7. amalgamation ii
TRANSCRIPT
8/17/2019 7. Amalgamation II
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I P C C _ 3 4 e _ A c c o u n t s _ G r o u p . I I _ A m a l g a m a t i o n – I I _ A s s i g n m e n t S o l u t i o n s _ _ _ _ 1
No.1 for CA/CWA & MEC/CEC MASTER MINDS
7. AMALGAMATION - II
SOLUTIONS TO ASSIGNMENT PROBLEMS
PROBLEM No. 1Balance Sheet of Z Ltd. as at 1
st April, 2012 ( Rs. in Crores)
Particulars Note No Amount
82.00116.50
7.50
43
I. Equity and Liabilities(1) Shareholder's Funds
(a) Share Capital(b) Reserves and Surplus
(2) Non-Current Liabilities(a) Long-term borrowings
(3) Current Liabilities(a) Trade payables
Total
12
3
4 249.00
104.0016.00
9.00
37.0054.0029.00
II. Assets(1) Non-current assets
(a) Tangible assets(b) Non-current investments(c) Other non-current assets
(2) Current assets(a) Current investments(b) Inventories(c) Trade receivables(d) Cash and cash equivalents
Total
5
6
78
249.00
Notes to Accounts: (Rs. in crores)
Particulars Amount Amount
1
2
3.
4
5
8
6
7
Share CapitalEquity Share Capital4,80,00,000 Equity shares of Rs.10 eachPreference Share Capital34,00,000 15% Preference Shares of Rs.100 each(all the above shares are allotted as fully paid up pursuant tocontracts without payment being received in cash)Reserve and SurplusSecurity Premium (60 + 36 + 4 + 2.8)Capital Reserve (Working Note No: 4) Investment Allowance Reserve
Long Term BorrowingsSecured Loans
18% of Debentures (Rs.100 each)Trade PayablesBills PayableSundry CreditorsFixed assetsTangible assets
Land and BuildingsPlant and Machinery
Cash and cash equivalentsCash At BankOther non-current assets
Amalgamation Adjustment AccountTrade Receivables (Sundry Debtors 45 + Bills Receivables 9)
48.00
34.00
102.804.709.00
7.50
1726
63.0041.00
82.00
116.50
7.50
43
104.00
29.00
9.0054
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P h : 9 8 8 5 1 2 5 0 2 5 / 2 6 w w w . m a s t e r m i n d s i n d i a . c o m
Note: Since Investment Allowance Reserve is to be maintained for 4 years, it is carried forward by acorresponding debit to Amalgamation Adjustment Account in accordance with AS-14.
Working Notes:
1. Calculation of Net assets taken over ( Rs. In crores)
Particulars X Ltd. Y Ltd.
38
24
10
22
30
16
140
25
17
6
15
24
13
100
3.33
31.00
34.33
4.17
12.00
16.17
Assets taken over:
Land and Buildings
Plant and Machinery
Investments
Inventory
Trade Receivable (Sundry Debtors + Bills Receivables)
Cash at Bank
Liabilities taken over:
Debentures(WN:2)
Trade payable (Sundry Creditors + Bills Payable)
Net assets taken over
(i)
(ii)
(i) – (ii) 105.67 83.83
2. Calculation of No. of Debentures to be issued in Z Ltd.
X Ltd.
Existing Debenture interest @ 15% = Rs.400 lakhs x 15/100 = Rs.60 lakhs
Debentures to be issued in Z Ltd. @ 18% to maintain the same amount of interest
= Rs.60 lakhs x 100/18 = Rs.333.33 lakhs
or Rs.3.33 crores
Y Ltd.
Existing Debenture interest @15% = Rs.500 lakhs x 15/100 = Rs.75 lakhs
Debentures to be issued in Z Ltd. @ 18% to maintain the same amount of interest
= Rs.75 x 100/18 = Rs.416.67 lakhs
or Rs.4.17 crores
3. Computation of Purchase Consideration: (Rs .In crores)
Particulars X Ltd. Y Ltd.
90
24
54
16.8
1.
2.
