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

AMALGAMATION, ABSORPTION AND RECONSTRUCTIONfunds and rationalization, it was agreed that Oyeyipo & Sons Limited shouldabsorb the business of Chukwu & Sons Limited.The balance sheets of the two companies prior to absorption on 30 April 2008were as follows:Oyeyipo & Chukwu & Oyeyipo& Chukwu&Sons Ltd Sons Ltd Sons Ltd Sons LtdShare capitalAuthorized of 50keach 1,200,000 200,000 Goodwill 60,000Issues: Fixed Asset 980,000 150,000Redeemable pref.Shares 40,000__Ordinary shares 800,000 100,000 Current Asset 310,000 240,000Share premium 100,000RevenueReserve 180,000 300,000Current Liabilities 170,000 50,000_ _____________________1,290,000 450,000 1,290,000 450,000NThe redemption, at 5% premium, of redeemable preference shares took placeon 1 May 2008. In order to partially finance the redemption, 80,000 ordinaryshares at a premium of 5 kobo were issued to existing shareholders and paidin full on that date.Chukwu & Sons Limited was liquidated on 1 May, 2008 when all its assets,except certain items of stocks valued at 40,000, were purchased from theliquidator by Oyeyipo and Sons Limited. The company was also to assume allthe liabilities of Chukwu & Sons Limited, and(i) issue 260,000 of its ordinary shares of 50k each at a premium of 8 koboper share and;(ii)pay300,000 in cash.The purchase consideration was effected on 2 May 2008 and share issueexpenses amounted to 60,800.You are requirequired ed to:(a) Prepare the balance Sheet of Oyeyipo & Sons Limited after the absorptionhad been effected.(b) Show your workings for calculations of:(i) Current Assets;(ii) Share premium; and(iii) Revenue Reserve.45