1. Amalgamation & Absorption Workbook Teachers

(1)

1. Transfer Co. – Beena Ltd Transferee Co. – Heena Ltd

Method of PC – Net Asset Method Nature of Amalgamation – Purchase

Step 1: Calculation of Goodwill (Super profit method)

No. Particulars Rs.

A Average Profits of past 5 years 30,100

B Share capital + Reserves (2,00,000 + 20,000) 220,000

C 8% of share Capital & Reserves (B x 8%) 17,600

D Super profit (A-C) 12,500

E Goodwill – Super Profit x 4 years of purchase 50,000

Step 2: Calculation of purchase Consideration (Net Assets Method)

Sr. No Particulars Rs Rs

A Assets

Goodwill (Step - 1) 50,000

Land & Building (1,00,000-10%) 90,000

Plant & Machinery (1,45,000-10%) 130,500

Stock (55,000- 10%) 49,500

Debtors 65,000

(-)Provision for bad debts @ 10% 6,500 58,500

(2)

B Liabilities

Creditors (80,000-5%) 76,000

Total (B) 76,000

C Net Assets Taken over i.e Purchase consideration 302,500

Step 3: Discharge of purchase consideration

Sr.No. Particulars Amount Mode of Discharge

A Cash 150,000 Cash

B Equity shares in Heena Ltd. 12,200 Equity Shares of Rs 10 (302,000-150,000) 152,500 each, Issued at Rs12.50 each

Total 302,500

Step 4:

Realisation A/c

Dr. Cr. Particulars Rs Rs Particulars Rs To Goodwill 25,000 By 5% Debentures 100,000

To Land & Building 100,000 By Loan From A 40,000

To Plant & Machinery 145,000 By Sundry Creditors 80,000

To Stock 55,000 By Heena Ltd A/c (PC) 302,500

To Debtors 65,000 By Equity Shareholders

To Bank A/c (Loss) 11,500

(3)

Loan from A 40000 Liquidation Expenses 4000 144,000 Total 534,000 Total 534,000

Heena Ltd A/c

Dr. Cr. Particulars Rs Particulars Rs

To Realisation A/C 302,500 By Cash A/C 150,000

By Equity Shares in Heena Ltd. 152,500

Total 302,500 Total 302,500

Equity Shareholders A/c

Dr. Cr.

Particulars Rs Particulars Rs

To Realisation A/C 11,500 By share Capital 200,000

To Cash & Bank A/C 56,000 By Reserve fund 20,000

To Equity Shares in Heena Ltd 152,500

Total 220,000 Total 220,000

Cash & Bank A/c

Dr. Cr.

(4)

To Balance b/d 50,000 By Realisation A/C 144,000

To Heena Ltd 150,000 By Equity Shareholders A/C 56,000

Total 200,000 Total 200,000

Equity Shares in Heena Ltd A/c

Dr. Cr.

To Heena Ltd 152,500 By Equity Shareholders A/C 152,500

Total 152,500 Total 152,500

Step 5:

In the books of Heena Ltd. (Transferee co.)

Nature of Amalgamation- Amalgamation in nature of purchase

Method of Accounting – Purchase Method

Journal Entries

Sr.No Particulars L.F Dr.Rs Cr.Rs

1 Business Purchase A/C Dr 302,500

To Liquidator of Beena Ltd 302,500

(Being Purchase Consideration due to Beena Ltd)

2 Goodwill A/C Dr 50,000

Land & Building A/C Dr 90,000

Plant & Machinery A/C Dr 130,500

(5)

Debtors A/C Dr 65,000

To Provision for Bad debts 6,500

To Sundry Creditors 76,000

To Business Purchase 302,500

(Assets & Liabilities Taken over from Beena Ltd. Recorded at fair value in books)

3 Liquidator of Beena Ltd Ac Dr 302,500

To Cash & Bank A/C 150,000

To Equity share Capital A/C (12,200x10) 122,000

To Securities Premium A/C (12,200x2.5) 30,500

(Discharge of PC in form of Cash & Shares)

4 Sundry Creditors A/C Dr 20,000

To Sundry Debtors A/C 20,000

(Elimination of intercompany dues)

5 Goodwill A/C Dr 6,250

To Stock A/C (10,000/40,000X25000) 6,250

(6)

2. Transfer Co. – X Ltd Transferee Co. – Y Ltd

Step 1: Calculation of Intrinsic Value per share

No Particulars X Ltd Y Ltd Transferor Transferee A ASSETS Fixed Assets (8,00,000 – 40,000) 760,000 1,600,000 Current Assets 900,000 860,000 Total (A) 1,660,000 2,460,000 B Liabilities Secured Loan - 500,000 Unsecured Loan 200,000 -Creditors 310,000 360,000 Total (B) 510,000 860,000

C Net Assets (A-B) 1,150,000 1,600,000

D No. of shares 10,000 80,000

E Intrinsic value per share (C/D) 115 20

Step 2: Cash to be paid for every two shares held in X Ltd.

No Particulars Rs

(7)

B Intrinsic value of 10 shares of Y Ltd (10 x 20) 200

C Cash to be paid for every 2 shares (A-B) 30

Step 3: Calculation of purchase Consideration

No. Particulars Rs Mode of Discharge

A Cash (30 x 10,000) ÷ 2 150,000 Cash

B Equity shares in Y Ltd 500,000 Issue of 50,000 shares of No of Shares to be issued x Rs.10 Rs 10 each issued at par (10/2 x 10,000) x Rs.10

C Total Purchase Consideration (A+B) 650,000

Step 4: Calculation of Goodwill or Capital Reserve

A Purchase consideration (Step 3) 650,000

B Net Assets taken over (Step 1) 1,150,000

C Capital Reserve (PC < Net asset) 500,000

Balance Sheet of Y Ltd (After Absorption)

(Amalgamation in nature of Purchase)

No Particulars Note Rs Rs

Equity & Liabilities

(8)

a Share Capital 1 1,300,000

b Reserves & Surplus 2 1,300,000 2,600,000

2 Non current liabilities

Long term borrowing 3 700000

3 Current Liabilities Trade Payable X Ltd 310,000 Y Ltd 360,000 670,000 Total (A) 3,970,000 B Assets

1 Non current Assets a Fixed Assets

b Tangible Assets 4 2,360,000

2 Current Assets

i Cash & Cash equivalents

Bank (2,00,000 – 1,50,000) 50,000

Other Current assets

X Ltd 900,000

Y Ltd 660,000 1,610,000

Total (B) 3,970,000

Note1 Share Capital

(9)

Issued, Subscribed & Paid up

1,30,000 eq. shares of Rs 10 each fully paid (80,000 + 50,000) 1,300,000 (Out of above 50,000 shares were issued

without consideration being recd in cash)

1,300,000

Note 2 Reserves & Surplus

No particulars Rs

General Reserve 800,000

Capital Reserve (Step 4) 500,000

1,300,000

Note 3 Long Term Borrowing

A Secured loan 500,000

B Unsecured loan 200,000

700,000

Note 4 Tangible Fixed Assets

Y – Ltd 1,600,000

Acquired from X Ltd 760,000

(10)

3. Transferor Co. – B Ltd Transferee Co. – A Ltd

Step 1 Calculation of P & L Account balance on 30-9-2011

No. Particulars A Ltd. B Ltd.

Opening Balance 187,500 150,000

B Add : Profit for six months 420,000 204,000

607,500 354,000

C Dividend paid (15 % share capital) 225,000 150,000

D Tax on dividend paid (10% of C) 22,500 15,000

247,500 165,000

E Balance as on 30.09.2011 360,000 189,000

Step 2 Balance Sheet as on 30.09.2011

No Particulars A Ltd. B Ltd.