Equity Shareholders
Rs.3010
6
Rs.10
croresRs.50××
Rs.305
2
Rs.10
croresRs.45××
Preference Shareholders
120Rs.100
croresRs.20×
120Rs.100
croresRs.14×
Total Purchase consideration 114 70.8
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No.1 for CA/CWA & MEC/CEC MASTER MINDS
4. Calculation of Goodwill/Capital Reserve
Particulars X Ltd. Y Ltd.
105.67
(114.00)
83.83
(70.80)
Net Assets takeover (Working Note : 1)
Less: Purchase Consideration (Working Note : 3)
Goodwill
Capital Reserve8.33
---
----
13.03
Note: Goodwill arising from amalgamation shall be adjusted against Capital Reserve arising fromamalgamation, and only balance of Rs.4.70 crores is to be shown in the Balance Sheet of Z Ltd ascapital reserve.
PROBLEM No. 2
(i) Calculation of Purchase Consideration: ( Net Assets Method)
AX Ltd. (Rs.’000) BX Ltd. (Rs.’000)Particulars
Amount Amount Amount Amount
85,0010,5012,5018,004,50
75,005,50
27,5040,00
4,00
30,0010,00
130,50
(40,00) 40,0015,00
152,00
(55,00)
Assets taken over:Sundry fixed assetsInvestmentsInventoryTrade receivablesCash & Bank Gross AssetsLess : Sundry Liabilities
12% DebenturesTrade payables
Purchase Consideration 90,50 97,00
. Discharge of Purchase consideration:
ParticularsAX Ltd.
Rs. ’000
BX Ltd.
Rs. ’000
9,05,000 Equity Shares of Rs.10 each
9,70,000 Equity Shares of Rs.10 each
90,50
97,00
Assumption: Face value of each share assumed to be Rs.10
(ii) Journal entries in books of ABX Ltd.
Part – I
Journal Entries for taking over the business of AX Ltd
Date Particulars Rs. ’000 Rs. ’000
01.01.2013Business Purchase A/c Dr.
To Liquidator of AX Ltd.
(Being Business of AX Ltd. purchased)
90,50 90,50
01.01.2013
Sundry fixed assets Dr.
Investment A/c Dr.
Inventory Dr.
Trade receivables Dr.
Cash and Bank Dr.
To 12% Debentures
To Trade payables
To Business Purchase A/c
(Being the purchase consideration of AX Ltd.accounted for)
85,00
10,50
12,50
18,00
4,50
30,00
10,00
90,50
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P h : 9 8 8 5 1 2 5 0 2 5 / 2 6 w w w . m a s t e r m i n d s i n d i a . c o m
01.01.2013
Liquidator of AX Ltd. Dr.
To Equity share capital A/c
(Being shares issued to Liquidator of AX Ltd.)
90,50
90,50
Part – II
Journal Entries for taking over the business of BX Ltd
Date Particulars Rs. ’000 Rs. ’000
01.01.2013
Business Purchase A/c Dr.
To Liquidator of BX Ltd.
(Being Business of AX Ltd. & BX Ltd. purchased)
97,00
97,00
01.01.2013
Sundry fixed assets Dr.
Investment A/c Dr.
Inventory Dr.
Trade receivables Dr.
Cash and Bank Dr.To 12% Debentures
To Trade payables
To Business Purchase A/c
(Being the purchase consideration of BX Ltd.
accounted for)
75,00
5,50
27,50
40,00
4,0040,00
15,00
97,00
01.01.2013
Liquidator of BX Ltd. A/c Dr.
To Equity share capital A/c
(Being shares issued to Liquidator of BX Ltd.)
97,00
97,00
Part – III
Other Journal Entries
Date Particulars Rs. ’000 Rs. ’000
01.01.2013Amalgamation adjustment A/c Dr.
