Adam Company Limited was incorporated on 1st April to take over as from 1st January in the same year the existing business of Bijoy Brothers. Under the take over agreement all profits made from 1st January are to belong to the Company. The purchase consideration was $ 7,00,000. The vendors received half of it in cash on 1st July in the same year together with interest at 10 per cent per annum. For other half of the purchase consideration, they were allotted 3,500 fully paid up shares of 100 each in the Company. Following balances appeared in the Company's Ledger as at 31st December : Share Capital : 4,500 shares of $ 100 each fully paid (including vendors' shares) Bank Overdraft Sundry Creditors Fixed Deposits Received Freehold Land at Cost Building at Cost Furniture and Fixtures at Cost Transport Vehicles at Cost Stock-in-trade on 1st January Book Debts $ 12,000 48,000 13,000 7,000 3,000 22,000 10,400 17,500 7,70,000 9,10,000 3,100 Cash on Hand Salaries and Wages 4,50,000 Rent Received 1,65,000 Rates and Taxes 65,000 Repairs to Building 35,000 Miscellaneous Expenses 50,000 1,30,000 Interest to Vendors 15,000 Purchases 35,000 4,20,000 Goodwill 95,000 Directors' Fees Sales The stock-in-trade as at 3lst December amounted to $4,80,000. Bad debts amounting to $ 1,000 out of which $500 related to book debts taken over by the Company, have to be written off and a provision of $ 5,000 to be made for doubtful debtors as at 31st December. Depreciation has to be written off : Building at 5%. Furniture and Fixtures at 10 per cent and Transport Vehicles at 20 per cent. You are required to prepare (a) a Statement of Profit and Loss for the period from 1st January to 31st December and to compute the profit prior to incorporation. For the purpose of determining the profit prior to incorporation you should assume the turnover to be spread evenly over the year and (b) Balance Sheet as on 31st December.
Adam Company Limited was incorporated on 1st April to take over as from 1st January in the same year the existing business of Bijoy Brothers. Under the take over agreement all profits made from 1st January are to belong to the Company. The purchase consideration was $ 7,00,000. The vendors received half of it in cash on 1st July in the same year together with interest at 10 per cent per annum. For other half of the purchase consideration, they were allotted 3,500 fully paid up shares of 100 each in the Company. Following balances appeared in the Company's Ledger as at 31st December : Share Capital : 4,500 shares of $ 100 each fully paid (including vendors' shares) Bank Overdraft Sundry Creditors Fixed Deposits Received Freehold Land at Cost Building at Cost Furniture and Fixtures at Cost Transport Vehicles at Cost Stock-in-trade on 1st January Book Debts $ 12,000 48,000 13,000 7,000 3,000 22,000 10,400 17,500 7,70,000 9,10,000 3,100 Cash on Hand Salaries and Wages 4,50,000 Rent Received 1,65,000 Rates and Taxes 65,000 Repairs to Building 35,000 Miscellaneous Expenses 50,000 1,30,000 Interest to Vendors 15,000 Purchases 35,000 4,20,000 Goodwill 95,000 Directors' Fees Sales The stock-in-trade as at 3lst December amounted to $4,80,000. Bad debts amounting to $ 1,000 out of which $500 related to book debts taken over by the Company, have to be written off and a provision of $ 5,000 to be made for doubtful debtors as at 31st December. Depreciation has to be written off : Building at 5%. Furniture and Fixtures at 10 per cent and Transport Vehicles at 20 per cent. You are required to prepare (a) a Statement of Profit and Loss for the period from 1st January to 31st December and to compute the profit prior to incorporation. For the purpose of determining the profit prior to incorporation you should assume the turnover to be spread evenly over the year and (b) Balance Sheet as on 31st December.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Adam Company Limited was incorporated on 1st April to take over as from 1st
January in the same year the existing business of Bijoy Brothers. Under the take over agreement all profits
made from 1st January are to belong to the Company. The purchase consideration was $ 7,00,000. The
vendors received half of it in cash on 1st July in the same year together with interest at 10 per cent per
annum. For other half of the purchase consideration, they were allotted 3,500 fully paid up shares of 100
each in the Company. Following balances appeared in the Company's Ledger as at 31st December :
2$
12,000
48,000
13,000
7,000
3,000
22,000
10,400
17,500
7,70,000
9,10,000
3,100
Share Capital:4,500 shares of
$ 100 each fully paid
(including vendors' shares)
Bank Overdraft
Cash on Hand
Salaries and Wages
Rent Received
4,50,000
1,65,000 Rates and Taxes
65,000 Repairs to Building
35,000
50,000
1,30,000
15,000
35,000
4,20,00
95,000
Sundry Creditors
Fixed Deposits Received
Freehold Land at Cost
Miscellaneous Expenses
Directors' Fees
Interest to Vendors
Purchases
Sales
Goodwill
Building at Cost
Furniture and Fixtures at Cost
Transport Vehicles at Cost
Stock-in-trade on 1st January
Book Debts
The stock-in-trade as at 31st December amounted to $4,80,000.
Bad debts amounting to $ 1,000 out of which $ 500 related to book debts taken over by the Company,
have to be written off and a provision of $ 5,000 to be made for doubtful debtors as at 31st December.
Depreciation has to be written off : Building at 5%. Furniture and Fixtures at 10 per cent and
Transport Vehicles at 20 per cent.
You are required to prepare (a) a Statement of Profit and Loss for the period from 1st January to 31st
December and to compute the profit prior to incorporation. For the purpose of determining the profit prior
to incorporation you should assume the turnover to be spread evenly over the year and (b) Balance Sheet as
on 31st December.
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