Financial Reporting and Ethics - The Institute of Chartered ...

AMALGAMATION, ABSORPTION AND RECONSTRUCTIONDr - Bank/Cash accountCr - Ordinary share capital account with the nominal valueCr - Share premium account with the premium.After this, the balance sheet of the new company can be prepared.3.7.3 Balance Sheet of the New CompanyThe balance sheet of the new company, after amalgamation is preparedusing the figures from the opening journal subject to adjustments fortransactions after amalgamation as enumerated above.ILLUSTRAUSTRATION TION 3.3The Moon Company Limited and the Rising Star Company Limited haveagreed to amalgamate. A new company Sunshine Company Limitedhas been formed to take over the combined concerns on 31 st January,2009. The Balance sheet of the two companies as at 31 st December,2008 were as follows:The Moon Company LimitedLiabilitiesAssets:Issued and paid up capital: Buildings 50,000N100,000 ordinary shares Machinery 20,000of 1 each 100,000 Stock 26,00015% Debentures 2,000 Debtors 12,000Creditors 6,000 Cash 5,000Unappropriated profit 5,000 _______113,000 113,000The Rising Star Company LimitedLiabilities:Assets:Issued and paid up capital: Buildings 30,0005,000 ordinary shares Machinery 25,000of 10 each 50,000 Goodwill 5,000Creditors 3,000 Stock 3,000Bill payable 2,000 Debtors 2,000General reserves 5,000Retained Earning 5,000 ______65,000 65,000The new company (Sunshine) will take over the assets and liabilities as follows:29