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

AMALGAMATION, ABSORPTION AND RECONSTRUCTIONILLUSTRAUSTRATION TION 3.4The following are the summarized balance sheets of two companies, Rose Ltdand Blacky Ltd as at 31 October 2008.Rose LtdSHARE CAPITAL:AL:ASSETSOrdinary shares of N1 each 150,000 Freehold property (at cost) 45,000Forfeited share capital 150 Plant & Machinery (at cost) 35,000Reserve account 10,000 Goodwill 10,000Profit & loss account 16,865 Stock 68,2765% Debenture 35,000 Sundry Debtors 25,850Sundry creditors 5,785 Balance at bank 33,674217,800 217,800NBlacky LtdORDINARY SHARESASSETSof 1 each fully paid 39,000 Freehold property (at cost) 13,0005% Debentures 7,000 Plant & machinery (at cost) 11,000Sundry creditors 25,700 Goodwill 10,000Bank overdraft 600 Stock 15,200Sundry debtors 9,500______ Profit & loss account 13,60072,300 72,300The two companies decided to amalgamate as on 31 st December, 2008 and anew company called Yellow Ltd was formed with an authorized capital of250,000 in ordinary shares of N1each. The following terms were agreed on:Rose Ltd(i)(ii)(iii)(iv)The consideration was 6 shares of 1 each fully paid to Rose Ltd inexchange for every 5 shares in Yellow Ltd and 1,000 cash.The debenture holders were to be allotted such debentures in YellowLtd bearing interest at 3½ % per annum as would bring them in thesame amount of interest.Yellow Ltd is to take over all assets and liabilities at their book values.The2,500 expenses of dissolution is to be paid by Rose Ltd.Blacky Ltd(i) The consideration was 1 share of 1 each, fully paid in Yellow Ltd inexchange for every 3 shares in Blacky Ltd and 500 in cash.(ii) The debenture holders were to be allotted such debentures in YellowLtd bearing interest at 3½% per annum as would bring them in thesame amount of interest.33