Amalgamation & Absorption Workbook Teachers

1
ACCOUNTING FOR AMALGAMATIONS
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.
Average Profits of past 5 years
30,100
Share capital + Reserves (2,00,000 + 20,000)
8% of share Capital & Reserves (B x 8%)
17,600
Super profit (A-C)
12,500
Goodwill Super Profit x 4 years of purchase
50,000
220,000
Step 2: Calculation of purchase Consideration (Net Assets Method)

Sr. No
A
Particulars
Rs
Rs
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%)

Debtors
(-)Provision for bad debts @ 10%
Total (A)
49,500
65,000
6,500
58,500
378,500
CA Final Financial Reporting

Accounting for Amalgamation Workbook
Anand R Bhangariya 86003 20000
Liabilities
Creditors (80,000-5%)
76,000
Total (B)
76,000
Net Assets Taken over i.e Purchase consideration
302,500
Step 3: Discharge of purchase consideration

Sr.No.
Particulars
Amount
Cash
150,000
Equity shares in Heena Ltd.
Mode of Discharge
Cash
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
To Goodwill
Rs
Particulars
25,000 By 5% Debentures
Rs
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)
To Debtors
65,000 By Equity Shareholders
To Bank
5% Debentures
1.2
A/c (Loss)
302,500
11,500
100000
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Loan from A
40000
Liquidation Expenses
4000
144,000
Total
534,000 Total
534,000
Heena Ltd A/c

Dr.
Cr.
Particulars
To Realisation A/C
Rs
Particulars
302,500 By Cash A/C
150,000
By Equity Shares in Heena Ltd.
Total
302,500
Rs
Total
152,500
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.
Particulars
1.3
Rs
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Particulars
Rs
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To Balance b/d
50,000 By Realisation A/C
To Heena Ltd
144,000
150,000 By Equity Shareholders A/C
Total
200,000
56,000
Total
200,000
Equity Shares in Heena Ltd A/c

Dr.
Cr.
Particulars
Rs
To Heena Ltd
Total
Particulars
Rs
152,500 By Equity Shareholders A/C
152,500
152,500
152,500
Total
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
1
Particulars
Business Purchase A/C
L.F
Dr
Dr.Rs
Cr.Rs
302,500
To Liquidator of Beena Ltd
302,500
(Being Purchase Consideration due to Beena Ltd)

2
1.4
Goodwill A/C
Dr
50,000
Land & Building A/C
Dr
90,000
Plant & Machinery A/C
Dr
130,500
Stock A/C
Dr
49,500
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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
To Stock A/C (10,000/40,000X25000)
6,250
6,250
(Being elimination of unrealised profit on stock)
1.5
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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
ASSETS
Fixed Assets (8,00,000 40,000)
760,000
1,600,000
Current Assets
900,000
860,000
1,660,000
2,460,000
500,000
Unsecured Loan
200,000
Creditors
310,000
360,000
Total (B)
510,000
860,000
1,150,000
1,600,000
10,000
80,000
115
20
Total (A)
B
Liabilities
Secured Loan
Net Assets (A-B)
No. of shares
Intrinsic value per share (C/D)
Step 2: Cash to be paid for every two shares held in X Ltd.

No
A
1.6
Particulars
Intrinsic value of 2 shares of X Ltd (2 x 115)
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Rs
230
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Intrinsic value of 10 shares of Y Ltd (10 x 20)
Cash to be paid for every 2 shares (A-B)
200
30
Step 3: Calculation of purchase Consideration

No.
Particulars
Rs
Mode of Discharge
Cash (30 x 10,000) 2
150,000 Cash
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

No
Particulars
Purchase consideration (Step 3)
Net Assets taken over (Step 1)
Capital Reserve (PC < Net asset)
Rs
650,000
1,150,000
500,000
Balance Sheet of Y Ltd (After Absorption)

(Amalgamation in nature of Purchase)
No
Particulars
Note
Rs
Rs
Equity & Liabilities

1
Shareholders Fund
1.7
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Share Capital
1,300,000
Reserves & Surplus
1,300,000
Non current liabilities

Long term borrowing
2,600,000
700000
Current Liabilities
Trade Payable
X Ltd
310,000
Y Ltd
360,000
Total (A)
B
Assets
Non current Assets
Fixed Assets
Tangible Assets
Current Assets
Cash & Cash equivalents
670,000
3,970,000
Bank (2,00,000 1,50,000)
2,360,000
50,000
Other Current assets

X Ltd
900,000
Y Ltd
660,000
Total (B)
1,610,000
3,970,000
Note1 Share Capital

No
Particulars
Authorised : 2,00,000 Eq. shares of Rs 10 each
1.8
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Rs
2,000,000
AT Academy

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

No
Particulars
Rs
Secured loan
500,000
Unsecured loan
200,000
700,000
Note 4 Tangible Fixed Assets

No
Particulars
Y Ltd
Rs
1,600,000
Acquired from X Ltd
760,000
2,360,000
1.9
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3. Transferor Co. B Ltd

Transferee Co. A Ltd
Step 1 Calculation of P & L Account balance on 30-9-2011

No.
Particulars
B Ltd.
Opening Balance
187,500
150,000
Add : Profit for six months
420,000
204,000
607,500
354,000
225,000
150,000
22,500
15,000
247,500
165,000
360,000
189,000
Dividend paid (15 % share capital)
Tax on dividend paid (10% of C)
A Ltd.
Balance as on 30.09.2011
Step 2 Balance Sheet as on 30.09.2011

No
Particulars
A Ltd.
B Ltd.

1
Shareholders Fund
Share Capital
Reserves & Surplus

Reserves
1,500,000
1,000,000
390,000
243,500
360,000
189,000
A Ltd. (Rs.4,15,000 - Rs. 25,000)

B Ltd. (Rs.2,56,000 - Rs.12,500)
P & L Account (Step 1)
1.10
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Current Liabilities
Trade Payable
Total (A)
Assets
Non current Assets
Fixed Assets
Opening WDV
93,750
75,000
2,343,750
1,507,500
1,250,000
875,000
62,500
43,750
1,187,500
831,250
237,500
187,500
390,000
256,000
528,750
232,750
2,343,750
1,507,500
(-) Depreciation @ 5 %
Tangible Assets
Current Assets
Stock in Trade
Debtors

(Balancing Figure)
Total (B)
Step 3 Calculation of Intrinsic value of shares of Company

No.
A
Particulars
A Ltd.
B Ltd.
Assets
Goodwill (Given)
120,000
Fixed other assets

Stock
1.11
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1,187,500
831,250
237,500
225,000
AT Academy

B Ltd. (1,87,500 7,500) + 25%

Debtors
390,000
256,000
Bank
528,750
232,750
2,343,750
1,665,000
Creditors
93,750
75,000
Total (B)
93,750
75,000
2,250,000
1,590,000
150,000
100,000
15
15.90
Total
B
Liabilities
Net Assets (A-B)
No. of equity shares
Intrinsic Value per share
Step 4 Share Exchange Ratio and Purchase Consideration

Particulars
No.
A
Existing no. of shares of B Ltd.
No. of shares to be issued (A x B)
Rs.
.
1.06
100,000
106,000
Purchase Consderation
D
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.
1.12
Particulars
Note No.
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Rs.
Rs.
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1
Share holders Fund
Share Capital
2,560,000
Reserves & Surplus
1,280,000
Current Liabilities
3,840,000
Trade payable
A Ltd.
93,750
B Ltd.
75,000
Total
4,008,750
Non Current Assets
Fixed Assets
i)
Tangible Assets
ii
Intangible assets Goodwill
Current Assets
Inventories
1.13
168,750
2,018,750
120,000
A Ltd.
237,500
B Ltd.
225,000
2,138,750
462,500
Trade Receivables
A Ltd.
390,000
B Ltd.
256,000
646,000

A Ltd.
528,750
B Ltd.
232,750
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761,500
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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

No
Particulars
Rs.
Securities Premium (106,000 shares x 5)
530,000
Reserves
390,000
Profit & Loss A/c
360,000
1,280,000

No
Particulars
1)
A Ltd
2)
Add : Acquired from B Ltd
Rs
1,187,500
831,250
2,018,750
1.14
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4. Transferor Co. Vibham

Transferee Co. Shubham
Nature of Amalgamation Merger
Step 1: Computation of intrinsic value per share

No.
A
Particulars
Vibham Ltd.
Shubham Ltd.
Fixed Assets
200
429
Current Assets
200
200
Goodwill
40
75
Total (A)
440
704
100
100
Assets
Liabilities
Loans secured
Preference share capital
60
Total (B)
100
160
Net Assets (A-B)
340
544
No. of shares
Intrinsic value per share (C/D)
68
136
Step 2 Share Exchange Ratio and Purchase Consideration

No.
A
Particulars
Existing no. of equity shares of Vibham Ltd.
No. of shares to be issued ( x 5)
1.15
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Rs.
.
1:2
5
2.5 crore
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Purchase consideration
D
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
Purchase Consideration incorporated in books
25
Paid-up capital of Vibham Ltd
50
Capital Reserve
25
Step 4: Balance sheet of Shubham Ltd. as on 1-4-2012

(Rs crores)
No.
Particulars
Note No.
Rs.
Rs.

1
Shareholders Fund
Share Capital
125
Reserves and Surplus
375
Non Current Liabilities
Long Term borrowings

Secured loan
500
200
Total
700
Assets
1
1.16
Non Current Assets
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Fixed Assets
(i)
Tangible
300
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
Total
60
125
Note 2 - Reserves and Surplus

No
Particulars
Rs. in crore
Capital Reserve (WN-3)
Other Reserves & Surplus (200+150)
350
Total
375
1.17
25
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5. Transferor Co. V Ltd.

Transferee Co. P Ltd.
Method of PC Pooling of Interest Method
Step 1: Calculation of Purchase consideration

(Net Payment Method)
No
Particulars
Share Exchange Ratio
Existing shares of V Ltd. (In Lakhs)
Rs
3:2
600
No of shares to be issued (In Lakhs)
900
(3/2 x 600)
10
Issue price per share (given)
Purchase consideration (C X D) (In Lakhs)
9,000
In the books of P Ltd (Transferee Co.)