1 Shareholders Fund

a Share Capital 1,500,000 1,000,000

b Reserves & Surplus

Reserves 390,000 243,500

A Ltd. (Rs.4,15,000 - Rs. 25,000) B Ltd. (Rs.2,56,000 - Rs.12,500)

(11)

2 Current Liabilities

Trade Payable 93,750 75,000

Total (A) 2,343,750 1,507,500

B Assets

1 Non current Assets a Fixed Assets Opening WDV 1,250,000 875,000 (-) Depreciation @ 5 % 62,500 43,750 1,187,500 831,250 b Tangible Assets 2 Current Assets Stock in Trade _237,500 _187,500 Debtors _390,000 _256,000

i Cash & Cash equivalents _528,750 _232,750

(Balancing Figure)

Total (B) _2,343,750 _1,507,500

Step 3 Calculation of Intrinsic value of shares of Company

A Assets

Goodwill (Given) 120,000

Fixed other assets 1,187,500 831,250

(12)

B Ltd. (1,87,500 – 7,500) + 25% Debtors 390,000 256,000 Bank 528,750 232,750 Total 2,343,750 1,665,000 B Liabilities Creditors 93,750 75,000 Total (B) 93,750 75,000

C Net Assets (A-B) 2,250,000 1,590,000

D No. of equity shares 150,000 100,000

E Intrinsic Value per share ₹ 15 ₹ 15.90

Step 4 Share Exchange Ratio and Purchase Consideration

A 1.06

B Existing no. of shares of B Ltd. 100,000

C No. of shares to be issued (A x B) 106,000

D

Purchase Consderation

1,590,000 (Issue of 1,06,000 shares of Rs.10 each issued @ Rs.15 each)

Step 5

Balance Sheet of A Ltd after absorption (as on 01-10-11)

Nature of Amalgamation – Amalgamation in nature of Purchase

No. Particulars Note No. Rs. Rs.

(13)

Equity & Liabilities 1 Share holders Fund

2 Current Liabilities Trade payable

A Ltd. 93,750

B Ltd. 75,000 168,750

Total 4,008,750

1 Non Current Assets a Fixed Assets

i) Tangible Assets 3 2,018,750

ii Intangible assets – Goodwill 120,000 2,138,750

2 Current Assets a Inventories A Ltd. 237,500 B Ltd. 225,000 462,500 b Trade Receivables A Ltd. 390,000 B Ltd. 256,000 646,000

c Cash & Cash equivalents

A Ltd. 528,750

(14)

Total (B) 4,008,750

Note1 Share Capital

No Particulars Rs.

Authorised

….. Eq shares of Rs 10 each

Issued subscribed & paid up

2,56,000 Equity Shares of Rs 10 each, fully paid 2,560,000 (Out of above 1,06,000 shares were issued without

consideration being received in cash)

2,560,000

Note 2 Reserves & Surplus

Securities Premium (106,000 shares x 5) 530,000

Reserves 390,000

Profit & Loss A/c 360,000

1,280,000

Note 3 Tangible Fixed Assets

1) A Ltd 1,187,500

2) Add : Acquired from B Ltd 831,250

(15)

4. Transferor Co. – Vibham Transferee Co. – Shubham

Method of PC – Net Asset Method Nature of Amalgamation – Merger

Step 1: Computation of intrinsic value per share

No. Particulars Vibham Ltd. Shubham Ltd.

A Assets Fixed Assets 200 429 Current Assets 200 200 Goodwill 40 75 Total (A) 440 704 B Liabilities Loans secured 100 100

Preference share capital 60

Total (B) 100 160

C Net Assets (A-B) 340 544

D No. of shares 5 4

E Intrinsic value per share (C/D) 68 136

Step 2 Share Exchange Ratio and Purchase Consideration

A _1:2

B Existing no. of equity shares of Vibham Ltd. 5

C No. of shares to be issued (½ x 5) 2.5 crore

(16)

D Purchase consideration 25 crores (Issue of 2.5 crores equity shares of Rs 10 each issued at par)

Step 3: Calculation of Capital Reserve arising on absorption

(Nature of Amalgamation :- Merger)

Sr.No. Particulars Rs. In crores

A Purchase Consideration incorporated in books 25

B Paid-up capital of Vibham Ltd 50

C Capital Reserve 25

Step 4: Balance sheet of Shubham Ltd. as on 1-4-2012

(Rs crores)

Equity & Liabilities 1 Shareholders Fund

a Share Capital 1 125

b Reserves and Surplus 2 375 500

2 Non Current Liabilities a Long – Term borrowings

Secured loan 200

Total 700

Assets

(17)

a Fixed Assets

(i) Tangible 300

2 Current Assets 400

Total 700

Note 1 - Share Capital

No Particulars Rs. in crore

Authorised

….. 10% Preferencce Shares of Rs 100 each

Issued subscribed & paid up

6.5 Eq shares of Rs 10 each fully paid up 65

(Out of above 2.5 equity shares were issued without consideration being received in cash)

0.6, 10% Preferencce Shares of Rs 100 each 60

Total 125

Note 2 - Reserves and Surplus

No Particulars Rs. in crore

A Capital Reserve (WN-3) 25

B Other Reserves & Surplus (200+150) 350

(18)

5. Transferor Co. – V Ltd. Transferee Co. – P Ltd.

Method of PC – Pooling of Interest Method Nature of Amalgamation – Merger

Step 1: Calculation of Purchase consideration

(Net Payment Method)

A Share Exchange Ratio 3:2

B Existing shares of V Ltd. (In Lakhs) 600

C No of shares to be issued (In Lakhs) 900

(3/2 x 600)

B Issue price per share (given) ₹ 10

E Purchase consideration (C X D) (In Lakhs) ₹ 9,000

In the books of P Ltd (Transferee Co.)

Journal entries

No Particulars L.F Debit Credit

1 Business Purchase a/c Dr 9,000

To Liquidator of V Ltd 9,000

2 Plant & Machine Dr 5,000

Furniture Dr 1,700

Stock Dr 4,041

(19)

Bank Dr 609

Bills Receivable Dr 80

General Reserve a/c Dr 3,000

(PC 9000 lakh – Paid up 6000 of V Ltd)

To Foreign Project Reserve 310

To General Reserve 3,200 To P & L a/c (825 – 50) 775 To 12 % Deb. 1,000 To Sundry Crs 463 To Sundry Provisions 702 To Business Purchase 9,000

(Being assets, liabilities & reserves taken over from V Ltd & the diff between P & C & Paid

up capital of V Ltd is adjusted against general reserve)

3 Liquidator of V Ltd a/c Dr 9,000

To Eq share Cap. a/c 9,000

4 Bills payable a/c Dr 80

To Bills Receivable 80

(Elimination of inter-company dues)

5 12% Deb. a/c Dr 1,000

To 13% Deb. a/c 1,000

(20)

13% deb. in V Ltd)

6 Reserve (GR) a/c Dr 1

To Bank a/c 1

(Being expenses of amalgamation borne by P Ltd)

Balance Sheet of P Ltd (After absorption)

Nature of Amalgamation – Amalgamation in nature of Merger

Sr Particulars Note Rs Rs

A Equity & Liabilities

1 Shareholders Fund

a Share capital 1 24,000

b Reserves & Surplus 2 16,654 40,654

2 Non current liabilities Long term borrowing

13 % Debentures 1,000

3 Current liabilities Trade payables

Bills Payable (Rs. 120 - Rs. 80) 40

Creditors (Rs. 1080 + Rs. 463) 1,543

b Short term provisions 2,532

Sundry Provisions (Rs. 1830 + Rs.702) 4,115

(21)

ASSETS

1 Non current Assets a Fixed Assets

i Tangible Assets 3 29,004

2 Current Asset

a Inventories (7862 + 4041) 11,903

b Trade Receivables (2120 + 1020) 3,140

c Cash & Cash equivalent 1,722

(1114 + 609 – 1) 16,765

Total (B) 45,769

Note 1 - Share Capital

Authorised ….. Eq shares of Rs 10 each Issued, subscribed & paid up

2400 lakhs eq shares of Rs 10 each fully paid (1500 + 900) 24,000 Note – Out of above, 900 lakh shares were issued

without consideration being recd in cash)

24,000

Note 2 - Reserves and Surplus

No Particulars Rs Rs

(a) Securities Premium 3,000

(b) Foreign Project Reserve 310

(22)

P Ltd. 9,500

V Ltd. 3,200

12,700 Less : Adjustment for diff in PC & paid up capital -3,000

Less : Amalgamation exp -1 9,699

(d) Profit & Loss Account

P Ltd. 2,870

V Ltd. 775 3,645

16,654

Note 3 - Tangible Fixed Assets

Land and Building 6,000

Plant & Machinery (14000 + 5000) 19,000

Furniture (2304 + 1700) 4,004

(23)

6.

