Amalgamation - Principles of Accounting

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Amalgamation

When two traders decide to merge their separate business to form a partnership then it is known as

Amalgamation of two sole traders. The entries and balance sheet are prepared in the books of partnership

concern.

Q 1. Following are the balance sheets of two sole traders who decided to amalgamate their business.

You are required to prepare the amalgamated balance sheet of their business.

Balance Sheet of Mr. Brown.

Balance Sheet of Mr. Owen.

Q 2. T. Terry is a businessman carrying on a small business. His balance sheet as on 01.01.2003 is as

follows:

B. Berry is another sole trader carrying on a similar business and his balance sheet as on 01.01.2003 is

as follows:

On 01.01.2003 they decided to amalgamate their separate business and form a partnership. For the

purpose of which partnership assets and liabilities are revalued as follows:

T. Terry B. Berry

Land Increase by 5000 -

Building 10% depreciation 5% depreciation

Machinery 20% depreciation 15% depreciation

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Assets $ Liabilities $

Premises 20 000Capital 70 000

Fixtures 35 000Creditors 18 000

Stock 14 000

Debtors 16 000

Bank Loan 3 000

88 000 88 000


Land 30 000Capital 68 000

Premises 25 000Creditors 16 000

Fixtures 5 000

Stock 10 000

Debtors 12 000

Cash in hand 2 000

84 000 84 000


Land 75 000Creditors 15 000

Building 40 000Capital 1 72 300

Machinery 25 000

Furniture 5 000

Stock 21 000

Debtors 18 000

Bank 3 300

1 87 300 1 87 300


Building 35 000Creditors 12 600

Furniture 2 000Capital 84 700

Machinery 25 000

Stock 18 000

Debtors 15 300

Cash 2 000

97 300 97 300

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Furniture Book Value Book Value

Stock Less 10% Less 10%

Debtors Book Value 1300 Provision for bad debts

Cash, bank and creditors for both the sole traders are at book value.

You are required to: a. Calculate the Capital for each partner.

b. Prepare the balance sheet of the Partnership.

Q 3. Mr. X and Mr. Y are two sole traders carrying on similar business concerns. Their balance sheet

as on 01.01.2001 was as follows:

Balance Sheet of Mr. X

Balance Sheet of Mr. Y

On 01.01.2001, they decided to amalgamate their sole trading business into a partnership concern. They

revalued assets and liabilities as follows:

Mr. X Mr. Y

Premises Less 10% depreciation -

Land Increased by 20000

Buildings Less 10% depreciation

Machinery Less 12% depreciation Less 10% depreciation

Furniture Book value Book value

Fittings Book value Book value

Stock Decrease by 5% Decrease by 5%

Debtors Book value less 2000 as Book value less 900 as

bad debts. Bad debts.

Creditors Less 1500 from book value. Less 1500 from book value.

The amount of cash in hand and cash at bank for both the sole traders are at book value.

You are required to:

(a) Calculate the capital for each partner.

(b) Prepare the balance sheet of the partnership.

Q 4. The following balance sheet appeared in the books of Neena as at 31.12.2002.


Premises 80 000Creditors 15 500

Buildings 45 000Bank Overdraft 14 000

Machinery 28 000Capital 1 65 000

Fittings 6 000

Stock 8 500

Debtors 22 000

Cash in hand 1 500

Cash at bank 3 500

1 94 500 1 94 500


Land 38 000Creditors 18 000

Furniture 21 000Bank Loan 21 000

Fittings 3 100Capital 1 10 000

Machinery 49 000

Stock 16 000

Debtors 15 900

Cash in hand 2 000

Cash at bank 4 000

1 49 000 1 49 000

Liabilities $ Assets $











Balance sheet of Beena as at 31.12.2002 was as follows:

Both of them decided to amalgamate on the following conditions:

1. The assets and liabilities were revalued as follows-

Neena Beena

Debtors 9 800 11 500

Premises 30 000 -

Machinery 20 000 28 000

Furniture 12 000 17 000

Stock 11 500 15 500

Creditors 26 000 27 000

All the other items are at Balance sheet values.

2. The business purchase price was fixed at Neena $ 68000 and Beena $ 60000.

You are required to show the balance sheet of Neena and Beena.

Q 5. The following balance sheets were available on 31.12.2002.

Balance Sheet of X

Balance Sheet of Y

X and Y decided to amalgamate their business on the following conditions on 01.01.2003.

X Y

Premises 45 000 -

Furniture 12 000 30 000

Stock 10 000 11 500

Debtors 7 000 14 200

Capital 72 000Premises 29 000

Creditors 25 000Machinery 25 000

Furniture 14 000

Stock 12 000

Debtors 10 000

Cash at bank 5 000

Cash in hand 2 000

97 000 97 000


Capital 60 000Machinery 30 000

Creditors 25 000Furniture 20 000

Stock 15 000

Debtors 12 000

Cash in hand 1 000

Cash at bank 7 000

85 000 85 000

1. The Goodwill is recorded in the books.


Capital 52 500Premises 40 000

Creditors 16 000Furniture 15 000

Bank Overdraft 4 000Stock 9 000

Debtors 8 000

Cash in hand 500

72 500 72 500


Capital 35 700Furniture 35 000

Creditors 27 000Stock 12 000

Bank Loan 5 000Debtors 15 000

Cash at bank 5 000

Cash in hand 700

67 700 67 700

1. Assets and Liabilities are revalued as follows:











Creditors 17 000 26 000

The amalgamation procedure was completed on 01.01.2003. You are required to amalgamate the balance

sheet of X and Y as at 01.01.2003.

Incoming search terms:

1. Bank Overdraft for X and Bank loan for Y will be taken at book value.

1. Xs Goodwill was considered value less and Ys Goodwill was valued at $ 400.

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Amalgamation - Principles of Accounting