Journal entries
No
1
Particulars
Business Purchase a/c
L.F
Dr
Debit
9,000
To Liquidator of V Ltd
2
9,000
Plant & Machine
Dr
5,000
Furniture
Dr
1,700
Stock
Dr
4,041
Drs
Dr
1,020
1.18
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Credit
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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
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

4
9,000
Bills payable a/c
Dr
80
To Bills Receivable
80
(Elimination of inter-company dues)

5
12% Deb. a/c
Dr
To 13% Deb. a/c
1,000
1,000
(Being 12% deb. converted into
1.19
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13% deb. in V Ltd)

6
Reserve (GR) a/c
Dr
To Bank a/c
(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
Shareholders Fund
Share capital
24,000
Reserves & Surplus
16,654
40,654
Long term borrowing

13 % Debentures
3
1,000
Current liabilities
Trade payables
Bills Payable (Rs. 120 - Rs. 80)
40
Creditors (Rs. 1080 + Rs. 463)
1,543
Short term provisions
2,532
Sundry Provisions (Rs. 1830 + Rs.702)

Total (A)
1.20
4,115
45,769
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ASSETS
1
Non current Assets
Fixed Assets
Tangible Assets
Current Asset
Inventories (7862 + 4041)
Trade Receivables (2120 + 1020)
3,140
Cash & Cash equivalent
1,722
29,004
11,903
(1114 + 609 1)
16,765
Total (B)
45,769

No
Particulars
Rs
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

24,000

No
Particulars
(a)
Securities Premium
(b)
Foreign Project Reserve
(c)
General Reserve
1.21
Rs
Rs
3,000
310
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P Ltd.
9,500
V Ltd.
3,200
12,700
Less : Adjustment for diff in PC & paid up capital

Less : Amalgamation exp
(d)
-3,000
-1
9,699
Profit & Loss Account

P Ltd.
2,870
V Ltd.
775
3,645
16,654
Note 3 - Tangible Fixed Assets

No
Particulars
Land and Building
Rs
6,000
Plant & Machinery (14000 + 5000)

Furniture (2304 + 1700)
19,000
4,004
29,004
1.22
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6.
W Note 1
Consideration payable to preference shareholders of P Ltd.
Sr.No.
Particulars
Existing preference dividend
Add : 10% increase
Required preference dividend after absorption
Face value of 8% preference shares to be issued
Rs.
40,000
4,000
44,000
550,000
( 44,000 8 )
W Note 2
Calculation of EPS
Sr. No.
Particulars
Profit before Tax
R Ltd
P Ltd
1,064,000
480,000
Less Tax
400,000
200,000
Profit after Tax
664,000
280,000
Less : Preference dividend
64,000
40,000
Earning available to ESH
600,000
240,000
No. of equity shares
240,000
120,000
EPS
2.5
W Note 3
Calculation of Price Earning Ratio of R Ltd.
PE Ratio = Market Price per Share / Earning per Share
= 40 2.5 = 16
1.23
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W Note 4
Calculation of Market price of P Ltd
Sr.No.
Particulars
Rs.
EPS of P Ltd.
PE Ration (75% x 16)
12
Market price share (AxB)
24
W Note 5
Calculation of no. of equity shares to be issued
Particulars
Sr.No.
A
Rs.
.
Existing as of shares of P Ltd.
No. of equity shares to be issued (AxB)
Issue of 72,000 equity shares @ Rs 40 each
0.6
120,000
72,000
2,880,000
W Note 6
Calculation of PS to be issued to Equity Shareholders of P Ltd.
Sr.No.
Particulars
Existing equity dividend of P Ltd (Given)
Rate of equity dividend of R Ltd
Rs.
192,000
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%)
1.24
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Loss of equity dividend (A-C)
Face Value of 8% preference shares to be issued
105,600
to compensate for loss of eq. dividend
1,320,000
Total Purchase consideration

Sr. No.
Particulars
Consideration payable to preference shareholders
Rs.
Rs.
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
Total (A+B)
4,200,000
4,750,000
Calculation of Goodwill
No.
A
Particulars
Assets
Fixed Assets (27,00,000 + 1,00,000)
Current Assets (23,00,000 - 2,00,000)
Total (A)
C
1.25
Rs.
2,800,000
2,100,000
4,900,000
Liabilities
Current Liabilities (10,00,000 - 40,000)
960,000
Total (B)
960,000
Net Assets
3,940,000
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Purchase Consideration
Goodwill ( D - C )
4,750,000
810,000
Balance Sheet as on 31-3-10

Sr. No.
Particulars
N. No.
Rs.
Rs.
EQUITY & LIABILITIES

1
Shareholders Fund
Share Capital
5,790,000
Reserve & Surplus
5,160,000
Long Term Borrowings
Current Liabilities (18,00,000 + 9,60,000)
2,760,000
Total
13,710,000
10,950,000
ASSETS
1
Non Current Assets
Fixed Assets
(i)
(ii)
2
Tangible Assets
(55,00,000 +27,00,000 + 1,00,000)
Intangible Assets Goodwill
Current Assets
(25,00,000 + 23,00,000 + 2,00,000)
Total
1.26
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8,300,000
810,000
9,110,000
4,600,000
13,710,000
AT Academy


No
Share Capital
Rs.
Authorised
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
Total
2,670,000
5,790,000

No
Particulars
Reserves
Rs.
3,000,000
Securities Premium (40-10) x 72,000
2,160,000
5,160,000
1.27
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7. Transfer Co. Indicate Ltd & Syndicate Ltd

Transferee Co. Sipiem Ltd
W Note 1 Calculation of Goodwill

No
Particulars
Avg. profits of last 3 years
Capital employed
Indikat (Rs)
Syndikat (Rs)
82,500
62,500
500,000
350,000
(share capital + P & L a/c)

C
Normal profit @ 10% on capital employed
50,000
35,000
Super profit (A-C)
32,500
27,500
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
A
Particulars
Syndikat
(Rs)
ASSETS
Goodwill (Step 1)
Indikat (Rs)
81,250
68,750
Fixed Assets
450,000
290,000
Current Assets
250,000
610,000
Total (A)
781,250
968,750
Liabilities
1.28
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Current Liabilities
200,000
550,000
Total (B)
200,000
550,000
Net Assets (A-B)
581,250
418,750
Issue price per share (10 + 2.5)
12.50
12.50
No of shares to be issued (C/D)
46,500
33,500
Existing shares of Transferor Co.
31,000
33,500
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
Sr
Particulars
Shareholders funds
Share Capital
Reserves & Surplus
Note
Rs
Rs
1,000,000
Securities Premium
250,000
(1,00,000 x 2.5)
2
Current liabilities
750,000
Total (A)
B
Assets
Non current assets
Fixed assets
Tangible assets
1.29
2,000,000
740,000
www.cavidya.com
AT Academy

ii
Intangible Goodwill
Current Assets
Cash & Cash Equivalents
150,000
Cash at Bank (20,000 x 12.5)
250,000
Other Current Asset
860,000
Total (B)
890,000
1,110,000
2,000,000

No
Particulras
Authorised 5,00,000 Eq. shares of Rs 10 each
Rs
5,000,000

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)
1,000,000
1.30
www.cavidya.com
AT Academy

8. Transfer Co. Payal Ltd

Transferee Co. Dipti Ltd
Method of PC Net Payment Method
W Note 1 Calculation of Purchase consideration

Sr.No.
A
Particulars
Rs.
Equity shares in Dipti Ltd

4,00,000 eq. shares of Rs 10 each issued at par
Cash
4,000,000
300,000
4,300,000
In the books of Payal Ltd.

Realisation A/c
Particulars
To land & building
To Goodwill
To Sundry Debtors
(3,98,400 40,000)
To Stock
Rs
Particulars
3,568,200 By 10% debentures
Total
1,000,000
500,000 By Creditors
436,200
By Bank O/D
200,000
358,400
By Dipti Ltd (PC)
785,200 By Shareholders A/c
To Plant & Machinery
Rs
1,643,900 (Loss on realization)
6,855,700
Total
4,300,000
919,500
6,855,700
Shareholders A/c
1.31
www.cavidya.com
AT Academy

Particulars
Rs
To Unpaid Calls
Particulars
Rs
10,000 By eq. share capital A/c
To Bank
5,000,000
300,000 By P & L A/c
To Eq. shares in Dipti Ltd
4,000,000 (269,500 40,000)
To Realisation A/c
229,500
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.
1
Particulars
Business Purchase A/c
L.F
Dr
Dr Rs.
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
1.32
Dr Rs.
www.cavidya.com
4,300,000
AT Academy

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.

No.
Particulars
Note No.
Rs.
Rs.

1
Shareholders Fund
Share Capital
18,950,000
Reserves & Surplus
1,268,000
Long Term borrowings

Secured Loans
6,000,000
10% Debentures (50 L + 10 L)
Current Liabilities
Short term borrowings

Bank overdraft
1.33
20,218,000
200,000
www.cavidya.com
AT Academy

Trade Payables
1,270,400
Total
1,470,400
27,688,400
ASSETS
1
Non Current Assets
Fixed Assets
(i)
Tangible
(ii)
Intangible
Goodwill
19,421,900
3,000,000
Current Assets
Inventories (17,92,600 + 7,85,200)
2,577,800
Trade Receivables (7,24,000 + 3,58,400)
1,082,400
(i)
Bank
(1684,200 3,00,000 140,000)
Other Current Assets
(i)
Bills Receivables
1,244,200
362,100
Total
22,421,900
5,266,500
27,688,400

No.
Particulars
Authorised : 20,00,000 eq. shares of Rs 10 each
Rs.
20,000,000
Issued, Subscribed & paid up

1)
19,00,000 eq. shares of Rs 10 each (15 Lakhs + 4 Lakhs)
2)
Less : Calls in arrears
1.34
19,000,000
-50,000
www.cavidya.com
AT Academy

(Out of above 4,00,000 eq. shares were issued without

Consideration being received in cash)
18,950,000
Note 2 - Reserve & Surplus

No.
Particulars
Rs.
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.
1)
2)
Particulars
Rs.
Land & Building

Dipti Ltd.
10333000
Payal Ltd.
3568200
13,901,200
Plant & Machinery

Dipti Ltd.
3876800
Payal Ltd.
1643900
Total
1.35
Rs.
www.cavidya.com
5,520,700
19,421,900
AT Academy

9. W Note 1 Calculation of Purchase consideration

Sr.No
Particulars
A Ltd
Consideration paid to Preference Shareholders
i)
A Ltd (3 lakh, 15 % P.S. of Rs 100 each issued @ Rs 150 each)
ii)
B Ltd (2 lakh, 15 % P.S. of Rs 100 each issued @ Rs 150 each)
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
ii)
B Ltd
450
300
1,200
B Ltd (7.5 lakh x 4) i.e. 30 lakh
900
Equity shares of Rs 10 each issued @ Rs 30

C
1,650
Total Purchase consideration (A + B)
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
A
B
Particulars
A Ltd B Ltd -
1.36
Rs in lakhs
10% 60
15%
10% 30
15%
www.cavidya.com
40
20
Total
60
AT Academy

W Note 3 Securities Premium

No
Particulars
A)
Preference share capital (5 lakh x 50)
B)
Equity share Capital (70 lakh x 20)
Rs
250
1,400
Total
1,650
W Note 4
Calculation of Goodwill / Capital Reserve
No
Particulars
Purchase consideration
Assets
Rs
2,850
Assets taken over (2000 + 1500)
3,500
Total (B)
3,500
Liabilities
Debenture Holders (W Note 2)
60
Creditors (270 + 120)
390
Bills Paayable (150 + 70)
220
Total (C)
670
Net Assets Taken Over (A-B)
Goodwill : (PC > Net asset) (A-D)
2,830
20

1.37
www.cavidya.com
AT Academy

Nature Amalgamation in nature of Purchase

Sr
Particulars
Note
Rs
Rs
Shareholders funds
Share Capital
1,200
Reserves & Surplus
1,670
Long term borrowing

15 % Debentures (W Note 2)
Current liabilities
Trade payables
60
Creditors (270 + 120)
390
Bills Payable (150 + 70)
220
Total
610
3,540
Assets
Non Current Assets
Fixed Assets
Tangible assets
ii
Intangible assets (W Note 4)
Non current investment
Unamortised exp.
1,550
20
1,570
200
Amalgamation Adjustment
2
2,870
20
Current Asset
1.38
www.cavidya.com
AT Academy

Inventories (350 + 250)
Trade Receivables
600
Debtors (250 + 300)
550
Bill Receivable (50 + 50)
100
Cash & cash equivalent

Cash at Bank (300 + 200)
500
1,750
3,540
Total
Note 1 Share Capital

No
Particulars
Rs in lakh
Authorised Eq. shares of Rs 10 each

.. 15% P.S. of Rs 100 each
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

No
Particulars
Securities Premium (WN 3)
Foreign Project Reserve (Statutory Reserve)
1.39
www.cavidya.com
Rs in lakh
1,650
20
AT Academy

1,670
Note 3 Tangible Assets

No
Particulars
Rs
Land & Bldg (550 + 400)
950
Plant & Machine (350 + 250)
600
1,550
1.40
www.cavidya.com
AT Academy


No
Particulars
Consideration paid to Preference Shareholders
i)
Alpha Ltd (4 lakh; 15% P.S. of Rs 100 each)
ii)
Beta Ltd (3 lakh; 15% P.S. of Rs 100 each)
Consideration paid to Equity Shareholders
i)
Alpha Ltd 10 lakh x 1.5 i.e. 15 lakh Equity shares
Alpha Ltd
Beta Ltd
400
300
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
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
A
B
Particulars
Alpha Ltd Beta Ltd -
1.41
Rs in lakhs
12% 96
16%
12% 80
16%
www.cavidya.com
72
60
Total
132
AT Academy

In the books of Gamma Ltd (Transferee Co.)

