% Debentures A/c (Being 9% debentures issued to 10% debenture holders) 1,000 Sundry Creditors of Well Ltd. Dr. 215 To Sundry Debtors of Nice Ltd. 215 (Cancellation of mutual owing) Goodwill Dr. 55 To Bank 55 (Being liquidation expenses reimbursed to Well Ltd.) Working Note: The purchase consideration will be: ` Form Preference shareholders: 16,200 × 100 16,20,000 9% Pref. shares Equity shareholders: 1,25,000 × 3/5 × 120 90,00,000 Equity shares 1,06,20,000 10 % Preference shares 18,00,000 Less: 10% discount 1,80,000 16,20,000 Debenture calculation Interest 10% Debenture 9,00,000 90,000 Therefore 9% debentures 90,000/9% = 10,00,000 Balance Sheet of Nice Ltd. (After absorption) as at 31st March 2024 Particulars Notes ` in ‘000 I Equity and Liabilities 1 Shareholders' funds

Options

AInventories 6 1,257
BTrade receivables 7 8,325
CCash and Cash equivalents 8 4,745 Total 1,19,225 Notes to accounts ` in ‘000 1 Share Capital Equity share capital Issued, subscribed and paid up 3,90,000 Equity shares of ` 100 each (out of above 75,000 shares are issued for consideration other than cash) 39,000 Preference Shares Issued, subscribed and paid up 1,11,200 9% Preference Shares of ` 100 each (9,500 + 1,620) (out of above 16,200 shares are issued for consideration other than cash) 11,120 50,120 2 Reserves and Surplus Securities premium 1,500 Reserves and surplus 19,500 21,000 3 Long-term borrowings 9 % Debentures (11,200+1,000) 12,200 Loan from bank (9,300+4255) 13,555 25,755 4 Trade Payable Nice Limited 15,740 Well Limited 4,850 20,590 Less: Inter Company holdings (215) 20,375 5 Property, Plant and Equipment and Intangibles Property, Plant and Equipment 62,550 Acquired during the year 19,656 82,206 Intangibles Goodwill (137+55) 192 6 Inventories 300 Acquired during the year 957 1,257 7 Trade receivables 6,590 Acquired during the year (1,585+150) 1,735 8,325 8 Cash and Cash Equivalents Nice Limited 4,800 Less: Expenses on liquidation (55) 4,745 ADVANCED ACCOUNTING
D
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Correct Answer

✅ Option A — Inventories 6 1,257

All Options:

  • AInventories 6 1,257 ✓
  • BTrade receivables 7 8,325
  • CCash and Cash equivalents 8 4,745 Total 1,19,225 Notes to accounts ` in ‘000 1 Share Capital Equity share capital Issued, subscribed and paid up 3,90,000 Equity shares of ` 100 each (out of above 75,000 shares are issued for consideration other than cash) 39,000 Preference Shares Issued, subscribed and paid up 1,11,200 9% Preference Shares of ` 100 each (9,500 + 1,620) (out of above 16,200 shares are issued for consideration other than cash) 11,120 50,120 2 Reserves and Surplus Securities premium 1,500 Reserves and surplus 19,500 21,000 3 Long-term borrowings 9 % Debentures (11,200+1,000) 12,200 Loan from bank (9,300+4255) 13,555 25,755 4 Trade Payable Nice Limited 15,740 Well Limited 4,850 20,590 Less: Inter Company holdings (215) 20,375 5 Property, Plant and Equipment and Intangibles Property, Plant and Equipment 62,550 Acquired during the year 19,656 82,206 Intangibles Goodwill (137+55) 192 6 Inventories 300 Acquired during the year 957 1,257 7 Trade receivables 6,590 Acquired during the year (1,585+150) 1,735 8,325 8 Cash and Cash Equivalents Nice Limited 4,800 Less: Expenses on liquidation (55) 4,745 ADVANCED ACCOUNTING
  • D

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Detailed Solution & Explanation

This question is a parsed fragment from the Suggested Answer of the examination. It presents the Balance Sheet presentation, Debt-Equity Ratio test under the reconstruction scheme, or absorption entries under AS 14. Based on the parsed data and structural context in the suggested answers, Option A is the correct answer.
Hence, **Option A** is the correct answer.

Key Concepts to Understand

Consideration

Something of value exchanged for a promise. 'Quid Pro Quo' (Something for something).

Balance Sheet

A statement showing the financial position of a business at a particular date, listing all assets on one side and all liabilities and capital on the other side. It is not an account but a statement.

Goodwill

An intangible asset representing the good reputation, brand name, customer loyalty, and earning capacity of a business over and above its net tangible assets. It arises in accounting during partnership changes or business acquisitions.

Debentures

Long-term debt instruments issued by a company to the public for raising loan capital, carrying a fixed rate of interest (coupon rate) payable regardless of profit. Debenture holders are creditors, not owners, of the company.

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