When a company acquire the business of other co., how to treat the cost of liquidation of selling company?

Question

example:

in a problem, it reads "the cost of liquidation of selling co., ultimately was Rs.5000".

the mode of payment of purchase consideration is clearly stated. But it is silent about which company to bear such liquidation expense. Because in the answer of that problem itself reads " It is clear that the costs of liquidation will payable by purchasing co, since the amount payable to the shareholders has been specified".

But i could not understand what it say. Please clarify me.....

Answer 1

The company purchasing the entity would pay the liquidation expenses.  This amount would be in addition to the cash promised to the shareholders, so the Rs 5000 would be expensed by the acquiring company as liquidation costs.  Good luck!