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

AMALGAMATION, ABSORPTION AND RECONSTRUCTION(b)Cash500(c)5% DebenturePresent Interest = 5/100 x 7,000 = 3503 ½ % Debenture to be issued that will generate the same interest of350 will be:3½ X = 3501003 ½ X = N35,000X = N35,0003 ½= N35,0007/ 2N(d)= N35000 x 2 / 7= N5000 x 2= N10,000Creditors taken overSundry creditors - 25,700Bank overdraft - 600Creditors for dissolution expenses 1,000SUMMARY OF PURCHASE CONSIDERATIONRose Ltd.Blacky Ltd.Ordinary share capital 125,000 13,0003 ½ % Debenture 50,000 10,000Cash 1,000 500Creditors taken over 5,785 25,700Creditors for Dissolution expenses - 1,000Bank overdraft _______ 600181,785 50,800Note(a)(b)(c)The purchase consideration, as calculated above, is debited to the newcompany account (Yellow Ltd) and credited to the realisation account.The components of the purchase consideration are then credited to newcompany account and debited to each component of purchaseconsideration account when settlement is effected.The bank amount of N31,174in the realisation account represents thecash taken over by Yellow Ltd after all adjustments have been made onthe accounts.37