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

FINANCIAL REPORTING AND ETHICSMiddle Belt Company Shareholders AccountRealisation A/C (Loss) 8,000 Share Capital 200,000Shares( of N.C.C) 165,000 Reserve Fund 50,000Cash (balance transferred) 97,000 P & L Account 20,000270,000 270,000B. Journal Entries in the books of Northern Chemical Company LimitedDRCRPurchase Consideration 245,000Middle Belt Chemical 245,000To record the agreed purchaseconsiderationGoodwill 75,000Buildings 209,700Stock 31,500Bill Receivable 4,050Debtors 24,750Debentures 100,000Purchase consideration 245,000To record the take over of assetsand liabilitiesMiddle belt Company 245,000Share Capital 150,000Share Premium 15,000Cash 80,000To record the settlement of purchase consideration.Notes:It should be noted that all undistributed profits and reserve fund should bedistributed amongst the shareholders of the selling company and should notbe brought into the new company’s book. However, employees fund likeprovident fund, Superannuation fund, Gratuities, etc. are to be brought to thenew company’s books as it is expected that the new company will absorb theemployees of the selling company.ILLUSTRAUSTRATION TION 3.6Messrs. Oyeyipo & Chukwu, who are friends, are also majority shareholdersand managing directors of their respective electrical businesses of Oyeyipo &Sons Limited, and Chukwu & Sons Limited. For the purposes of access to more44