Journal entries
Nature Amalgamation in nature of merger
No
1
Particulars
L.F
Dr
Debit (Rs.)
Credit (Rs.)
3,000
To Liquidator of Alpha Ltd
1,900
To Liquidator of Beta Ltd
1,100
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
3,000
(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)

To Eq. share cap. A/c
1.42
www.cavidya.com
700
2,300
AT Academy

(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)

Sr
Particulars
Note
Rs
Rs
Shareholders funds
Share Capital
3,000
Reserves & Surplus
214
Long term borrowing
3,214
16 % Debentures (W Note 2)
132
Current liabilities
299
Total
3,645
Assets
Non Current Assets
Fixed Assets
2,200
Current Asset
1,445
Total
3,645

No
1.43
Particulars
www.cavidya.com
Rs in lakh
AT Academy


.. 15% P.S. of Rs 100 each
23 lakh Eq. shares of Rs 100 each fully paid
7 lakh 15% P.S. of Rs 100 each fully paid
2,300
700
3,000
All the above shares were issued without consideration being received in cash
No
Particulars
Profit and Loss A/c (140 106)
Revaluation Reserve
Rs in lakh
34
180
214
1.44
www.cavidya.com
AT Academy

11. Calculation of Net Assets excluding goodwill

No.
A
Particulars
Fixed Assets
400,000
100,000
Current Assets
230,000
220,000
630,000
320,000
200,000
140,000
200,000
140,000
430,000
180,000
Liabilities
Current Liabilities
Total (B)
B Ltd.
Assets
Total (A)
B
A Ltd.
Net Assets (A-B)
WN-2 Calculation of G/W (Super Profit Method)

No.
Particulars
Average Profits of last 3 years
Net Assets excluding G/W (WN-1)
Required Rate of Return
A Ltd.
B Ltd.
45,400
20,733
430,000
180,000
8%
8%
Normal Profit (B x C)
34,400
14,400
Super Profit (A - D)
11,000
6,333
Goodwill (E x 4 years)
44,000
25,333
Rounded off
44,000
25,330
WN-3 Calculation & discharge of PC

Particulars
No.
A
Net Assets excluding G/W (WN-1)
G/W (WN-2)
1.45
www.cavidya.com
A Ltd
B Ltd
430,000
180,000
44,000
25,330
AT Academy

Total PC (A + B)
Issue Price per share
Number of Shares (C/D)
474,000
205,330
Rs 10
Rs 10
47,400
20,533
In the books of A Ltd (Transferor Co.)

Journal Entries
No.
1
Particulars
Realisation A/c
L.F
Dr
Dr Rs
Cr Rs
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
To Realisation A/c
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

4
AS Ltd.
430,000
Dr
474,000
To Realisation A/c
474,000
(PC due)
5
Equity Shares in AS Ltd
Dr
To AS Ltd.
1.46
474,000
474,000
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AT Academy

(Being PC received)
6
Realisation A/c
Dr
44,000
44,000
(Profit on realization A/c

Transferred to Equity Shareholders A/c)
7
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.
1
Particulars
Realisation A/c
Dr Rs
Dr
Cr Rs
410,000
To Fixed Assets
100,000
To Current Assets
220,000
To Goodwill
90,000
(Transfer of assets of realization A/c)

2
Dr
140,000
To Realisation A/c
140,000
(Transfer of liability to realization A/c)

3
Dr
P & L A/c
Dr.

1.47
www.cavidya.com
200,000
70,000
270,000
AT Academy

(Transfer of Capital & reserves

to Equity Shareholders A/c)
4
AS Ltd. A/c
Dr
205,330
To Realisation A/c
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
Dr
64,670
To Realisation A/c
64,670
(Loss on realization)
7
Dr
To Equity shares in AS Ltd.
205,330
205,330
(dividend under liquidation paid)
1.48
www.cavidya.com
AT Academy

12. WN-1 Shareholding Patterns of T Ltd

No.
Particulars
Number
No. of Shares before bonus issue
10,000
(+) Bonus Shares (1:2)
Total no. of shares after bonus
No. of shares held by A (2000 + 1000) bonus
Shares held by outside shareholders (C-D)
5,000
15,000
3,000
12,000
WN-2 Calculation of PC & discharge of PC (Net payment)

No.
Particulars
Rs
Consideration payable to outsider

1
Shareholders
Form of discharge
8,000 shares of A Ltd. of Rs
1,200,000 100 each valued at Rs 150 each
12,000 Shares x Rs.100

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

Total
Mutual Set off
1,500,000
Ledger Accounts in the books of T Ltd.

Realisation A/c
(Rs. In Lakhs)
Particulars
To Fixed Assets
To Current Assets
1.49
Rs.
Particulars
15 By Current Liabilities
5 By A Ltd (PC due)
www.cavidya.com
Rs.
2
15
AT Academy

By Equity Shareholders
(Loss on Realisation)
20
20

Particulars
Rs.
Particulars
Rs.
To Realisation A/c
3 By Equity Share Capital
15
To A Ltd
3 By Reserves & Surplus
To Eq. shares in A Ltd
12
18
18
A Ltd A/c
Particulars
Rs.
To Realisation A/c
Particulars
Rs.
15 By equity shares in A Ltd
12
(Mutual Set Off)

15
15
Equity Shares in A Ltd A/c

Particulars
To A Ltd
Rs.
12
Particulars
12
Rs.
12
12

1.50
www.cavidya.com
AT Academy

Particulars
Rs.
To Equity Shareholders
15
Particulars
Rs.
By Balance b/d
10
By Reserves and Surplus
(Bonus)
Total
15
Total
15
Particulars
Rs.
Reserves and Surplus A/c

Particulars
Rs.
To Equity Share Capital A/c
By Bal b/d
In the books of A Ltd. (Transferee Co.)

Journal Entries
Method of Accounting Pooling of Interest
No.
1
Particulars
L.F
Dr
Dr Rs
Cr Rs
15
To liquidator of T Ltd.
2
15
Fixed Asset A/c
Dr
15
Current Asset A/c
Dr
1.51
To Current Liabilities
To Reserves & Surplus
15
www.cavidya.com
AT Academy

Liquidator of T Ltd A/c
Dr
15
To Equity Share Capital (8000 shares x 100)
To securities Premium (8000 shares x 50)
To Investment in shares of T Ltd.
(Discharge of liquidator of T Ltd.

& cancellation of investment)
4
Current Liability A/c
Dr
To Current Assets
(Elimination of inter company due)

5
Reserves & Surplus A/c (25 / 125 x 50,000)

To Stock (Current Asset)
(elimination of unrealised profit on stock)
1.52
www.cavidya.com
Dr
0.1
0.1
AT Academy

13. W Note 1 Calculation of Intrinsic value of shares

Sr.
A
Particulars
SHO
THAM
AN
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
2900
3300
1710
Liabilities : Loans
900
1000
700
Total (B)
900
1000
700
2000
2300
1010
100
80
40
(1252 60% x 20)

Total (A)
B
Net Assets (A-B)
No of shares (in lakhs)
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
Total no of shares (in lakhs)
100
80
Shares held by Puru Ltd (in lakhs)
40
20
1.53
www.cavidya.com
AT Academy

Shares held by outsiders
60
60
Intrinsic value per share (WN 1) (in Rs)
20
28.75
Consideration payable to outside Sh. holders(CxD)
1200
1725
Nos of shares to be issued @ Rs 20/Sh.(E 20)
60
86.25
Consideration payable to Puru Ltd (BxD)

to be mutually set off
800
575
Total purchase consideration (E+G)
2000
2300
In the books of Puru Ltd (Transferee Co.)

Nature of amalgamation In nature of purchase
Journal Entries
No.
1
Particulars
Investment in shaes of Sho Ltd A/c
L.F
Dr Rs
Dr
300
Dr
275
Cr Rs
(800 500) WN 2
Investment in shares of Tham Ltd A/c
(575 300) WN 2
To capital reserve
575
(Revaluation of investment in shares

of Sho Ltd & Tham Ltd)
2
Dr
4,300
To Liquidator of Sho Ltd
2,000
To Liquidator of Tham Ltd
2,300
(Being P.C. due)
1.54
www.cavidya.com
AT Academy

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
4,300
(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
1.55
Land A/c
Dr
20
Building A/c
Dr
300
Machinery A/c
Dr
600
Other Fixed asset A/c
Dr
50
www.cavidya.com
AT Academy

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
Share Capital
2962.5
Reserves & Surplus
4029.5
Long term borrowings

Loans (900 + 1000 + 700 + 1600)
6,992
4200
Total
11,192
ASSETS
1
Non current assets
Fixed Assets
i)
Tangible
Others
1.56
6,480
100
www.cavidya.com
AT Academy

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

Total
11,192

No
Particulars
Rs.
Authorised . Eq. shares of Rs 10 each

(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

No
Particulars
Reserves
Rs.
2,000
Securities Premium
1,462.50
Capital Reserve (575 8)
567
Total
4029.5
WN3 Tangible Fixed Assets

1.57
www.cavidya.com
AT Academy

Sr.No.
Particulars
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
1.58
Rs.
www.cavidya.com
6,480
AT Academy


Sr. No.
Particulars
Assets (FA + Net working capital)
Liabilities 10% Debentures
Net Assets i.e. PC (A B)
Rs Cr.
130
25
105
W Note 2 Shareholding Pattern

Sr. No.
Particulars
No of Shares
Total Shares of H Ltd
Total 2.5 Cr Shares
Shares held by S Ltd.
2 Cr shares
Shares held by Outside shareholders
0.5 Cr share
W Note 3 Discharge of PC
Sr. No.
A
B
C
Particulars
Rs
Consideration payable to outside

shareholders (0.5 / 2.5 x 105)
Consideration payable to S Ltd.
(2 / 2.5 x 105)
Total
21
84
Form of discharge
21 lakh shares of Rs 10 @
Rs 100 each
Mutual set off
105
In the books of S Ltd. (Transferee Co.)