W Note 1

Consideration payable to preference shareholders of P Ltd.

Sr.No. Particulars Rs.

A Existing preference dividend 40,000

B Add : 10% increase 4,000

C Required preference dividend after absorption 44,000 D Face value of 8% preference shares to be issued 550,000

( 44,000 ÷ 8 )

W Note 2

Calculation of EPS

Sr. No. Particulars R Ltd P Ltd

A Profit before Tax 1,064,000 480,000

B Less Tax 400,000 200,000

C Profit after Tax 664,000 280,000

D Less : Preference dividend 64,000 40,000

E Earning available to ESH 600,000 240,000

F No. of equity shares 240,000 120,000

G EPS 2.5 2

W Note 3

Calculation of Price Earning Ratio of R Ltd.

(24)

W Note 4

Calculation of Market price of P Ltd

A EPS of P Ltd. 2

B PE Ration (75% x 16) 12

C Market price share (AxB) 24

W Note 5

Calculation of no. of equity shares to be issued

A 0.6

B Existing as of shares of P Ltd. 120,000

C No. of equity shares to be issued (AxB) 72,000

D Issue of 72,000 equity shares @ Rs 40 each 2,880,000

W Note 6

Calculation of PS to be issued to Equity Shareholders of P Ltd.

A Existing equity dividend of P Ltd (Given) 192,000

B Rate of equity dividend of R Ltd 12%

(288,000 ÷ 24,00,000 x 100)

C Equity dividend received by shareholders of P Ltd 86,400 after absorption (72,000 x Rs 10 EV x 12%)

(25)

D Loss of equity dividend (A-C) 105,600 E Face Value of 8% preference shares to be issued

to compensate for loss of eq. dividend 1,320,000

Total Purchase consideration

Sr. No. Particulars Rs. Rs.

A Consideration payable to preference shareholders 550,000 (55,000 8 % P.S. of Rs 10 each)

B Consideration payable to Eq shareholders

(i) 72,000 eq shares of Rs 10 each would @ 40 2,880,000

(ii) 1,32,000 8% preference share of Rs 10 each 1,320,000 4,200,000

C Total (A+B) 4,750,000

Calculation of Goodwill

No. Particulars Rs. A Assets Fixed Assets (27,00,000 + 1,00,000) _2,800,000 Current Assets (23,00,000 - 2,00,000) _2,100,000 Total (A) 4,900,000 B Liabilities Current Liabilities (10,00,000 - 40,000) 960,000 Total (B) 960,000 C Net Assets _3,940,000

(26)

D Purchase Consideration _4,750,000

E Goodwill ( D - C ) 810,000

Balance Sheet as on 31-3-10

Sr. No. Particulars N. No. Rs. Rs.

EQUITY & LIABILITIES 1 Shareholders Fund

b Reserve & Surplus 2 5,160,000 10,950,000

2 Non Current Liabilities a Long Term Borrowings

3 Current Liabilities (18,00,000 + 9,60,000) 2,760,000

Total 13,710,000

ASSETS

(i) Tangible Assets 8,300,000

(55,00,000 +27,00,000 + 1,00,000)

(ii) Intangible Assets Goodwill 810,000 9,110,000

2 Current Assets 4,600,000

(25,00,000 + 23,00,000 + 2,00,000)

(27)

Note 1 - Share Capital

No Share Capital Rs.

Authorised

Issued, subscribed & paid up

3,12,000 Eq. shares of Rs 10 each fully paid 3,120,000 (Out of above 72,000 shares are issued for

consideration other than cash)

2,67,000 Pref shares of Rs 10 each fully paid 2,670,000

Total 5,790,000

Note 2 - Reserves and Surplus

Reserves _3,000,000

Securities Premium (40-10) x 72,000 _2,160,000

(28)

7. Transfer Co. – Indicate Ltd & Syndicate Ltd Transferee Co. – Sipiem Ltd

W Note 1 Calculation of Goodwill

No Particulars Indikat (Rs) Syndikat (Rs)

A Avg. profits of last 3 years 82,500 62,500

B Capital employed 500,000 350,000

(share capital + P & L a/c)

C Normal profit @ 10% on capital employed 50,000 35,000

D Super profit (A-C) 32,500 27,500

E Goodwill (D x 2.5) 81,250 68,750

150,000

W Note 2 Calculation of Purchase consideration, Nos of shares to be issued &

Share Exchange ratio

No Particulars Indikat (Rs) Syndikat_(Rs)

A ASSETS Goodwill (Step 1) 81,250 68,750 Fixed Assets 450,000 290,000 Current Assets 250,000 610,000 Total (A) 781,250 968,750 B Liabilities

(29)

Current Liabilities 200,000 550,000

Total (B) 200,000 550,000

C Net Assets (A-B) 581,250 418,750

D Issue price per share (10 + 2.5) 12.50 12.50

E No of shares to be issued (C/D) 46,500 33,500

F Existing shares of Transferor Co. 31,000 33,500

G Share Exchange Ratio (E/F) 1.5 1.0

Balance Sheet of Sipiem Ltd as on 01-07-13

Nature – Amalgamation in nature of Purchase

A Equity & Liabilities 1 Shareholders funds

a Share Capital 1 _1,000,000

b Reserves & Surplus

Securities Premium _250,000

(1,00,000 x 2.5)

2 Current liabilities _750,000

Total (A) 2,000,000

B Assets

1 Non current assets a Fixed assets

(30)

ii Intangible Goodwill 150,000 890,000 2 Current Assets

a Cash & Cash Equivalents

Cash at Bank (20,000 x 12.5) 250,000

b Other Current Asset 860,000 1,110,000

Total (B) 2,000,000

Note 1 - Share Capital

No Particulras Rs

Authorised – 5,00,000 Eq. shares of Rs 10 each _5,000,000 Issued, subscribed & paid up

1,00,000 eq. shares of Rs 10 each fully paid _1,000,000 (Note – Out of above 80,000 shares were

issued without consideration recd in cash)

(31)

8. Transfer Co. – Payal Ltd Transferee Co. – Dipti Ltd

Method of PC – Net Payment Method Nature of Amalgamation – Purchase

W Note 1 Calculation of Purchase consideration

A Equity shares in Dipti Ltd

4,00,000 eq. shares of Rs 10 each issued at par 4,000,000

B Cash 300,000

C Total Purchase consideration 4,300,000

In the books of Payal Ltd.

Realisation A/c

To land & building 3,568,200 By 10% debentures 1,000,000

To Goodwill 500,000 By Creditors 436,200

To Sundry Debtors

358,400 By Bank O/D 200,000

(3,98,400 – 40,000) By Dipti Ltd (PC) 4,300,000

To Stock 785,200 By Shareholders A/c

919,500 To Plant & Machinery 1,643,900 (Loss on realization)

Total 6,855,700 Total 6,855,700

(32)

To Unpaid Calls 10,000 By eq. share capital A/c 5,000,000

To Bank 300,000 By P & L A/c

To Eq. shares in Dipti Ltd 4,000,000 (269,500 – 40,000) 229,500

To Realisation A/c 919,500

Total 5,229,500 Total 5,229,500

In the books of Dipti Ltd. (Transferee Ltd)

Nature of amalgamation – Purchase

Method of accounting – Purchase

Journal Entries

No. Particulars L.F Dr Rs. Dr Rs.