To statutory reserve A/c(Being statutory reserve has maintained)
150
150
(iii) Balance Sheet of ABX Ltd. as on 1.1.2013
Particulars Note No. (‘000)
187,50
7,50
70,00
25,00
290,00
I. EQUITY AND LIABILITIES
(1) Shareholder's Funds
(a) Share Capital
(b) Reserves and Surplus
(2) Non-Current Liabilities
Long-term borrowings
(3) Current Liabilities
(a) Trade payables (10,00 + 15,00)
Total
II. ASSETS
(1) Non-current assets
(a) Fixed assets
Tangible assets (85,00 + 75,00)
(b) Non-current Investments (10,50+ 5,50)(c) Other non-current asset
1
2
3
160,00
16,007,50
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No.1 for CA/CWA & MEC/CEC MASTER MINDS
(2) Current assets
(a) Inventories (12,50 + 27,50)
(b) Trade Receivables (18,00 + 40,00)
(c) Cash & Cash equivalents (4,50 + 4,00)
Total
4
40,00
58,00
8,50
290,00
Notes to Accounts:
Particulars (Rs.000) (Rs.000)
1.
2.
3.
4.
Share Capital
18,75,000 Equity Shares of Rs.10 each
(All these shares are issued for consideration other than in cash)
Reserves and surplus (Statutory Reserves)
Investment Allowance Reserve
Export Profit Reserve
Long Term Borrowings12% Debentures (Assumed that new debentures were issued in
exchange of the old series)
Other non-current assets
Amalgamation Adjustment Account
6,00
1,50
187,500
7,50
70,00
7,50
NOTES:1. Shares are issued by ABX Ltd. on the basis of net assets acquired of AX Ltd. and BX Ltd. Hence,
there is no goodwill.2. The statutory reserves of AX Ltd. and BX Ltd. are shown in the balance sheet of ABX Ltd. with a
corresponding debit in Amalgamation Adjustment Account.
PROBLEM No. 3 WORKING NOTES:1
(i) Computation of Amount of Debentures of shares to be issued:Star (Rs.) Moon (Rs.)
Average Net profit
3
962,88,1250,1788,24,2 +− = 1,37,500
3
500,79,1050,71,1950,36,1 ++ = 1,62,500
(ii) Equity share issued:a. Ratio of distribution
Star : Moon1,375 : 1,625
b. NumberStar : 13,750Moon : 16,250
30,000
c. Amount:13,750 shares of Rs. 5 each = 68,75016,250 shares of Rs. 5 each = 81,250
WORKING NOTES:2
(i) Capital employed (after revaluation of assets):Fixed Assets 3,55,000 1,95,000Current Assets 1,49,750 78,875
5,04,750 2,73,875
C o p y R i g h t s R e s e r v e d
T o M A S T E R M I N D S , G u n t u r
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P h : 9 8 8 5 1 2 5 0 2 5 / 2 6 w w w . m a s t e r m i n d s i n d i a . c o m
Less: Current liabilities (2,98,500) (90,125)2,06,250 1,83,750
(ii) Debenture issued:8% Return of capital employed 16,500 14,700
15% Debentures to be issuedTo provide equivalent incomeStar : 16,500 x 100 / 15 = 1,10,000Moon : 14,700 x 100/15 = 98,000
Name of the Company: Neptune Ltd.
Balance Sheet as at 31st
Dec. 2012
Particulars Note No. Rs.