Journal Entries
Nature of Amalgamation : Purchase
1.59
www.cavidya.com
AT Academy

Sr. No.
1
Particulars
L.F
Investment in eq. shares of H Ltd A/c
Dr
(84 32) (WN 3)
Dr Rs
52
To Capital Reserve
52
(Being upward revaluation of shares in H Ltd)

2
Dr
105
To liquidator of H Ltd. (PC due)

3
105
FA A/c
Dr
30
CA A/c
Dr
300
200
To 10 % debentures
25
105
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.

(Discharge of
investment)
5
Cr Rs
liquidator
&
cancellation
10 % debenture A/c
84
of
Dr
To Investment in 10% deb of H Ltd.
25
24
To Capital Reserve A/c

(Being investment in debentures cancelled & the
difference between FV & cost transferred to CR)
1.60
www.cavidya.com
AT Academy

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

Rs in Crores
No.
Particulars
N. No.
Rs.
Rs.

1
Shareholders funds
Share Capital
82.1
Reserves & Surplus
471.90
Current Liabilities
554
120
(356+200)
556
Total
1,230
ASSETS
1
Non current assets
Fixed Assets
i)
Tangible (100 + 30)
130
Net Current assets
1,100
(800 + 300)
Total
1,230

No
Particulars
Rs.
Authorised . Eq. shares of Rs 10 each

1.61
www.cavidya.com
AT Academy

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

No
Particulars
Capital Reserve
Rs.
53
Reserves & Surplus
400
Securities Premium
18.90
Total
1.62
www.cavidya.com
471.90
AT Academy

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

Particulars
Rs. (lakhs)
Calculation of yield
18
Yield = 45 x 40%
W Note 3 Capitalised value of yield

Particulars
Capitalised value of yield
Rs. (lakhs)
120
Yield 15% = 18 15%
W Note 4 Consideration payable to Foreign Collaborating Co.

Particulars
Consideration payable to Foreign Collaborating Co.
(24 % x 120)
Rs. (lakhs)
28.80
W Note 5 Amount to be treated as unsecured loan from foreign collaborating

company
Sr.
Particulars
PC payable (WN 4)
Cost of acquisition of foreign company
1.63
Rs. Lakhs
28.80
www.cavidya.com
2.40
AT Academy

Capital Gain (A-B)
26.40
Tax @ 30%
Net amount payable to foreign co. (A-D)
20.88
Amount payable in cash (50%)
10.44
Amount to be treated as unsecured loan
10.44
7.92
In the books of Variety Ltd. (Transferee Co.)

Journal Entries
No.
1
Particulars
L.F
Investment in Eq. shares of VR Ltd
Dr Rs
Cr Rs
28,80,000
To cash & Bank (W Note 45)
10,44,000
To unsecured loan from foreign co.
10,44,000
To TDS payable
(Being purchase of 24% shares of VR
7,92,000
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
To Capital Reserve
(Being upward revaluation of shares of VR Ltd)
1.64
www.cavidya.com
Dr
83,80,000
83,80,000
AT Academy

Dr
1,20,00,000
To liquidator of VR Ltd
5
1,20,00,000
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
6
1,20,00,000
Liquidator of VR Ltd. A/c
Dr
1,20,00,000
To Investment in eq shares of VR Ltd

(Discharge of liquidator &
investment)
7
1,20,00,000
cancellation of
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)

Sr
Particulars
Note
Rs
Shareholders funds
Share Capital
80,00,000
Reserves & Surplus
2,02,05,000
Non Current liabilities

1.65
www.cavidya.com
Rs
2,82,05,000
AT Academy


Unsecured loan from foreign
10,44,000
collaborating company
Secured loan
2
40,00,000
50,44,000
Current liabilities
(60lac + 20lac 1.50lac)
78,50,000
Total
B
Assets
Non Current Assets
Fixed Assets
i)
Tangible Assets
4,10,99,000
1,53,25,000
(120 lac + 33.25 lac)

2
Current Asset
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+5,00,00010,44,0007,92,000)
Total
4,10,99,000

No
1.66
Particulars
www.cavidya.com
Rs
AT Academy


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

No
Particulars
Capital Reserves (83,80,000 41,75,000)
Other reserves (variety limited)
Rs
42,05,000
1,60,00,000
2,02,05,000
1.67
www.cavidya.com
AT Academy

16. W Note 1 Profit & Loss A/c for 6 month ended 30-9-2012
Particulars
Brett Ltd
To Pref Dividend
(10% of 2,00,000)
To Equity dividend
Shane Ltd
20,000
1,20,000
1,91,500
Total
3,11,500
Shane
Ltd
Ltd
By Balance B/d
2,00,000
1,00,000
By Profit for 6
months
1,02,500
54,000
9000
3,11,500
1,54,000
45,000 By dividend recd
(15% of 8
Lakhs)
To Balance c/d
Brett
Particulars
(15% of 3
from Shane Ltd
Lakhs)
(45000
x
89,000
6000/30,000)
1,54,000
Total
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. doesnt include dividend recd
from Brett Ltd.
W Note 2
Balance Sheet as on 30-9-2012 (Before absorption)
Liabilities
ESC
10% PSC
Brett
Shane
Ltd
Ltd
8,00,000
3,00,000 Building
2,00,000
GR
3,00,000
1,00,000
P & L A/c (WN1)
1,91,500
Crs
1,80,000
1.68
Assets
(-) Depr @ 5%
for 6 M
89,000 Machinery
2,10,000
www.cavidya.com
(-) Depr @ 15%

for 6 M
Brett
Shane
Ltd
Ltd
2,00,000
1,00,000
5,000
2,500
1,95,000
97,500
5,00,000
3,00,000
37,500
22,500
AT Academy

4,62,500
2,77,500
1,00,000
60,000
5,000
3,000
95,000
57,000
60,000
Stock
1,20,000
1,50,000
Debtors
3,80,000
2,50,000
1,09,000
37,000
50,000
30,000
14,71,500
8,99,000
Furniture
(-) Depr @ 10%
for 6 M
Investment in
Shares of Shane
Cash&
(B/F)
Bank
Preliminary exp
Total
14,71,500
8,99,000
Total
W Note 3
Calculation of Net Assets
No.
A
Particulars
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
Cash & Bank

1.69
Rs
37,000
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AT Academy

Total (A)
B
9,93,000
Liabilities
Creditors (B)
2,10,000
Net Assets i.e. PC (A-B)
7,83,000
W Note 4
Calculation of PC
Sr.No.
A
Particulars
Consideration payable to PSH
(2000, 10% PS of Rs 100 each)
Rs
2,00,000
Consideration payable to outside SH

24000 x (783000 200000) 30000 = 4,66,400
B
No. of eq. shares to be issued = (4,66,400 / 15) = 31093.33
4,66,400
i.e. issue of 31093 shares @ Rs 15 = 466,395

Cash for fractional share (0.33 x 15) = 5
Consideration payable to Brett Ltd
C
(6000 x (783000 200000) 30000 = 1,16,600
1,16,600
To be mutually set-off
D
Total PC
7,83,000
W Note 5 Calculation of Net Capital Reserve

No.
A
1.70
Particulars
Rs.
Capital Reserve arising an revaluation of

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AT Academy

Investment in Shane Ltd (116,600 60,000)
56,600
Goodwill
50,000
Net Capital Reserve (A-B)
6,600
Balance Sheet of Brett Ltd as on 30-09-2012 (After Absorption)

Sr
Particulars
Note
Rs
Shareholders funds
Share Capital
13,10,930
Reserves & Surplus
6,03,565
Current liabilities
Trade Payables
Rs
19,14,495
3,90,000
(1,80,000 + 2,10,000)
Total
B
Assets
Non Current Assets
Fixed Assets
i)
Tangible Assets
ii)
Intangible Assets
Current Asset
Inventories
23,04,495
12,58,500
270000
(1,20,000 + 1,50,000)
b
Trade Receivables
1.71
630000
www.cavidya.com
AT Academy

(3,80,000 + 2,50,000)
c
145995
10,45,995
(1,09,000 + 37,000 5)
Total
23,04,495

No
Particulars
Rs

.. P.S. of Rs 100 each
(80,000 + 31,093) 1,11,093 Eq. shares of Rs 100 each fully paid
2000, 10 % Pref shares of Rs 100 each
11,10,930
2,00,000
(out of above, 31093 of shares & 2000 P.S. are issued for
consideration other than cash)
13,10,930

No
Particulars
Rs
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
Preliminary Expenses
1.72
(50,000)
www.cavidya.com
AT Academy

6,03,565
Note 3 Tangible Assets

No
Particulars
Rs
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
12,58,500
1.73
www.cavidya.com
AT Academy


Sr.No
Particular
Rs
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)
Liabilities
Net Assets
(B)
(A-B)
12,73,000
2,00,000
10,73,000
Discharge of Purchase consideration

No
A
Particulars
Consideration payable to preference shareholders
10 % 30,000 preference share of Rs. 10 each
Rs
3,00,000
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
A
1.74
Particular
Agreed Purchase Consideration
www.cavidya.com
Rs
1,93,250
AT Academy

Value of investment appearing in books
1,00,000
Capital Reserve
93,250
Goodwill in book
80,000
Capital Reserve
13,250
In the Books of H Ltd. Balance sheet as at 30.09.2012 (Before Absorption)

Liabilities
Rs.
Assets
Block Assets (6,00,000 32,500)
Rs.
Equity share capital
4,00,000
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
5,67,500
11,00,500
Profit and Loss A/c for period 1.4.2012 - 30.09.2012

Particulars
Rs.
Particulars
To dividend on Equity shares
40,000 By Balance b/d
preference shares
30,000 By profit earned for period
To balance c/d
1,00,000
70,500
1,00,500
Total
1.75
Rs.
1,70,500
www.cavidya.com
Total
1,70,500
AT Academy

18. Calculation of Intrinsic value / share

No.
Particulars
Geeta
Kiran
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
Liabilities
3,00,000
5,00,000
Net Assets
10,30,000
10,30,000
No. of shares
10,000
5,000
Intrinsic value per share
103
206
WN 2 Calculations & Discharge of Net P.C.

Sr.
A
Particulars
Rs.
Share exchange ratio

(206 / 103)
Gross nos of shares to be issued

(2 x 5000)
10,000
Less : Nos of shares already held by Kiran

Ltd in Geeta Ltd
1.76
1,000
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AT Academy

Net nos of shares to be issued (B-C)
Issue price per share
Net purchase consideration
9,000
103
9,27,000
In the books of Geeta Ltd

Journal Entries
Nature of amalgamation In nature of Purchase
Method of accounting Purchase method
No.
1
Particulars
L.F
Business Purchase a/c
Dr Rs
9,27,000
To liquidator of Kiran Ltd

2
9,27,000
Goodwill a/c
Dr
Fixed Asset a/c
Dr
Investments a/c
Dr
Current assets a/c
Dr
1,50,000
10,00,000
77,000
2,00,000
To Current liabilities
5,00,000
9,27,000
(Being assets & liabilities of Kiran Ltd taken

over)
3
Cr Rs
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.)