1 Business Purchase A/c Dr 4,300,000

To Liquidator of Payal Ltd.

4,300,000 (Being Purchase Consideration due)

2 Land & Building A/c Dr 3,568,200

Sundry Debtors (3,98,400 – 40,000) Dr 358,400

Stock A/c Dr 785,200

Plant & Machinery A/c Dr 1,643,900

To 10 % Debentures 1,000,000

To Sundry Creditors 436,200

To Bank O/D 200,000

(33)

To Capital Reserve (B/F) 419,500 (Being assets & liabilities taken over)

3 Liquidator of Payal Ltd A/c Dr 4,300,000

To Equity Share Capital A/c 4,000,000

To Bank A/c 300,000

(Being discharge of Purchase Consideration)

4 Capital Reserve A/c Dr 140,000

To Bank

140,000 (Being liquidation expenses paid)

Balance Sheet of Dipti Ltd.

EQUITY & LIABILITIES

1 Shareholders Fund

2 Non – Current Liabilities a Long Term borrowings

i Secured Loans 6,000,000

10% Debentures (50 L + 10 L) 3 Current Liabilities

a Short term borrowings

(34)

b Trade Payables 1,270,400 1,470,400

Total 27,688,400

ASSETS

1 Non Current Assets a Fixed Assets (i) Tangible 3 19,421,900 (ii) Intangible Goodwill 3,000,000 22,421,900 2 Current Assets a Inventories (17,92,600 + 7,85,200) 2,577,800 b Trade Receivables (7,24,000 + 3,58,400) 1,082,400 c Cash & Cash equivalents

(i) Bank

1,244,200 (1684,200 – 3,00,000 – 140,000)

d Other Current Assets

(i) Bills Receivables 362,100 5,266,500

Total 27,688,400

Note 1 - Share Capital

Authorised : 20,00,000 eq. shares of Rs 10 each 20,000,000

Issued, Subscribed & paid up

1) 19,00,000 eq. shares of Rs 10 each (15 Lakhs + 4 Lakhs) 19,000,000

(35)

(Out of above 4,00,000 eq. shares were issued without Consideration being received in cash)

18,950,000

Note 2 - Reserve & Surplus

1) Profit & Loss A/c 988,500

2) Capital Reserve (4,19,500 – 1,40,000) 279,500

Total 1,268,000

Note 3 - Tangible Assets

No. Particulars Rs. Rs.

1) Land & Building

Dipti Ltd. 10333000

Payal Ltd. 3568200 13,901,200

2) Plant & Machinery

Dipti Ltd. 3876800

Payal Ltd. 1643900 5,520,700

(36)

9.

W Note 1 Calculation of Purchase consideration

Sr.No Particulars A Ltd B Ltd

A Consideration paid to Preference Shareholders

i) A Ltd (3 lakh, 15 % P.S. of Rs 100 each issued @ Rs 150 each) 450

ii) B Ltd (2 lakh, 15 % P.S. of Rs 100 each issued @ Rs 150 each) 300

B Consideration paid to Equity Shareholders

i) A Ltd (8 lakh x 5) i.e. 40 lakh

Equity shares of Rs 10 each issued @ Rs 30 1,200

ii) B Ltd (7.5 lakh x 4) i.e. 30 lakh 900

Equity shares of Rs 10 each issued @ Rs 30

C Total Purchase consideration (A + B) 1,650 1,200 2,850

Note : As per AS 14, Purchase consideration means consideration payable to

shareholders of Transferor Co. Therefore, consideration paid to deb. holders

will not form part of Purchase Consideration. Deb. holders will be taken over

and discharged separately.

W Note 2 Consideration paid to debenture holders

No Particulars Rs in lakhs A A Ltd - 40 B B Ltd - 20 Total 60 10% × 60 15% 10% × 30 15%

(37)

W Note 3 Securities Premium

A) Preference share capital (5 lakh x 50) 250

B) Equity share Capital (70 lakh x 20) 1,400

Total 1,650

W Note 4

Calculation of Goodwill / Capital Reserve

A Purchase consideration 2,850

B Assets

Assets taken over (2000 + 1500) 3,500

Total (B) 3,500

C Liabilities

Debenture Holders (W Note 2) 60

Creditors (270 + 120) 390

Bills Paayable (150 + 70) 220

Total (C) 670

D Net Assets Taken Over (A-B) 2,830

E Goodwill : (PC > Net asset) (A-D) 20

(38)

Nature – Amalgamation in nature of Purchase

a Share Capital 1 1,200

b Reserves & Surplus 2 1,670 2,870

2 Non current liabilities a Long term borrowing

15 % Debentures (W Note 2) 60 3 Current liabilities a Trade payables Creditors (270 + 120) 390 Bills Payable (150 + 70) 220 610 Total 3,540 B Assets

i Tangible assets 3 1,550

ii Intangible assets (W Note 4) 20 1,570

b Non current investment 200

c Unamortised exp.

Amalgamation Adjustment 20

(39)

a Inventories (350 + 250) 600 b Trade Receivables

Debtors (250 + 300) 550

Bill Receivable (50 + 50) 100

c Cash & cash equivalent

Cash at Bank (300 + 200) 500 1,750

Total 3,540

Note 1 Share Capital

No Particulars Rs in lakh

Authorised – ……… Eq. shares of Rs 10 each ……….. 15% P.S. of Rs 100 each

Issued, Subscribed & Paid up

70 lakh Eq. shares of Rs 10 each fully paid 700

5 lakh 15% P.S. of Rs 100 each fully paid 500

(Note – All the above shares were issued without consideration being recd. in cash)

1,200

Note 2 Reserves & Surplus

Securities Premium (WN 3) 1,650

(40)

1,670

Note 3 Tangible Assets

Land & Bldg (550 + 400) 950

Plant & Machine (350 + 250) 600

(41)

10.

W Note 1 Calculation of Purchase consideration

No Particulars Alpha Ltd Beta Ltd

A Consideration paid to Preference Shareholders

i) Alpha Ltd – (4 lakh; 15% P.S. of Rs 100 each) 400

ii) Beta Ltd – (3 lakh; 15% P.S. of Rs 100 each) ₃₀₀

B Consideration paid to Equity Shareholders

i) Alpha Ltd – 10 lakh x 1.5 i.e. 15 lakh Equity shares 1,500 15 lakh Equity shares of Rs 100 each

ii) Beta Ltd – 8 lakh x 1 i.e. 8 lakh Equity shares ₈₀₀ 8 lakh Equity shares of Rs 100 each

C Total Purchase consideration 1,900 1,100

3,000

Note : As per AS 14, Purchase consideration means consideration payable to

shareholders of Transferor Co. Therefore, consideration paid to deb. holders

will not form part of Purchase Consideration. Deb. holders will be taken over

and discharged separately.

W Note 2 Consideration paid to debenture holders

No Particulars Rs in lakhs A Alpha Ltd - 72 B Beta Ltd - 60 Total 132 12% × 96 16% 12% × 80 16%

(42)

In the books of Gamma Ltd (Transferee Co.)

Journal entries

Nature – Amalgamation in nature of merger

No Particulars L.F Debit (Rs.) Credit (Rs.)

