Akul and Bharat, who were partners and Chandar and Dev who were partners, decided to amalgamate as on January 1, 2015 under the name ABCD Trading Company. Their Balance Sheets on December 31, 2014 were as follows:
Akul and Bharat Balance Sheet as on 31 December, 2014
| Liabilities |
Amount |
Assets |
Amount |
| Sundry Creditors |
20,000 |
Stock |
30,000 |
| Reserve |
20,000 |
Sundry Debtors |
12,000 |
|
|
Buildings |
28,000 |
| Capital accounts: |
|
Investments |
20,000 |
| Akul |
30,000 |
|
|
| Bharat |
20,000 |
|
|
|
90,000 |
|
90,000 |
Chandar and Dev Balance Sheet as on 31 December, 2014
| Liabilities |
Amount |
Assets |
Amount |
| Sundry Creditors |
30,000 |
Stock |
58,000 |
| Bank loan |
18,000 |
Sundry Debtors |
30,000 |
| Capital accounts: |
|
|
|
| Cahndar |
30,000 |
|
|
| Dev |
30,000 |
|
|
|
1,08,000 |
|
1,08,000 |
Akul and Bharat shared profits in proportion to their capitals; while Chandar and Dev shared profits equally. The terms of amalgamation are:
(i) Akul, Bharat, Chandar and Dev to be partners in the new firm and to share profits and losses in the same ratio as their capitals in the new firm after all adjustments have been made.
(ii) The buildings owned by Akul and Bharat to be taken over by the new firm at a valuation of Rs. 36,000. However, the new firm does not take over their investments.
(iii) The Goodwill appearing in the Balance Sheet of Chandar and Dev was worthless.
(iv) After the above adjustments have been made,Chandar and Dev each to bring Rs. 7,000 as additional capital.On the assumption that the above adjustments were duly completed on 1st January, 2014, show the necessary journal entries that are required to close the books of old firms and open the books of new firm and prepare its Balance Sheet.