4
Amalgamation adjustment a/c
1.77
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Dr
1,50,000
AT Academy

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
Share capital
Reserves & Surplus
Current liabilities
19,00,000
2,27,000
21,27,000
8,00,000
Total
29,27,000
Assets
1
Non current assets
Fixed assets
Tangible assets (5 lac + 10 lac)
ii
Intangible
Goodwill (1,50,000 + 2,00,000)
Current assets
Current Investment
(2,00,000 + 77,000)
3,50,000
18,50,000
2,77,000
Other current assets

(6,00,000 + 2,00,000)
8,00,000
Total
1.78
15,00,000
www.cavidya.com
10,77,000
29,27,000
AT Academy

W Note 1 Share Capital

No
Particulars
Rs.
Authorised
.. Equity shares of Rs 100 each
(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

No
Particulars
General Reserve
Rs.
2,00,000
Securities Premium
27,000
Special Reserve
1,50,000
Amalgamation Adjustment a/c
-1,50,000
1.79
Total
2,27,000
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AT Academy

19. Calculation of Purchase consideration

No.
Particulars
Rs.
Rs.
Consideration payable to A ltd.

7,000 shares of R. 5 each (500 x 14 1)
35,000
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
No.
1
Particulars
Dividend receivable A/c
L.F
Dr
Dr Rs
Cr Rs
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
1.80
Dr
8,30,000
To Stock
5,00,000
To Debtors
2,50,000
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AT Academy

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
Dr
80,000
To Realisation A/c
80,000
(Being loss on realisation transfeled to equity

shareholders)
8
Equity share in A Ltd. A/c
Dr
To A ltd. A/c
1,15,000
1,15,000
(Being discharge of purchase consideration)

1.81
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AT Academy

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

No.
1
Particulars
General Reserve A/c
L.F
Dr
Dr Rs
Cr Rs
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
Debtors A/c
Dr
Bank A/c
Dr
Dividend Receivable A/c
Dr
Profit and loss A/c
Dr
To Capital reserve (B/F)

1.82
www.cavidya.com
5,00,000
2,50,000
30,000
50,000
70,000
1,50,000
AT Academy

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

1
Shareholders funds
Share capital
1.83
1
www.cavidya.com
13,65,000
AT Academy

Reserves and Surplus
Current liabilities
Trade payables
1,15,000
(2,00,000 + 3,00,000)
b
14,80,000
5,00,000
Short term provision

Proposed Dividend
2,00,000
Total
21,80,000
Assets
1
Non Current assets
Fixed Assets
i)
Tangible
Current Assets
a)
Other investments
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)
8,50,000
70,000
Total
90,000
13,30,000
21,80,000

Particulars
Rs
Authorised
Eq. shares of Rs 5 each
1.5% Pref. shares of Rs 100 each
1.84
www.cavidya.com
AT Academy


(2,00,000 + 23,000) 2,23,000 Eq. shares of Rs 5 each
2500, 7.5 % Pref. Shares of Rs 100 each
11,15,000
2,50,000
(Out of above, 23000 Eq. shares and 2500 were issued for
consideration other than cash) Dont write Pref. shares bcoz it
used to discharge a liability
13,65,000

Particulars
General Reserve (3,00,000 2,50,000) 15000
Capital Reserve (1,50,000)
Rs
35,000
1,50,000
P & L a/c
-70,000
Total
1,15,000
Note 3 Tangible assets

Particulars
Rs
Factory shed
5,00,000
Machinery
3,00,000
Furniture
50,000
Total
1.85
www.cavidya.com
8,50,000
AT Academy

20. Calculation of Net Assets

No.
A
Particulars
X Transferee
Y Transferors
Assets
Fixed assets
10,00,000
50,000
Sundry Debtors
2,90,000
1,50,000
Stock
4,80,000
2,10,000
Shares in Y
1000Y
Shares in X
3000X
Cash
1,40,000
Dividend receivable
24,000
1910000+1000Y
90,000
524000+3000X
Liabilities
12% Debentures
3,00,000
Current liabilities
2,00,000
Dividend payable
1,20,000
Net Assets
No. of shares
Intrinsic value of share
90,000
3,20,000
3,90,000
1590000+1000Y
134000+3000X
15,000
5,000
(1590000+1000Y ) 15,000
(134000+3000X) 5,000
Let intrinsic value of share of X ltd. Be X , Y ltd. Be Y
X=
1590000 + 1000
15000
15000 X = 1590000 + 1000 Y

15000 X - 1000 Y = 1590000
134000 + 3000
5000
5000 Y = 134000 + 3000
X
Y=
- 3000 X + 5000 Y = 134000

1.86
www.cavidya.com
AT Academy

Multiply (1) by 5 and (2) by 1

75000 X - 5000 Y = 7950000
- 3000 X + 5000 Y = 134000
72000 X = 8084000
X = 112.28
Y=
Y = 94.17
134000 + 3000 (112.28)

5000
Calculation of Purchase Consideration

No
1
Particulars
Rs
Consideration payable to X ltd.
Rs
94,170
1000 x shares x 94.17

To be set off matually
2
Consideration payable to outsides equity shareholders

Gross no. of shares to be issued
(5,000 - 1,000) x 94.17 112.28
Less : no.of shares already held by Y
Net no of Shares to be Issued
Issue of 354 shares @ 112.28
Cash for fractional shares (.83 x 112.28)
Total
1.87
www.cavidya.com
3354.83
3,000
354.83
39,747
93
1,34,010
AT Academy

Journal Entries
In the books of X Ltd
Amalgamation in nature of merger
No.
1
Particulars
Profit and loss A/c
L.F
Dr
Dr Rs
Cr Rs
1,20,000
To proposed dividend
1,20,000
(Being dividend disclosed @ 8% by x ltd)

2
General Reserve A/c
Dr
55,830
To Investment in Y ltd.
55,830
(Being revaluation of ivestment in Y ltd.)

3
Dr
1,34,010
To liquidators of Y ltd.
1,34,010
(Being entry for business purchase)

4
Fixed Assets A/c
Dr
50,000
Sundry debtors A/c
Dr
1,50,000
Stock A/c
Dr
2,10,000
Bank A/c
Dr
90,000
Dividend Receivable A/c
Dr
24,000
P & L A/c
Dr
29,160
To Capital Reserve (b/f)

1,34,010
To 12% Debentures
3,00,000
1.88
29,150
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90,000
AT Academy

(Being assets & liabilities incorporated)

5
Liquidator of Y ltd. A/c
Dr
1,34,010
To Cash
93
To equity share capital (354 x 100)
35,400
To share premium (354 x 12.28)
4,347
To investment in share of Y
94,170
(Being discharge of purchase Consideration)

6
Proposed dividend A/c
Dr
24,000
To dividend receivable A/c
24,000
(Being elimination of intercompany dues)

7
Capital Reserve A/c
Dr
20,000
To Stock A/c
20,000
(Being elimination of profit on stock)

8
Creditors A/c
Dr
40,000
To debtors A/c
40,000
(Being elimination of intercompany owings)
Balance Sheet of X Ltd as on 01-04-12. (After absorption)

No.
Particulars
Note
Rs
Rs

1
Shareholders funds
Share Capital
15,35,400
Reserves & Surplus
1,68,507
1.89
www.cavidya.com
17,03,907
AT Academy

Non Current liabilities

Long term borrowing
Secured loan 12% Debenture
Current liabilities
Short term provision

Proposed dividend (1,20,000 24,000)
3,00,000
96,000
Other current liabilities

(2,00,000 + 90,000 40,000)
2,50,000
Total
3,46,000
23,49,907
ASSETS
1
Non current assets
Fixed assets
Tangible (10,00,000 + 50,000)
Current assets
Inventories (4,80,000 + 2,10,000 20,000)
6,70,000
Trade Receivable (2,90,000 + 1,50,000

40K)
4,00,000
10,50,000

(1,40,000 + 90,000 93)
2,29,907
Total
12,99,907
23,49,907

Particulars
Rs
Authorised
1.90
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AT Academy

Eq. Shares of Rs 100 each

(15000 + 354) = 15,354 eq. shares of Rs 100 each
15,35,400
Out of above, 354 eq. shares were issued without consideration

being recd. in cash

Particulars
Rs
General Reserve (2,00,000 55,830)
1,44,170
Securities Premium
4,347
Capital Reserve (29,150 20,000)
9,150
P & L a/c (1,60,000 1,20,00 29,160)
10,840
Total
1,68,507
Balance in Reserve A/c of Y ltd. At the time of absorption

No
Particulars
Rs
General Reserve
Profit and loss A/c Opening Balance
10,000
Add : Dividend received
24,000
1,00,000
34,000
Less : Loss on revalation of investment

in x ltd [5,00,000 - (3000 x 112.28)]
Rs
Profit and loss A/c (Debit Balance)
1.91
www.cavidya.com
-1,63,160
-29,160
AT Academy

21. Step 1 Calculation of Intrinsic value per share

Sr. No.
A
Particulars
C Ltd
D Ltd
Assets
Fixed Assets
30,00,000
1,50,000
3000 y
9000 x
8,70,000
4,50,000
Stock
14,40,000
6,30,000
Bank
4,74,000
2,70,000
Investment
Debtors
Dividend receivable from

C
1,08,000
Ltd (9000 x 12% x 100)

Total A
B
57,84,000 + 3000 y
16,08,000 + 9000 x
14 % debentures
9,00,000
Current Liabilities
6,00,000
2,70,000
Proposed dividend
5,40,000
Liabilities
DDT (10% of 5,40,000)
54,000
11,94,000
11,70,000
4590000 + 3000 y
4,38,000 + 9000 x
45,000
15,000
Total (B)
C
Net Assets (A-B)
Total no. of Shares

(c/d)
(45,90,000 + 3000 y) /
45,000
(4,38,000 + 9000 x ) /
15,000
Assuming that intrinsic value / share of C ltd is x & that of D Ltd is y.

x = 45,90,000 + 3000 y 45000
1.92
y = 438000 + 9000 x 15000

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x = 1530 + y 15
y = 146 + 3x 5
therefore 15x = 1530 + y
5y = 146 + 3x
therefore 15x y = 1530
- 3x + 5y = 146
therefore 15x y = 1530
- 15x + 25y = 730
15x y = 1530
+ 15 + 25 = 730
24
= 2260
therefore y = 94.17
therefore x = 108.28
Step 2 : Calculation and discharge of PC

Sr.No.
Particulars
Rs
Consideration payable to C Ltd. (3000 x 94.17) (Mutual set off)
Consideration payable to outside shareholders
(i)
Gross no. of shares to be issued = (12000 x 94.17) 108.28
(ii)
(-) no. of shares already held by D Ltd in C Ltd.
(iii)
Net number of shares to be issued
1436.28
(iv)
Issue of 1436 shares @ 108.28
1,55,490
(v)
Cash for fractional shares
Total Purchase consideration [(A)+ B (iv) + B(v)]
2,82,510
10436.2763
9000
30
4,38,030
Step 3
Calculation of reserve & surplus balance of D Ltd immediately prior to
absorption (Only in case of pooling of interest method)
1.93
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AT Academy

No.
Particulars
General Reserve
Profit & Loss A/c
Rs
Rs
3,00,000
30,000
Add : dividend received from C Ltd

C
Rs
1,08,000
1,38,000
4,38,000
Gain / Loss on revaluation of

Investment in C Ltd.
(i)
Cost
15,00,000
(ii)
Agreed value 9000 shares x 108.28
Debit balance is P & L
9,74,520
-5,25,480
-87,480
Step 4 : Journal Entries in books of C Ltd.