1 Business Purchase A/c Dr 3,000

To Liquidator of Alpha Ltd 1,900

To Liquidator of Beta Ltd 1,100

2 Fixed Assets A/c Dr 2,200

Current assets A/c Dr 1,445

General Reserve A/c Dr 350

P&L A/c (456 – 350) Dr 106

To Deb. Holders of Transferor A/c 132

To Current liabilities A/c 299

To Revaluation Reserve A/c 180

To General Reserve A/c 350

To P & L A/c 140

(Being assets, liabilities & reserves of Alpha & Beta Ltd taken over)

3 Liquidator of Alpha Ltd A/c Dr 1,900

Liquidator of Beta Ltd A/c Dr 1,100

To 15% P.S. Capital A/c (400 +300) 700

(43)

(Being discharge of liquidator)

4 Deb. holders of transferor co. A/c Dr 132

To 16% Deb. A/c 132

(Being discharge of deb. holders)

Balance Sheet as on 01-04-11

a Share Capital 1 3,000

b Reserves & Surplus 2 214 3,214

2 Non current liabilities a Long term borrowing

16 % Debentures (W Note 2) 132

3 Current liabilities 299

Total 3,645

B Assets

1 Non Current Assets

a Fixed Assets 2,200

2 Current Asset 1,445

Total 3,645

Note 1 Share Capital

(44)

Authorised – ……… Eq. shares of Rs 100 each …….. 15% P.S. of Rs 100 each

Issued, subscribed & paid up

23 lakh Eq. shares of Rs 100 each fully paid _2,300

7 lakh 15% P.S. of Rs 100 each fully paid 700

3,000

All the above shares were issued without consideration being received in cash

Note 2 Reserves & Surplus

Profit and Loss A/c (140 – 106) 34

Revaluation Reserve 180

(45)

11.

Calculation of Net Assets excluding goodwill

No. Particulars A Ltd. B Ltd. A Assets Fixed Assets 400,000 100,000 Current Assets 230,000 220,000 Total (A) 630,000 320,000 B Liabilities Current Liabilities 200,000 140,000 Total (B) 200,000 140,000

C Net Assets (A-B) 430,000 180,000

WN-2 Calculation of G/W (Super Profit Method)

A Average Profits of last 3 years 45,400 20,733

B Net Assets excluding G/W (WN-1) 430,000 180,000

C Required Rate of Return 8% 8%

D Normal Profit (B x C) 34,400 14,400

E Super Profit (A - D) 11,000 6,333

F Goodwill (E x 4 years) 44,000 25,333

G Rounded off 44,000 25,330

WN-3 Calculation & discharge of PC

No. Particulars A Ltd B Ltd

A Net Assets excluding G/W (WN-1) 430,000 180,000

(46)

C Total PC (A + B) 474,000 205,330

D Issue Price per share Rs 10 Rs 10

E Number of Shares (C/D) 47,400 20,533

In the books of A Ltd (Transferor Co.)

Journal Entries

No. Particulars L.F Dr Rs Cr Rs

1 Realisation A/c Dr 630,000

To Fixed Assets A/c 400,000

To Current Assets A/c 230,000

(Transfer of assets to realization A/c)

2 Current Liabilities A/c Dr 200,000

(Transfer of Liability to realization A/c)

3 Equity Share Capital A/c Dr 150,000

General Reserve A/c Dr 160,000

P & L A/c Dr 120,000

To Equity Shareholders A/c 430,000

4 AS Ltd. Dr 474,000

(PC due)

5 Equity Shares in AS Ltd Dr 474,000

(47)

(Being PC received)

6 Realisation A/c Dr 44,000

To Equity Shareholders A/c 44,000

(Profit on realization A/c

Transferred to Equity Shareholders A/c)

7 Equity Shareholders A/c Dr 474,000

To Equity shares in AS Ltd 474,000

(Being dividend under liquidation paid in forms of eq. shares in AS Ltd.)

Journal Entries in the books of B Ltd. (Transferor Co.)

No. Particulars Dr Rs Cr Rs

1 Realisation A/c Dr _410,000

To Fixed Assets _100,000

To Current Assets _220,000

To Goodwill _90,000

(Transfer of assets of realization A/c)

2 Current Liabilities A/c Dr _140,000

To Realisation A/c _140,000

(Transfer of liability to realization A/c)

3 Equity Share Capital A/c Dr _200,000

P & L A/c Dr. _70,000

(48)

(Transfer of Capital & reserves to Equity Shareholders A/c)

4 AS Ltd. A/c Dr _205,330

(PC due)

5 Equity shares in AS Ltd A/c Dr _205,330

To AS Ltd A/c _205,330

(PC received)

6 Equity Shareholders A/c Dr _64,670

(Loss on realization)

7 Equity Shareholders A/c Dr _205,330

To Equity shares in AS Ltd. _205,330

(49)

12.

WN-1 Shareholding Patterns of T Ltd

No. Particulars Number

A No. of Shares before bonus issue 10,000

B (+) Bonus Shares (1:2) 5,000

C Total no. of shares after bonus 15,000

D No. of shares held by A (2000 + 1000) – bonus 3,000

E Shares held by outside shareholders (C-D) 12,000

WN-2 Calculation of PC & discharge of PC (Net payment)

No. Particulars Rs Form of discharge

1

Consideration payable to outsider

1,200,000

8,000 shares of A Ltd. of Rs

Shareholders 100 each valued at Rs 150 each

12,000 Shares x Rs.100

2 Consideration payable to A Ltd 300,000 Mutual Set off 3,000 Shares x Rs.100

Total 1,500,000

Ledger Accounts in the books of T Ltd.

Realisation A/c

(Rs. In Lakhs)

Particulars Rs. Particulars Rs.

To Fixed Assets 15 By Current Liabilities 2

(50)

By Equity Shareholders 3 (Loss on Realisation)

20 20

Equity Shareholders A/c

To Realisation A/c 3 By Equity Share Capital 15

To A Ltd 3 By Reserves & Surplus 3

To Eq. shares in A Ltd 12

18 18

A Ltd A/c

To Realisation A/c 15 By equity shares in A Ltd 12

By Equity Shareholders 3

(Mutual Set Off)

15 15

Equity Shares in A Ltd A/c

To A Ltd 12 By Equity Shareholders 12

12 12

(51)

To Equity Shareholders 15 By Balance b/d 10

By Reserves and Surplus 5 (Bonus)

Total 15 Total 15

Reserves and Surplus A/c

To Equity Share Capital A/c 5 By Bal b/d 8

To Equity Shareholders A/c 3

8 8

In the books of A Ltd. (Transferee Co.)

Journal Entries

Nature of Amalgamation – Merger

Method of Accounting – Pooling of Interest

No. Particulars L.F Dr Rs Cr Rs

1 Business Purchase A/c Dr 15

To liquidator of T Ltd. 15

2 Fixed Asset A/c Dr 15

Current Asset A/c Dr 5

To Current Liabilities 2

To Reserves & Surplus 3

(52)

3 Liquidator of T Ltd A/c Dr 15

To Equity Share Capital (8000 shares x 100) 8

To securities Premium (8000 shares x 50) 4

To Investment in shares of T Ltd. 3

(Discharge of liquidator of T Ltd. & cancellation of investment)

4 Current Liability A/c Dr 1

To Current Assets

1 (Elimination of inter company due)

5 Reserves & Surplus A/c (25 / 125 x 50,000) Dr 0.1 To Stock (Current Asset)

0.1 (elimination of unrealised profit on stock)

(53)

13.

W Note 1 Calculation of Intrinsic value of shares

Sr. Particulars SHO THAM AN

A ASSETS

Land (Book value + 100%) 200 100 20

Building (Book value + 50%) 600 150 300

Machinery (Book value + 20%) 960 600 600

Other fixed Assets 100 200 50

Investment in AN Ltd 1,010

(40 lakh shares x 25.25)

Net Current Assets 1,040 1,240 740

(1252 – 60% x 20)

Total (A) 2900 3300 1710

B Liabilities : Loans 900 1000 700

Total (B) 900 1000 700

C Net Assets (A-B) 2000 2300 1010

D No of shares (in lakhs) 100 80 40

E Intrinsic value of shares 20.00 28.75 25.25

(in Rs) (C/D)

W Note 2 Calculation & Discharge of Purchase consideration

Sr. Particulars SHO THAM

A Total no of shares (in lakhs) 100 80

(54)

C Shares held by outsiders 60 60

D Intrinsic value per share (WN 1) (in Rs) 20 28.75

E Consideration payable to outside Sh. holders(CxD) 1200 1725 F Nos of shares to be issued @ Rs 20/Sh.(E ÷ 20) 60 86.25 G Consideration payable to Puru Ltd (BxD)

to be mutually set off 800 575

H Total purchase consideration (E+G) 2000 2300

In the books of Puru Ltd (Transferee Co.)

