Absorption of Kokila Ltd. by Gana Ltd.

Vocabulary and key financial details regarding the absorption of Kokila Ltd. by Gana Ltd. based on the provided balance sheet and statutory terms.

Gana Ltd.

The transferee/purchasing company that absorbs Kokila Ltd. as of $31.03.2018$.

Kokila Ltd.

The transferor/vendor company being absorbed by Gana Ltd. under the Net Asset Method of absorption.

Absorption Date

The date on which the financial positions of Gana Ltd. and Kokila Ltd. are recorded for the absorption process, specifically $31.03.2018$.

Equity share capital (10)

The capital structure where shares have a nominal value of $10$, totaling $10,00,000$ for Gana Ltd. and $3,00,000$ for Kokila Ltd.

10% Preference share capital

The class of shares in Kokila Ltd. totaling $1,00,000$, to be paid at a $10\%$ premium by the issue of $9\%$ preference shares of Gana Ltd.

Retirement Gratuity Fund

A liability listed on the balance sheet for both companies, valued at $50,000$ for Gana Ltd. and $1,30,000$ for Kokila Ltd.

Preliminary expenses

A fictitious asset appearing in the balance sheet, valued at $30,000$ for Gana Ltd. and $10,000$ for Kokila Ltd.

Goodwill (Kokila Ltd.)

An asset of the transferor company valued at $50,000$ for the purpose of the absorption, compared to its book value of $25,000$.

Building Valuation (Kokila Ltd.)

The value assigned to Kokila Ltd.'s buildings during absorption, which is $1,50,000$.

Machinery Valuation (Kokila Ltd.)

The value assigned to Kokila Ltd.'s machinery during absorption, which is $1,60,000$.

Stock Revaluation

The terms of absorption specify that stock is to be taken over at $10\%$ less than its book value.

Reserve for bad and doubtful debts

A provision to be created at a rate of $7.5\%$ on Debtors as part of the absorption terms.

Equity Settlement (Kokila Ltd.)

The provision that equity shares of Kokila Ltd. will be issued equity shares of Gana Ltd. at a $5\%$ premium.

Absorption Method

Specifically identified as the [Net Asset Method-Absorption- Purchase Method] used for preparing journal entries and ledger accounts in the books of the transferor company.