No.
1
Particulars
P & L A/c
L.F
Dr
Dr Rs
5,94,000
To Proposed Dividend (12% x 45,00,000)
5,40,000
To Divided distribution tax

2
General Reserve A/c (4,50,000 282,510)
54,000
Dr
1,67,490
To Investment in D Ltd
1,67,490
(Less on revaluation of investment adjusted

against GR)
3
Dr
4,38,030
To Liquidator of D Ltd
4
4,38,030
Fixed Assets A/c
Dr
1,50,000
Debtors A/c
Dr
4,50,000
Stock A/c
Dr
6,30,000
1.94
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Cr Rs
AT Academy

Bank A/c
Dr
2,70,000
Dividend receivable from C Ltd A/c
Dr
1,08,000
Profit & Loss A/c
Dr
87,480
To 14% debentures
9,00,000
2,70,000
4,38,030
To Capital Reserve
87,450
[15,00,000 - (15,000 X 94.17)]

5
Liquidator of D Ltd A/c
Dr
4,38,030
To Equity share Capital A/c (1436 x 100)
1,43,600
To Securities Premium (1436 x 8.28)
11,890
To Bank
30
To Investment in shares in D Ltd

6
Proposed Dividend A/c
2,82,510
Dr
1,08,000
To Dividend receivable from C Ltd

7
Capital Reserve A/c
1,08,000
Dr
60,000
To Stock
60,000
(unrealized profit on stock adjusted against

capital reserve)
8
Dr
To Debtors A/c
(inter company dues eliminated)
1,20,000
1,20,000
1.95
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AT Academy

No
A
Particulars
Rs.
Authorised .. eq. shares of Rs 100 each

Issued, subscribed & paid : 46,436
eq. shares of Rs 100 each fully paid
46,43,600
(Out of above 1436 shares were issued

Balance Sheet of C Ltd. as on 1-4-13

No.
Particulars
Note No.
Rs.
Rs.

1
Shareholders fund
Share Capital
46,43,600
Reserves & Surplus
3,24,370
Secured loans
- 14 % Debentures
9,00,000
Current Liabilities
Short term provisions

- Proposed dividend
4,32,000
- DDT
b.
54,000
Other Current Liabilities
4,86,000
7,50,000
Total
71,03,970
ASSETS
1.96
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AT Academy

Non Current Assets
Fixed Assets
Tangible Assets
Current Assets
Debtors
12,00,000
Stock
20,10,000
Bank
7,43,970
31,50,000
Total
71,03,970

No
Particulars
GR (4,00,000 - 1,67,490)
Rs
2,32,510
P & L (7,34,000 - 5,94,000 - 87,480)
52,520
Capital Reserve (87,450 - 60,000)
27,450
SP
11,890
Total
1.97
www.cavidya.com
3,24,370
AT Academy

22. Statement of Consideration payable by A Ltd.

No.
A
Particulars
Rs
Consideration payable to PSH (100,000 10%)
Consideration payable to A Ltd (8 / 6 x 6000) x 10
80,000
(Mutual set off)
Consideration payable to outside equity shareholders
(i)
Gross number of shares to be issued

8/6 x (30,000 6000) =
(ii)
90,000
(Issue of 900 10% Preference shares of Rs 100 each at par)
32,000
Less : number of shares already held by B Ltd

in A Ltd =
5,000
(iii)
Net no. of shares to be issued =
(iv)
Issue of 27,000 shares @ Rs 10 each
2,70,000
Total PC (A+B+C)
4,40,000
27,000
In the books of A Ltd, Journal Entries Amalgamation in nature of purchase

No.
1
Particulars
Fixed Asset A/c
L.F
Dr
Dr Rs
Cr Rs
1,05,000
To Revaluation Reserve
(Appreciation in value of FA credited
1,05,000
to Revaluation reserve A/c)

2
Reserve & Surplus A/c
Dr
To proposed dividend
1.98
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60,000
60,000
AT Academy

Proposed Dividend A/c
Dr
60,000
To Bank
4
60,000
Bank A/c
Dr
6000
To Dividend Income A/c (6000 x 10 x 10%)

5
Dividend Income A/c
6000
Dr
6000
To P & L A/c
6000
(Dividend income transferred to P & L A/c)

6
Business purchase A/c
Dr
4,40,000
To liquidates of B Ltd
7
4,40,000
Fixed Assets A/c (250,000 + 15%)
Dr
2,87,500
Stock A/c (3,20,000 5%)
Dr
3,04,000
Debtors A/c
Dr
1,90,000
Bills Receivable A/c
Dr
20,000
Cash & Bank (40000 30000 + 5000)
Dr
(30000 = Divi. Paid & Rs. 5,000 Dividend Recd)
15,000
To Provision for bad debts (5% x 1,90,000)

8%)
9,500
To Debentures holders of B Ltd (150,000 +
1,62,000
To Sundry Creditors
1,25,000
To Bills payable
25,000
4,40,000
To Capital Reserve (B/F)

8
Liquidator of B Ltd A/c
Dr
To Equity Share Capital
1.99
55,000
www.cavidya.com
4,40,000
2,70,000
AT Academy

To 10% Preference Share Capital
90,000
To Investment in B Ltd.
(Discharge of PC & Cancellation
80,000
of investment in B Ltd)
9
Debenture holders of B Ltd
Dr
Discount on issue of debentures
Dr
(162000 x 10%) 90%
1,62,000
18,000
To 12% Debenture A/c

10
Capital Reserve A/c
1,80,000
Dr
30,000
To Bank A/c
(Liquidation expenses paid by A Ltd
30,000
adjusted against capital reserve)

11
Creditors A/c
Dr
To Debtors A/c
(elimination of inter company dues)
1.100
www.cavidya.com
10,000
10,000
AT Academy

23. Calculation of Purchase Consideration

No.
Particulars
M Ltd
N Ltd
Assets
Sundry Asset
30,000
20,000
Creditors
15,000
6,000
Net Assets (Purchase Consideration)
15,000
14,000
Liabilities
In the books of N Ltd (Transferor Co.)

No.
1
Particulars
Realisation A/c
L.F
Dr
Dr Rs
33,000
To Sundry assets
2
Cr Rs
33,000
Creditors A/c
Dr
6,000
To Realisation A/c
6,000
(Being transfer of liabilities to realization)

3
Equity share capital A/c
Dr
20,000
20,000
(Being eq. share capital A/c transferred to eq.

shareholders A/c)
4
Dr
1,000
To P & L A/c
1,000
(Being P & L A/c transfer to shareholders)

5
MN Ltd A/c
Dr
To Realisation A/c (WN 1)

1.101
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14,000
14,000
AT Academy

(Being P.C. amount made due)

6
Equity shares in MN Ltd A/c
Dr
14,000
To MN Ltd A/c
14,000
(Being P.C. received)

7
Dr
13,000
To Realisation A/c
13,000
(Being loss on realization A/c)

8
Loan from M Ltd A/c
Dr
8,000
To Equity shares in MN Ltd A/c
8,000
(Being loan from M Ltd discharges in form of equity

shares in MN Ltd)
9
Dr
6,000
6,000
(Being dividend under liquidation paid)
Journal entries in books of M Ltd

No.
1
Particulars
L.F
Dr
Dr Rs
Cr Rs
8,000
To Loan to N Ltd
8,000
(Being loan discharged)

2
Share in MN Ltd A/c
Dr
6,000
Realisation A/c
Dr
14,000
To shares in N Ltd
20,000
(Being dividend under liquidation received and loss

booked)
1.102
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AT Academy

Realisation A/c
Dr
42,000
To Sundry assets A/c

4
42,000
Sundry Creditors A/c
Dr
15,000
To Realisation A/c
5
15,000
Dr
40,000
P & L A/c
Dr
5,000
45,000
(Being share capital & P & L A/c bal. transfered to eq.

shareholders)
6
MN Ltd A/c
Dr
15,000
15,000
(Being P.C. made due)

7
Dr
15,000
To MN Ltd A/c
15,000
(Being receipt of P.C.)

8
Loan H Ltd A/c
Dr
10,000
10,000
(Being discharge of loan from H Ltd by issue of equity

shares)
9
Dr
26,000
To Realisation A/c
26,000

10
Dr
1.103
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19,000
19,000
AT Academy


No.
Particulars
Existing number of shares
Agreed value per share
Gross purchase consideration
Less : Investment in shares in Y Ltd (8,000 x 25*)
Net purchase consideration
Issue price per share
Nos of shares to be issued
X Ltd
Y Ltd
60,000
20,000
15
25
9,00,000
5,00,000
2,00,000
7,00,000
5,00,000
10
10
70,000
50,000
Journal entries in the books of Y Ltd (Transferor Co.)

No.
1
Particulars
Realisation A/c
L.F
Dr
Dr Rs
9,00,000
To plant & machinery
3,00,000
To stock
4,00,000
To debtors
1,00,000
To cash
1,00,000
Secured loan A/c
Dr
1,00,000
Current liabilities A/c
Dr
4,00,000
To Realisation A/c
3
5,00,000
Eq. share capital A/c
Dr
2,00,000
General Reserve A/c
Dr
2,00,000
To Eq. shareholders A/c
1.104
Cr Rs
www.cavidya.com
4,00,000
AT Academy

XY Ltd A/c
Dr
5,00,000
5,00,000

5
Eq. shares in XY Ltd A/c
Dr
5,00,000
To XY Ltd A/c
6
5,00,000
Realisation A/c
Dr
1,00,000
To Eq. shareholders A/c
1,00,000
(Being profit on realization A/c)

7
Eq. shareholders A/c
Dr
5,00,000
To Eq. shares in XY Ltd A/c
5,00,000
Journal entries in the books of X Ltd (Transferor Co.)