Nature of amalgamation – In nature of purchase

Journal Entries

1 Investment in shaes of Sho Ltd A/c Dr 300

(800 – 500) WN 2

Investment in shares of Tham Ltd A/c Dr 275 (575 – 300) WN 2

To capital reserve 575

(Revaluation of investment in shares of Sho Ltd & Tham Ltd)

2 Business Purchase A/c Dr 4,300

To Liquidator of Sho Ltd 2,000

To Liquidator of Tham Ltd 2,300

(55)

3 Land A/c (200 + 100) Dr 300

Building A/c (600 + 150) Dr 750

Machinery (960 + 600) Dr 1560

Other Fixed assets (100 + 200) Dr 300

Investment in shares of AN Ltd Dr 1,010

Net current asset (1040 + 1240 – (40% x 20) Dr 2,272

Capital Reserve A/c (Bal fig.) Dr 8*

To Loans A/c (900 +1000) 1,900

(Being assets & liabilities of Sho Ltd & Tham Ltd recorded in books at fair value)

4 Liquidator of Sho Ltd A/c Dr 2,000

Liquidator of Tham Ltd A/c Dr 2,300

To Eq. share cap. (160 + 86.25 x 10) 1462.5

To Securities Prem. (146.25 x 10) 1462.5

To Investment in shares of Sho Ltd 800

To Investment in shares of Tham Ltd 575

(Being discharge of liquidators of Sho & Tham and investments are cancelled)

5 Land A/c Dr 20

Building A/c Dr 300

Machinery A/c Dr 600

(56)

Net Current asset A/c Dr 740

To Loans A/c 700

To Investment in shares in AN Ltd 1010

(Being assets & liabilities of AN Ltd recorded)

Balance Sheet of Puru Ltd (After absorption) as on 01-04-2012

Rs in lakhs

No. Particulars N. No. Rs. Rs.

1 Shareholders funds

a Share Capital 1 2962.5

b Reserves & Surplus 2 4029.5 6,992

2 Non current liabilities a Long term borrowings

Loans (900 + 1000 + 700 + 1600) 4200

Total 11,192

ASSETS

1 Non current assets a Fixed Assets

i) Tangible 3 6,480

b Non current investment

(57)

2 Net Current assets 4,612 (1600 + 1040 + 1240 + 740 – 8*)

Total 11,192

Note 1 Share Capital

Authorised …. Eq. shares of Rs 10 each Issued, subscribed & paid up

(150 + 146.25) 296.25 lakhs equity

shares of Rs 10 each fully paid up 2962.5

(Out of above,146.25 lakh equity shares were issued without consideration being

received in cash)

2962.5

Note 2 Reserves & Surplus

Reserves 2,000

Securities Premium 1,462.50

Capital Reserve (575 – 8) 567

Total 4029.5

(58)

Sr.No. Particulars Rs. Land (200 + 200 + 100 + 20) 520 Building (500 + 600 + 150 + 300) 1,550 Machinery (1500 + 960 + 600 + 600) 3,660 Other (400 + 100 + 200 + 50) 750 Total 6,480

(59)

14.

W Note 1 Calculation of Purchase consideration

Sr. No. Particulars Rs Cr.

A Assets (FA + Net working capital) 130

B Liabilities – 10% Debentures 25

C Net Assets i.e. PC (A – B) 105

W Note 2 Shareholding Pattern

Sr. No. Particulars No of Shares

1 Total Shares of H Ltd Total 2.5 Cr Shares

2 Shares held by S Ltd. 2 Cr shares

3 Shares held by Outside shareholders 0.5 Cr share

W Note 3 Discharge of PC

Sr. No. Particulars Rs Form of discharge

A Consideration payable to outside 21 21 lakh shares of Rs 10 @ shareholders (0.5 / 2.5 x 105) Rs 100 each

B Consideration payable to S Ltd. 84 Mutual set off (2 / 2.5 x 105)

C Total 105

In the books of S Ltd. (Transferee Co.)

Journal Entries

(60)

Sr. No. Particulars L.F Dr Rs Cr Rs

1 Investment in eq. shares of H Ltd A/c Dr

52 (84 – 32) (WN – 3)

To Capital Reserve

52 (Being upward revaluation of shares in H Ltd)

2 Business Purchase A/c Dr 105

To liquidator of H Ltd. (PC due) 105 3 FA A/c Dr 30 CA A/c Dr 300 To Current Liabilities 200 To 10 % debentures 25 To Business Purchase 105 4 Liquidator of H Ltd. A/c Dr 105

To Eq. share capital (21 L shares x 10) 2.1

To securities Premium (21 L X Rs 90) 18.9

To Investment in eq. shares of H Ltd.

84 (Discharge of liquidator & cancellation of

investment)

5 10 % debenture A/c Dr 25

To Investment in 10% deb of H Ltd. 24

To Capital Reserve A/c

1 (Being investment in debentures cancelled & the

(61)

Balance Sheet of S Ltd (After absorption) as on 01-07-2012

Rs in Crores

No. Particulars N. No. Rs. Rs.

a Share Capital 1 82.1

b Reserves & Surplus 2 471.90 554

2 Non current liabilities 120

a Current Liabilities

(356+200) 556

Total 1,230

ASSETS

1 Non current assets a Fixed Assets

i) Tangible (100 + 30) 130

2 Net Current assets 1,100

(800 + 300)

Total 1,230

Note 1 Share Capital

Authorised …. Eq. shares of Rs 10 each Issued, subscribed & paid up

(62)

8.21 crs equity shares of Rs 10 each

fully paid 82.10

(Out of above, 21 lakh equity shares were issued without consideration being received in cash)

82.10

Note 2 Reserves & Surplus

Capital Reserve 53

Reserves & Surplus 400

Securities Premium 18.90

(63)

15.

W Note 1 Calculation of Average Profits

Particulars Rs. (lakhs)

Calculation of Average Profits of last 3 years

45 [(30 + 40 + 65) ÷ 3]

W Note 2 Calculation of yield

Calculation of yield

18 Yield = 45 x 40%

W Note 3 Capitalised value of yield

Capitalised value of yield

120 Yield ÷ 15% = 18 ÷ 15%

W Note 4 Consideration payable to Foreign Collaborating Co.

Consideration payable to Foreign Collaborating Co.

28.80 (24 % x 120)

W Note 5 Amount to be treated as unsecured loan from foreign collaborating

company

Sr. Particulars Rs. Lakhs

A PC payable (WN – 4) 28.80

(64)

C Capital Gain (A-B) 26.40

D Tax @ 30% 7.92

E Net amount payable to foreign co. (A-D) 20.88

F Amount payable in cash (50%) 10.44

G Amount to be treated as unsecured loan 10.44

In the books of Variety Ltd. (Transferee Co.)

Journal Entries

Nature of Amalgamation – Purchase

1 Investment in Eq. shares of VR Ltd 28,80,000

To cash & Bank (W Note 45) 10,44,000

To unsecured loan from foreign co. 10,44,000

To TDS payable

7,92,000 (Being purchase of 24% shares of VR

Ltd. from foreign collaborating co.)