No.
1
Particulars
Equity shares in XY Ltd A/c
L.F
Dr
Dr Rs
Cr Rs
2,00,000
To Investment in Y Ltd
1,00,000
To Realisation A/c (Profit)
1,00,000*
(Being received the shares for

discharge of investments)
2
1.105
Realisation A/c
Dr
21,00,000
To land & building
1,00,000
To plant & machinery
7,00,000
To debtors
3,00,000
To stock
9,00,000
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AT Academy

To cash at bank
3
1,00,000
Secured loan A/c
Dr
6,00,000
Current liabilities A/c
Dr
6,00,000
To Realisation A/c
4
12,00,000
XY Ltd A/c
Dr
7,00,000
7,00,000

5
Equity shares in XY Ltd A/c
Dr
7,00,000
To XY Ltd A/c
7,00,000
(Being receipt of P.C.)

6
Dr
1,00,000
To Realisation A/c
1,00,000

7
General Reserve A/c
Dr
4,00,000
Dr
6,00,000

8
10,00,000
Dr
To Eq. shares in XY Ltd
9,00,000
9,00,000
1.106
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AT Academy


No
A
Particulars
Sachin Ltd
Assets
Goodwill
50,000
Machinery
25,000
1,00,000
Furniture
20,000
Stock
75,000
Drs
60,000
Bank
20,000
Total (A)
B
Rahul Ltd
3,25,000
50,000
5,000
45,000
68,000
20,000
2,13,000
Liabilities
Sundry Creditors
40,000
Purchase Consideration (A B)
No of shares to be issued
Issue price Rs 10 / share
2,85,000
70,000
1,43,000
28,500
14,300
Calculation of intrinsic value of shares of Sachin Ltd & Rahul Ltd Let the
intrinsic value of Sachin Ltd & Rachul Ltd be x & y
x = 285000 + 200 y 2000 (1)
y = 143,000 + 100 x 1000 2
x = 1425 + y 10
y = 1430 + x 10
Therefore 10x = 1425 xy
10y = 1430 + x
Therefore 10x y = 1425
-x + 10y = 1430
Therefore 10x y = 1425
-10x + 100y = 14300
1.107
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AT Academy

10x y = 1425
'+ 10 + 100 = 14300
' 99 = 15725
Therefore y = 158.83
Therefore x = 158.38
Schedule showing shareholding in Saurav Ltd attributable to

shareholders of Sachin Ltd & Rahul Ltd.
No.
Particulars
Total no of shares
Less : no of shares held by other transferor co.
No. of shares held by outside shareholders (A-B)
Total amount payable to outside shareholders
No of shares held in Saurav Ltd (E/10) as per

ledger
Sachin Ltd
Rahul Ltd
2,000
1,000
100
200
1,900
800
158
159
3,00,930
1,27,070
30,093
12,707
W Note 2 Calculation of net amount receivable by Sachin Ltd from

Rahul Ltd
No.
A
Particulars
Amount receivable by Sachin Ltd from Rahul Ltd
200 shares of Rahul Ltd x 158.84
1.108
31,768
Amount payable by Sachin Ltd to Rahul Ltd

100 shares x 158.38
Rs
15,838
Net Amount receivable by Sachin Ltd

www.cavidya.com
15,930
AT Academy

Books of Sachin Ltd

Realisation A/c
Dr.
Cr.
Particulars
To Machinery A/c
Rs
Particulars
1,00,000 By Creditors
To Furniture A/c
20,000 By Saurav Ltd
To Stock
75,000 By Investment in
To Debtors
60,000 shares in Rahul Ltd
To Cash & Bank
20,000
To ESH (Profit realization)
56,768
Total
Rs
3,31,768
Total
40,000
2,85,000
6,768
3,31,768

Dr.
Cr.
Particulars
To Rahul Ltd
Rs
Particulars
15,838 By ESC
To ES in Saurav Ltd
2,00,000
3,00,930 By P & L
60,000
By Realisation A/c
Total
3,16,768
Rs
Total
56,768
3,16,768
Saurav Ltd
Dr.
Cr.
Particulars
1.109
Rs
www.cavidya.com
Particulars
Rs
AT Academy

To Realisation A/c
Total
2,85,000 By ES in Saurav Ltd
2,85,000
2,85,000
2,85,000
Total
Eq. shares in Saurav Ltd

Dr.
Cr.
Particulars
Rs
To Saurav Ltd
Particulars
2,85,000 By ESH
To Rahul Ltd
Rs
3,00,930
15,930
Total
3,00,930
Total
3,00,930
Investment in Shares in Rahul Ltd

Dr.
Cr.
Particulars
Rs
To Balance b/d
Particulars
25,000 By Rahul Ltd
Rs
31,768
To Realisation A/c
(31768-25000)
6,768
Total
31,768
Total
31,768
Rahul Ltd
Dr.
Cr.
Particulars
Rs
To Investment in shares
of Rahul Ltd
Total
Particulars
By ESH
Rs
15,838
31,768 By ES in Saurav Ltd
15,930
31,768
31,768
Total
Books of Rahul Ltd

1.110
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AT Academy

Realisation A/c
Dr.
Cr.
Particulars
To Machinery A/c
Rs
Particulars
50,000 By Crs
To Furniture A/c
70,000
5,000 By Saurav Ltd
To Stock
45,000 By Inv in Sachin Ltd
To Debtors
68,000
To Cash
20,000
To ESH
28,838
Total
Rs
2,16,838
Total
1,43,000
3,838
2,16,838
Eq. Shares in Saurav Ltd

Dr.
Cr.
Particulars
To Saurav Ltd
Rs
Particulars
1,43,000 By Sachin Ltd

By ESH
Total
Rs
15,930
1,27,070
1,43,000
Total
1,43,000
ESH A/c
Dr.
Cr.
Particulars
To Sachin Ltd
To ES in Saurav Ltd
Rs
Particulars
31,768 By ESC
1,27,070 By P & L
By Realisation A/c
1.111
www.cavidya.com
Rs
1,00,000
30,000
28,838
AT Academy

Total
1,58,838
Total
1,58,838
Saurav Ltd. A/c

Dr.
Cr.
Particulars
Rs
To Realisation A/c
Particulars
1,43,000
Total
By ES in Saurav Ltd.
1,43,000
Total
Investment in Sachin Ltd.
Rs
1,43,000
1,43,000
Dr.
Cr.
Particulars
Rs
To Bal b/d
Particulars
12,000 By Sachin Ltd
To Realisation
Rs
15,838
3,838
Total
15,838
Total
15,838
Sachin Ltd
Dr.
Cr.
Particulars
Rs
Particulars
To Inv in Sachin Ltd
15,838 By ESH
To ES in Saurav Ltd
15,930
Total
31,768
Rs
31,768
Total
31,768
Balance Sheet Saurav Ltd as on 1-4-2013

Nature of Amalgamation : Purchase
No.
1.112
Particulars
www.cavidya.com
Note No
Rs.
Rs.
AT Academy


1
Shareholders Fund
Share Capital
Current Liabilities
4,28,000
Trade Payable
1,10,000
Total
5,38,000
ASSETS
1
Non Current Assets
Fixed Assets
(i)
Tangible
(ii)
Intangible
- Goodwill
1,75,000
75,000
Current Assets
Inventories
1,20,000
Trade Receivables
1,28,000
Cash & Cash Equivalents
40,000
Total
2,50,000
2,88,000
5,38,000

No
Particulars
Rs
Authorised .. eq. shares of Rs 10 each

Issued, subscribed & paid : 42800 eq.
shares of Rs each fully paid
1.113
www.cavidya.com
4,28,000
AT Academy

(Out of above all shares were issued without

consideration being received in cash)

No.
Particulars
Machinery
1,50,000
Furniture
25,000
Total
1.114
Rs
www.cavidya.com
1,75,000
AT Academy

26. Calculation & discharge of Purchase consideration

Sr.No
Particulars
Assets
1)
Fixed asset
Lav Ltd
5,00,000
Kush Ltd
6,25,000
Lav Ltd. - (4,00,000 + 25%)

Kush Ltd. - (5,00,000 + 25%)
2)
Stock
2,70,000
2,75,000
Lav Ltd. - (90% x 3,00,000)

Kush Ltd. - (110% x 2,50,000)
3)
Debtors
(-) Allowance for Bad Debts @ 5%
4)
Cash at Bank
Liabilities
1)
Trade Creditors
3,20,000
12,000
16,000
2,28,000
3,04,000
40,000
Total (A)
B
2,40,000
10,38,000
1,94,000
70,000
12,74,000
5,64,000
Kush Ltd. - (5,76,000 12,000)

2)
Sales Tax liability
24,000
Total (B)
2,18,000
5,64,000
Purchase consideration (A-B)
8,20,000
7,10,000
Discharge of Purchase consideration
1)
Equity Shares in Ram Ltd
8,00,000
7,00,000
Lav Ltd 8,000 shares @ 100

1.115
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AT Academy

Kush Ltd 7,000 shares @ 100

2)
Cash (Bal fig.)

Total (D)
20,000
10,000
8,20,000
7,10,000
Debit
Credit
Journal entries In books of Ram Ltd

No.
1
Particulars
L.F
Dr
15,30,000
To Liquidator of Lav Ltd
8,20,000
To Liquidator of Kush Ltd
7,10,000
Fixed Asset A/c
Dr
11,25,000
Stock A/c
Dr
5,45,000
Debtors A/c
Dr
5,60,000
Bank A/c
Dr
1,10,000
To Allowance for Bad Debt.
28,000
To Trade Creditors
7,58,000
To Sales Tax liability
24,000
15,30,000
(Being assets & liabilities of Lav Ltd & Kush

Ltd taken over)
3
Liquidator of Luv Ltd A/c
Dr
8,20,000
Liquidator of Kush Ltd A/c
Dr
7,10,000
To Equity share capital A/c

To Bank
1.116
15,00,000
30,000
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AT Academy

(Being discharge of Purchase Consideration)
Balance Sheet of Ram Ltd Nature Amalgamation in nature of Purchase

Sr
Particulars
Shareholders Funds
Share Capital
Current liabilities
Trade payable
Sales Tax liability
Note
Rs
15,00,000
7,58,000
24,000
Total (A)
Assets
Non Current Assets
Fixed assets
Current assets
Inventories
Trade Receivables
7,82,000
22,82,000
11,25,000
5,45,000
Debtors
5,60,000
Less Allowance
c
Rs
28,000
5,32,000
80,000
11,57,000
(1,10,000 30,000)
Total (B)
1.117
www.cavidya.com
22,82,000
AT Academy


No
Particulars
Rs

15,000 eq. shares of Rs 100 each fully paid
15,00,000
(All the above shares were issued without

consideration being recd in cash)
15,00,000
1.118
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AT Academy

27. Step - 1:
Calculation of amount payable to outside share holders Calculation of Intrinsic Value/
Share
No.
A
Particulars
Kaif Ltd.
Asset
Sundry Assets
7,70,000
4,40,000
1000Y
2000X
7,70,000 + 1000Y
4,40,000 + 2000X
2,00,000
1,50,000
5,70,000 + 1000Y
2,90,000 + 2000X
5,000
4,000
(5,70,000 + 1,000Y ) 5,000
(2,90,000 + 2,000X) 4,000
Investment
Total (A)
B
Raj Ltd.
Liabilities
Creditors
Net assets [A B]
No. of Shares
Interinsic Value / Share
Step - 2: Solving the Equation

The intrinsic value of Raj Ltd. Being Rs. Y & that of Kaif Ltd. X
5,70,000 + 1,000
5,000
570 + Y = 5X
Y = 5X - 570 .. (i)
2,90,000 + 2,000
4,000
290 + 2
4
290 + 2X = 4Y
1.119
.. ( )
www.cavidya.com
AT Academy

From eq (i) & (ii)
290 + 2
=5
4
570
290 + 2X = 20X - 2280

X = 142.78
Y = 5X - 570
Y = 5 x 142.78 - 570
= 143.89
Step - 3: Consideration Payable

No.
Particular
Kaif Ltd.
Raj Ltd.
Total no. of shares
5,000
4,000
No. of shares held by other transferor Co.
2,000
1,000
Shares held by outsiders (A B)
3,000
3,000
Intrinsic Value / Share
143
144
Consideration Payable to Share holders (C x D)
4,28,340
4,31,670
1.120
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AT Academy

28. W Note 1 Calculation of Intrinsic value of shares

No.
A
Particulars
X Ltd
Y Ltd
Assets
Goodwill
Machinery
Stock
50,000
40,000
2,00,000
90,000
40,000
80,000
(72,000 / 90%)
Debtors
Bank
Total (A)
B
2,10,000
1,20,000
60,000
90,000
5,60,000
4,20,000
40,000
30,000
5,20,000
3,90,000
40,000
30,000
13
13
Less : liabilities
Creditors
Net Assets (A-B)
No. of shares
W Note 2
Share Exchange Ration / Swap Ration
= Intrinsic value of y ltd Intrinsic value of x ltd
= 13 13
=1
W Note 3
No. of shares to be issued
= 30,000 shares x 1
1.121
www.cavidya.com
AT Academy

= 30,000
W Note 4
Journal entries in the books of X ltd.
No.
Particulars
Investment in shares in y ltd
L.F.
Dr.
Dr Rs
Cr Rs
3,90,000
(30,000 shares x Rs 13)

To Equity shares cap. (30,000 x 10)
3,00,000
To Securities Premium (30,000 x 3)
90,000
Note :
X Ltd has acquired the shares from shareholders of Y Ltd. Therefore no accounting entry
will be passed in the books of Y Ltd.

No.
Particulars
Note
X Ltd.
Y Ltd.

1
Shareholders Funds
Share capital
7,00,000
3,00,000
Reserves & Surplus
1,40,000
62,000
Current liabilities
40,000
30,000
8,80,000
3,92,000
Trade payables
Total
Assets
1
1.122
Non current assets
www.cavidya.com
AT Academy

a)
Fixed assets
i)
Tangible Machinery
1,50,000
1,00,000
ii)
Intangible Goodwill
30,000
10,000
b)

Investment in Eq. shares of Y Ltd
Current assets
a)
Inventories
b)
Trade Receivables
c)
1.123
3,90,000
40,000
72,000
2,10,000
1,20,000
60,000
90,000
Total
8,80,000
3,92,000
www.cavidya.com
AT Academy

29. Calculation of present value of synergy benefits

Year
Cash Flow
Discounting Factor 20%
Discounted cash flow
2012
50
0.833
41.65
2013
75
0.694
52.05
2014
90
0.579
52.11
2015
100
0.482
48.20
2016
105
0.402
42.21
2017
595
0.402
239.19
475.41
(W.N. note below)
Present value of cash flow =

=
= 595
105 (1 + 0.02)
. .
2016 (1 + )
20% 2%
Calculation of Purchase consideration

Particulars
Rs. In Lakhs
Cash (50% of synergy benefit)

( 475.41 ) x 50%
237.705
Equity shares in chennai ltd.

25 1000000
50
No. of shares to be issued =

= 500000 shares
Issue of 500000 shares @ Rs. 50
1.124
www.cavidya.com
250
AT Academy

Total
487.705
Calculation of cash received by each shareholders of Kokatta Ltd.

.
= 23.77
1.125
237.705
10
www.cavidya.com
AT Academy

30. Balance Sheet of Yash Ltd. as on 31.10.2009

Sr. No.
Particulars
Note No.
Rs.
Rs.

1
Shareholders funds
a.
Share Capital
500
b.
Reserves & Surplus
387
a.
Long Term Borrowings
887
Unsecured Loan
Supplier of Fixed Assets
3
Current Liabilities
a.
Creditors for Goods
Outstanding expenses
Short term Provisions
750
260
30
Provision for Income Tax
260
Total
550
2,187
ASSETS
1
Non Current Assets
a.
Fixed Assets
i.
Tangible Assets
b.
Investments
Upkar Ltd.
2
1.126
1,302
100
Current Assets
www.cavidya.com
AT Academy

a.
Inventories
15
b.
Sundry Debtors
c.
50
d.
Prepaid Expenses
10
e.
Advance to Suppliers
40
f.
Advance for Income Tax
400
270
785
Total
2,187
Profit & Loss A/c for the Year Ended 31.10.2009

Sr. No.
1
Particulars
Note No.
Rs.
Rs.
Rs.
Revenue from Operations

Sales
4,330
Other Income
Total Revenue (1+2)
Expenses
a.
Cost of Materials consumed
b.
Purchase of stock in Trade
c.
Changes in inventories of finished goods,
4,330
2190
WIP & Stock in Trade

i.
Opening Stock of WIP & FG
10
ii.
Closing Stock of WIP & FG
(15)
d.
Employee Benefit Expenses

Salary
1.127
-5
700
www.cavidya.com
AT Academy

e.
Finance Cost
Interest
50
f.
Depreciation & Amortization
g.
Other Expenses
Profit before exceptional & extraordinary
180
520
3,635
695
items & tax (3 4)

6
Exceptional items
Profit on Sale of Fixed Assets
Profit before extraordinary items
2
697
& Tax (5 6)
8
Extraordinary item
Profit before tax ( 7 8 )
697
10
Tax Expense
260
i.
Current Tax
ii.
Deferred Tax
11
Profit for the period from
437
from continuing operations (9-10)

Particulars
A)
Authorised Equity Shares of Rs. 10 each
B)
a)
50 Cr. Equity shares @ Rs. 10 each
1.128
www.cavidya.com
Rs.
1000
500
AT Academy

(Out of above shares of Rs.200 cr. Were

issued without consideration received in cash)
500

No
Particulars
A)
Rserves
B)
Less Dividend Paid
Rs.
437
50
387
Note 3 - Tangible Fixed Assets

No.
Particulars
A.
Gross Block
Less Depreciation
Rs.
1482
180
Net Block
1,302
Sundry Debtors A/c

Particulars
Rs.
Particulars
Rs.
70
To Sales (Balancing Figure)
4,330 By Bank A/c
4,000
By Balance c/d
Total
4,400
Total
400
4,400
Sundry Creditors for Goods A/c

Particulars
To Bank A/c
1.129
Rs.
2,000
www.cavidya.com
Particulars
By Business Purchase
Rs.
30
AT Academy

By Purchase
2,190
By Balance c/d (Advance)

To Balance c/d
40
260
Total
2,260
Total
2,260
Sundry Creditors for Fixed assets A/c

Particulars
Rs.
To Bank A/c [600 + 50]
650
By Interest
To Balance c/d
750
By Fixed asset
1,400
Total
Total
Particulars
Rs.
50
1,350
1,400
Fixed assets A/c

Particulars
Rs.
Rs.
150
To Profit on sale
2 By Bank A/c
To Creditors for Fixed assets

Total
Particulars
20
1,350 By Balance c/d
1,482
1,502
1,502
Total
Expenses A/c
Particulars
To Bank A/c
Rs.
Particulars
500
To Outstanding expenses
30 By Prepaid expenses
By P&L A/c
Total
530
Total
Calculation of Provision for tax
1.130
Rs.
www.cavidya.com
10
520
530
AT Academy

Particulars
Rs.
Rs.
(In Crores)
(In Crores)
Net Profit as per Books
697
Add Back: Depreciation as per Books
180
877
Less: a) Depreciation as per IT
200
b) Profit on sale of Machinery
-202
Net Profit for taxation
675
Tax Provision @ 38.5%
260
Note: Provision of AS-22 is ignored. Provision of MAT ignored.
1.131
www.cavidya.com
AT Academy

31. Computation of Amount of Debentures and shares to be issued

No
Particulars
c.
d.
(1,36,950+1,71,
050+1,79,500)
3 years = 1,37,500
3 years = 1,62,500
13,750
16,250
13,750 x 5 = 68,750
16,250 x 5 = 81,250
Fixed Assets
3,55,000
1,95,000
Current Assets
1,49,750
78,875
5,04,750
2,73,875
Less : Current Liabilities
2,98,500
90,125
Capital Employed
2,06,250
1,83,750
2,06,250 x 8% = 16,500
1,83,750 x 8% = 14,700
16,500 15% = 1,10,000
14,700 15% = 98,000
1,78,750
1,79,250
Average Net Profit
Equity Shares to be issued in

the above ratio of (a) (Total
30,000 in 1375:1625)
Equity Share Capital at Rs. 5 per
share
Capital Employed (after
revaluation)
e.
8% Return on Capital
Employed
f.
15% Debentures to be issued to
g.
Moon
(2,24,7881,250+1,88,962)
a.
b.
Star
provide equivalent income at e

above
Total Purchase Consideration (c
+ f)
Computation of Goodwill / Capital Reserve

Particulars
Fixed Assets taken over
Star
Moon
Total
3,55,000
1,95,000
5,50,000
Current Asset (after adjustment
1.132
www.cavidya.com
AT Academy

of inter-company owings)
1,49,750
57,200
2,06,950
Total Assets taken over
5,04,750
2,52,200
7,56,950
(adjusting inter-company owings)
2,76,825
90,125
3,66,950
Net Assets Taken Over
2,27,925
1,62,075
3,90,000
Less : Purchase Consideration calculated above
1,78,750
1,79,250
3,58,000
49,175
-17,175
32,000
Less : Current Liabilities
Capital Reserve / (Goodwill)
Balance Sheet of Neptune Ltd. as at 31st December 2004

No.
Particulars
N. No.
Rs.
Rs.

1
Shareholders funds
Share Capital
1,50,000
Reserves & Surplus
32,000
1,82,000
15% Debentures
2,08,000
Current liabilities
3,66,950
Total
7,56,950
ASSETS
1
Non current assets
Fixed Assets (3,55,000 + 1,95,000)
5,50,000
Net Current assets
2,06,950
(1,49,750 + 78,875 21,675)

1.133
www.cavidya.com
AT Academy

Total
7,56,950

No
Particulars
Rs in lakh
Authorised 40,000 Eq. shares of Rs 100 each

30,000 Eq. shares of Rs 5 each fully paid
1,50,000
(all fully paid-up pursuant to a contract without payments being received

in cash)
1,50,000
All the above shares were issued without consideration being recd in cash

No
Particulars
Capital Reserve
Rs
32,000
32,000
1.134
www.cavidya.com
AT Academy

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1

ACCOUNTING FOR AMALGAMATIONS

1. Transfer Co. Beena Ltd

Step 1: Calculation of Goodwill (Super profit method)

Average Profits of past 5 years

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

8% of share Capital & Reserves (B x 8%)

Super profit (A-C)

Goodwill Super Profit x 4 years of purchase

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

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

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

Stock (55,000- 10%)

CA Final Financial Reporting

Anand R Bhangariya 86003 20000

Net Assets Taken over i.e Purchase consideration

Step 3: Discharge of purchase consideration

Equity shares in Heena Ltd.

152,500 each, Issued at Rs12.50 each

To Land & Building

100,000 By Loan From A

To Plant & Machinery

145,000 By Sundry Creditors

55,000 By Heena Ltd A/c (PC)

65,000 By Equity Shareholders

CA Final Financial Reporting

Anand R Bhangariya 86003 20000

Heena Ltd A/c

302,500 By Cash A/C

By Equity Shares in Heena Ltd.

Equity Shareholders A/c

11,500 By share Capital

To Cash & Bank A/C

56,000 By Reserve fund

To Equity Shares in Heena Ltd

Cash & Bank A/c

CA Final Financial Reporting

Anand R Bhangariya 86003 20000

50,000 By Realisation A/C

150,000 By Equity Shareholders A/C

Equity Shares in Heena Ltd A/c

152,500 By Equity Shareholders A/C

To Liquidator of Beena Ltd

(Being Purchase Consideration due to Beena Ltd)

Land & Building A/C

Plant & Machinery A/C

CA Final Financial Reporting

Anand R Bhangariya 86003 20000

To Provision for Bad debts

(Assets & Liabilities Taken over from Beena

Liquidator of Beena Ltd Ac

To Cash & Bank A/C

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

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

(Discharge of PC in form of Cash & Shares)

Sundry Creditors A/C

To Sundry Debtors A/C

(Elimination of intercompany dues)