2 TDS payable A/c Dr 7,92,000

To Bank A/c 7,92,000

(Being TDS paid to Government)

3 Investment in Eq. shares of VR Ltd Dr 83,80,000

To Capital Reserve

83,80,000 (Being upward revaluation of shares of VR Ltd)

(65)

4 Business Purchase A/c Dr 1,20,00,000

To liquidator of VR Ltd 1,20,00,000

5 Fixed Assets (35 – 5%) Dr 33,25,000

Debtors A/c Dr 10,00,000

Inventories A/c Dr 50,00,000

Cash & Bank A/c Dr 5,00,000

Capital Reserve A/c (B/F) Dr 41,75,000

To Current Liabilities A/c 20,00,000

To Business Purchase 1,20,00,000

6 Liquidator of VR Ltd. A/c Dr 1,20,00,000

To Investment in eq shares of VR Ltd

1,20,00,000 (Discharge of liquidator & cancellation of

investment)

7 Current Liabilities A/c Dr 1,50,000

To Debtors A/c

1,50,000 (Being inter co dues eliminated)

Balance Sheet of Variety Ltd (as on 01-04-2012)

b Reserves & Surplus 2 2,02,05,000 2,82,05,000

(66)

Long term borrowings

Unsecured loan from foreign 10,44,000

collaborating company

Secured loan 40,00,000 50,44,000

2 Current liabilities

(60lac + 20lac – 1.50lac) 78,50,000

Total 4,10,99,000

B Assets

1 Non Current Assets a Fixed Assets i) Tangible Assets 1,53,25,000 (120 lac + 33.25 lac) 2 Current Asset a Inventories 11000000 (60 lac + 50 lac) b Trade Receivables 78,50,000

(70lac + 10lac – 1.50lac)

c Cash & cash equivalents 69,24,000 2,57,74,000

(82,60,000+5,00,000–10,44,000–7,92,000)

Total 4,10,99,000

Note 1 Share Capital

(67)

Authorised – ……… Eq. shares of Rs 100 each Issued, subscribed & paid up

8 lakhs equity shares of Rs 10 each fully paid up 80,00,000

80,00,000

Note 2 Reserves & Surplus

Capital Reserves (83,80,000 – 41,75,000) 42,05,000

Other reserves (variety limited) _1,60,00,000

(68)

16.

W Note 1 Profit & Loss A/c for 6 month ended 30-9-2012

Particulars Brett Ltd Shane Ltd Particulars Brett Shane

Ltd Ltd

To Pref Dividend

- 20,000 By Balance B/d 2,00,000 1,00,000

(10% of 2,00,000) By Profit for 6_months 1,02,500 54,000

To Equity dividend 1,20,000 45,000 By dividend recd

9000

-(15% of 8

Lakhs) (15% of 3Lakhs) from Shane Ltd To Balance c/d 1,91,500 89,000 (45000 _6000/30,000) x

Total 3,11,500 1,54,000 Total 3,11,500 1,54,000

Note:

 It is assumed that Shane Ltd had not paid preference dividend. Therefore before paying equity dividend, Shane Ltd will pay PD.

 It is assumed that, profit for 6 months of Shane Ltd. doesn’t include dividend recd from Brett Ltd.

W Note 2

Balance Sheet as on 30-9-2012 (Before absorption)

Liabilities Brett Shane Assets Brett Shane

Ltd Ltd Ltd Ltd

ESC 8,00,000 3,00,000 Building 2,00,000 1,00,000

10% PSC - 2,00,000 (-) Depr @ 5%_{for 6 M} 5,000 2,500

GR 3,00,000 1,00,000 1,95,000 97,500

P & L A/c (WN1) 1,91,500 89,000 Machinery 5,00,000 3,00,000 Crs 1,80,000 2,10,000 (-) Depr @ 15%_{for 6 M} 37,500 22,500

(69)

4,62,500 2,77,500 Furniture 1,00,000 60,000 (-) Depr @ 10% for 6 M 5,000 3,000 95,000 57,000 Investment in 60,000 -Shares of Shane Stock 1,20,000 1,50,000 Debtors 3,80,000 2,50,000 Cash& Bank (B/F) 1,09,000 37,000 Preliminary exp 50,000 30,000 Total 14,71,500 8,99,000 Total 14,71,500 8,99,000

W Note 3

Calculation of Net Assets

No. Particulars Rs A Assets Goodwill Given 50,000 Building (110% of 100,000) 1,10,000 Machinery (110% of 3,00,000) 3,30,000 Furniture (110% of 60,000) 66,000 Stock 1,50,000 Debtors 2,50,000

(70)

Total (A) 9,93,000 B Liabilities

Creditors (B) 2,10,000

C Net Assets i.e. PC (A-B) 7,83,000

W Note 4

Calculation of PC

Sr.No. Particulars Rs A Consideration payable to PSH 2,00,000 (2000, 10% PS of Rs 100 each) B

Consideration payable to outside SH

4,66,400 24000 x (783000 – 200000) ÷ 30000 = 4,66,400

No. of eq. shares to be issued = (4,66,400 / 15) = 31093.33 i.e. issue of 31093 shares @ Rs 15 = 466,395

Cash for fractional share (0.33 x 15) = 5

C

Consideration payable to Brett Ltd

1,16,600 (6000 x (783000 – 200000) ÷ 30000 = 1,16,600

To be mutually set-off

D Total PC 7,83,000

W Note 5 Calculation of Net Capital Reserve

(71)

Investment in Shane Ltd (116,600 – 60,000) 56,600

B Goodwill 50,000

C Net Capital Reserve (A-B) 6,600

Balance Sheet of Brett Ltd as on 30-09-2012 (After Absorption)

2 Current liabilities

a Trade Payables 3,90,000

(1,80,000 + 2,10,000)

Total 23,04,495

B Assets

i) Tangible Assets ₃ 12,58,500

ii) Intangible Assets 2 Current Asset

a Inventories 270000

(1,20,000 + 1,50,000)

(72)

(3,80,000 + 2,50,000)

c Cash & cash equivalents 145995 10,45,995

(1,09,000 + 37,000 – 5)

Total 23,04,495

Note 1 Share Capital

Authorised – ……… Eq. shares of Rs 100 each …….. P.S. of Rs 100 each

Issued, subscribed & paid up

(80,000 + 31,093) 1,11,093 Eq. shares of Rs 100 each fully paid 11,10,930

2000, 10 % Pref shares of Rs 100 each 2,00,000

(out of above, 31093 of shares & 2000 P.S. are issued for consideration other than cash)

13,10,930

Note 2 Reserves & Surplus

Securities Premium (31,093 x Rs 5) 1,55,465

General Reserve (WN 2) 3,00,000

Profit and Loss Account 1,91,500

Capital Reserve 6,600

(73)

6,03,565

Note 3 Tangible Assets

Building (1,95,000 + 1,10,000) 3,05,000

Machinery (4,62,500 + 3,30,000) 7,92,500

Furniture (95,000 + 66,000) 1,61,000

(74)

17.

W Note 1 Calculation of Purchase consideration

Sr.No Particular Rs

A Assets

Goodwill 80,000

Block Assets (6,00,000 x 110%) 6,60,000

Stock and Debtors 4,00,000

Cash and Bank 1,33,000

(A) 12,73,000

B Liabilities (B) 2,00,000

C Net Assets (A-B) 10,73,000

Discharge of Purchase consideration

A Consideration payable to preference shareholders

10 % 30,000 preference share of Rs. 10 each 3,00,000

B consideration payable outside equity shareholders

(10,73,000 - 3,00,000) x 300000 ÷ 4,00,000 5,79,750

57975 equity shares of Rs. 10 each

C consideration payable to M. Ltd. (Mutually Set Off)

( 7,73,000 x 1,00,000 ÷ 4,00,000) 1,93,250

Goodwill or capital reserve to be appeared in balance sheet

Sr.No Particular Rs

(75)

B Value of investment appearing in books 1,00,000

Capital Reserve 93,250

C Goodwill in book 80,000

D Capital Reserve 13,250

In the Books of H Ltd. Balance sheet as at 30.09.2012 (Before Absorption)

Liabilities Rs. Assets Rs.

Equity share capital 4,00,000 Block Assets (6,00,000 -_32,500) 5,67,500 10 % preference share capital 3,00,000 Stock and Debtors 4,00,000 General Reserve 1,00,000 Cash and Bank (Bal. Figure) 1,33,000 Profit and Loss A/c 1,00,500

Creditors 2,00,000

Total 11,00,500 Total 11,00,500

Profit and Loss A/c for period 1.4.2012 - 30.09.2012

To dividend on Equity shares 40,000 By Balance b/d 1,00,000 preference shares 30,000 By profit earned for period 70,500

To balance c/d 1,00,500

(76)

18.

Calculation of Intrinsic value / share

No. Particulars Geeta Kiran

A Assets Goodwill 3,00,000 1,50,000 Fixed assets 5,00,000 10,00,000 Investment in Geeta Ltd (1000 x 103) 1,03,000 Other investments 2,50,000 77,000 Current assets 2,80,000 2,00,000 Total (A) 13,30,000 15,30,000 B Liabilities 3,00,000 5,00,000 C Net Assets 10,30,000 10,30,000 D No. of shares 10,000 5,000

E Intrinsic value per share 103 206

WN 2 Calculations & Discharge of Net P.C.

Sr. Particulars Rs.

A Share exchange ratio

(206 / 103) 2

B Gross nos of shares to be issued

(2 x 5000) 10,000

C Less : Nos of shares already held by Kiran

(77)

D Net nos of shares to be issued (B-C) 9,000

E Issue price per share 103

F Net purchase consideration 9,27,000

In the books of Geeta Ltd

Journal Entries

Nature of amalgamation – In nature of Purchase

Method of accounting – Purchase method

1 Business Purchase a/c _9,27,000

To liquidator of Kiran Ltd _9,27,000

2 Goodwill a/c Dr _1,50,000

Fixed Asset a/c Dr _10,00,000

Investments a/c Dr 77,000

Current assets a/c Dr _2,00,000

To Current liabilities _5,00,000

To Business Purchase _9,27,000

(Being assets & liabilities of Kiran Ltd taken over)

3 Liquidator of Kiran Ltd a/c Dr _9,27,000

To Eq. share capital a/c (9000 x 100) _9,00,000

To securities premium (9000 x 3) _27,000

(Being discharge of P.C.)

(78)

To special reserve a/c _1,50,000 (Being statutory reserve of Kiran Ltd

incorporated)

Balance Sheet of Geeta Ltd as on 01-04-2012.

No. Particulars Note Rs Rs

1 Shareholders Funds

a Share capital 1 _19,00,000

b Reserves & Surplus 2 _2,27,000 _21,27,000

2 Current liabilities _8,00,000

Total 29,27,000

Assets

1 Non current assets a Fixed assets

i Tangible assets (5 lac + 10 lac) _15,00,000

ii Intangible

Goodwill (1,50,000 + 2,00,000) _3,50,000 _18,50,000

2 Current assets a Current Investment

(2,00,000 + 77,000) _2,77,000

b Other current assets

(6,00,000 + 2,00,000) _8,00,000 _10,77,000

(79)

W Note 1 Share Capital

Authorised

….. Equity shares of Rs 100 each Issued, subscribed & paid up

(10,000 + 9,000) 19,000 equity shares of Rs 100 19,00,000 (out of above, 9000 equity shares were issued

without consideration being received in cash)

W Note 2 Reserves and Surplus

General Reserve 2,00,000

Securities Premium 27,000

Special Reserve 1,50,000

Amalgamation Adjustment a/c -1,50,000

(80)

19.

Calculation of Purchase consideration

No. Particulars Rs. Rs.

A Consideration payable to A ltd.

7,000 shares of R. 5 each (500 x 14 ÷ 1) 35,000

B Consideration payable to outsides Gross no. of shares to be issued

(5,000 - 500) x 14 shares 63,000

Less: already held by B ltd. In A ltd. 40,000

No.of shares to be issued 23,000

issue of 23,000 shares in A ltd @ 5 1,15,000

Total 1,50,000

In this problem investment of B ltd in shares of A ltd. is not revaluated

because, intrinsic value of shares is neither given nor calculated. Purchase

consideration is calculated on the basis of ratio i.e. 14 : 1 given in problem.

In the books of B Ltd In the books of B Ltd Journal Entries

1 Dividend receivable A/c Dr 50,000

To profit and loss A/c 50,000

(40,000 x Rs. 5 x 25%)

(Being entry for dividend receivable decleared by A ltd. @ 25%)

2 Realisation A/c Dr 8,30,000

To Stock 5,00,000

(81)

To Dividend receivable 50,000

To Bank 30,000

(Being assets taken over transfeled to Realisation A/c)

3 Sundry Creditors A/c Dr 3,00,000

6% Debentures A/c Dr 3,00,000

To Realisation A/c 6,00,000

(Being liabilities transfeled to the Realisation A/c)

4 Share Capital A/c Dr 5,00,000

To Equity shareholders A/c 5,00,000

(Being capital transfeled to the equity shareholders A/c)

5 Equity shareholders A/c Dr 70,000

To profit and loss A/c 70,000

(Being balance in profit & loss A/c transfeled to the eq. shareholders A/c)

6 A Ltd. A/c Dr 1,50,000

To Realisation A/c 1,50,000

(Being purchase consideration due)

7 Equity shareholders A/c Dr 80,000

(Being loss on realisation transfeled to equity shareholders)

8 Equity share in A Ltd. A/c Dr 1,15,000

To A ltd. A/c 1,15,000

(82)

9 Equity shareholders A/c Dr 1,50,000

To Equity shares in A ltd. 1,15,000

To A ltd. A/c 35,000

(Being dividend recei. under liquidation)

In the books of A Ltd : In nature of merger Journal Entries

1 General Reserve A/c Dr _2,50,000

To proposed dividend A/c _2,50,000

(Being dividend declared)

2 General Reserve A/c Dr _15,000

To investment in shares of B ltd. _15,000

(Being revaluation of investment of shares in B ltd.) (50,000 - 35,000)

3 Business purchase A/c Dr _1,50,000

To liquidator of B ltd. _1,50,000

(Being entry for business purchase)

4 Stock A/c Dr _5,00,000

Debtors A/c Dr _2,50,000

Bank A/c Dr _30,000

Dividend Receivable A/c Dr _50,000

Profit and loss A/c Dr _70,000

(83)

To 6% Debentures _3,00,000

To Sundry creditors _3,00,000

To Business purchase _1,50,000

(Being assets and liabilities incorporated) (Diff. between paid up capital & P.C)

5 Liquidator of B ltd. A/c Dr _1,50,000

To equity share capital _1,15,000

To investment in shares of B ltd. _35,000

(Being discharge of P.C)

6 Dividend Proposed A/c Dr _50,000

To Dividend Receivable A/c _50,000

(Being elimination of intercompany dues)

7 6% Debentures A/c Dr _3,00,000

To investment in debenture of B ltd. _50,000

To 7.5% preference share capital _2,50,000

(Being discharge of debenture holders by issuing them

preference share capital and cancellation of investment)

Balance Sheet of A Ltd as on 01-04-12 (After absorption)

No. Particulars Note Rs Rs

(84)

b Reserves and Surplus 2 1,15,000 14,80,000 2 Current liabilities

a Trade payables

(2,00,000 + 3,00,000) 5,00,000

b Short term provision

Proposed Dividend 2,00,000

Total 21,80,000

Assets

1 Non Current assets a Fixed Assets i) Tangible 3 8,50,000 2 Current Assets a) Other investments 70,000 b) Inventories (2,20,000 + 5,00,000) 7,20,000 c) Drs (2,00,000 + 2,50,000) 4,50,000 d) Bank balance (60,000 + 30,000) 90,000 13,30,000 Total 21,80,000

Note 1 Share Capital

Particulars Rs

Authorised

… Eq. shares of Rs 5 each