I. Equity and liabilities1. Share holders funds
a. Share capitalb. Reserves and Surplus
2. Non – current liabilitiesa. Long-term borrowings
3. Current liabilitiesa. Other current liabilities
12
3
1,50,00032,000
2,08,000
3,66,950
Total 7,56,950
II. Assets:1. Non-Current Assets
a. Fixed Assets2. Current assets
a. Other current assets
5,50,000
2,06,950
Total 7,56,950
Notes to Accounts:
Note No. Particulars Amount
1. Share Capital:Authorised40,000 equity shares of Rs. 5 eachIssued and subscribed30,000 equity shares of Rs. 5 each(all the above shares are allotted as fully paid up pursuant to a contractwithout payments being received in cash)
2,00,000
1,50,000
2. Reserves & Surplus:Capital Reserve 32,000
3. Long – term borrowings:Secured loans
15% Debentures 2,08,000
Working Notes:
S.No. Particulars Star Moon Total
1. Purchase ConsiderationEquity shares issued15% Debentures Issued
Total Purchase Consideration
68,7501,10,0001,78,750
81,25098,000
1,79,250
1,50,0002,08,0003,58,000
2. Net Assets taken overFixed AssetsCurrent Assets
Less: Current Liabilities
Net assets taken over
3,55,0001,49,750
(2,98,500)
2,06,250
1,95,00078,875
(90,125)
1,83,750
5,50,0002,28,625
(3,88,625)
3,90,0003. Capital Reserve (1-2) 27,500 4,500 32,000
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No.1 for CA/CWA & MEC/CEC MASTER MINDS
PROBLEM No. 4
Calculation of Avg. annual profits for 3 years:
Particulars X Y Z
Average annual profits for 3 years beforecharging debenture interestLess: Debenture interestAverage annual profits for 3 years after debenture interest
Add / Less:Depreciation adjustment on revaluation of tangible assets
Average annual profits for 3 years after depreciationadjustmentsRatio of Average profit after adjustment of Depreciation
1,80,000(20,000)
1,60,000
(20,000)
1,40,000
70
1,44,000-
1,44,000
10,000
1,54,000
77
78,000(10,000)
68,000
(10,000)
58,000
29
Calculation of Capital Employed and Normal profit
Particulars X Y Z
Tangible blockCurrent Assets
Less:10% DebenturesLess:Trade payablesCapital EmployedNormal rate of return (10%)Normal profit
10,00,0003,50,000
13,50,000
2,00,000
2,00,0009,50,000
10%95,000
5,00,0001,40,000
6,40,000
-
1,50,0004,90,000
10%49,000
6,00,00080,000
6,80,000
1,00,000
1,00,0004,80,000
10%48,000
Computation of Goodwill
Particulars X Y Z
1. Average Profit2. Normal profit3. Super profit (1 - 2) 4. No. of years purchase5. Goodwill (3 X 4)
1,40,00095,00045,000
31,35,000
1,54,00049,000
1,05,0003
3,15,000
58,00048,00010,000
330,000
Computation of Purchase consideration under net asset: (Value method)
Particulars X Y Z
Goodwill
Tangible assets
Current assets
Total
Less: 10% debentures
Trade payable
Purchase consideration
1,35,000
10,00,000
3,50,000
14,85,000
(2,00,000)
(2,00,000)
10,85,000
3,15,000
5,00,000
1,40,000
9,55,000
-
(1,50,000)
8,05,000
30,000
6,00,000
80,000
7,10,000
(1,00,000)
(1,00,000)
5,10,000
Total purchase consideration = 10,85,000 + 8,05,000 + 5,10,000 = 24,00,000
C o p y R i g h t s R e s e r v e d
T o M A S T E R M I N D S , G u n t u r
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P h : 9 8 8 5 1 2 5 0 2 5 / 2 6 w w w . m a s t e r m i n d s i n d i a . c o m
Statements showing no. of equity shares and debentures to be issued
Particulars X Y Z
1. Purchase consideration2. Value of Equity shares to be issued
(18,00,000 x (70 : 77 : 29)3. Values of debentures to be issued (1- 2)4. No. of equity shares to be issued (2/10)5. No. of debentures to be issued (3/100)
10,85,000
7,15,9003,69,100
71,5903,691
8,05,000
7,87,50017,500
78,750175
5,10,000
2,96,6002,13,400
29,6602,134
Other Journal Entries
Date Particulars Rs. Rs.
31.03.2001 Cash A/c Dr.To Equity share Capital A/c
3,50,0003,50,000
31.03.2001 Preliminary Expenses A/c Dr .To Cash A/c
50,00050,000
31.03.2001 10% Debentures A/c Dr.To Cash A/c
3,00,0003,00,000
Balance Sheet of XYZ Ltd as on 01.04.2001
Notes to Accounts:1) Equity share capital
2,15,000 equity shares of Rs.10 each(1,80,000 + 35,000) 21,50,000(Of the above 1,80,000 shares are issued for consideration other than cash)
Particulars Note toAccounts
Amount
1
a
EQUITY AND LIABILITIES:Shareholder’s fundsShare capital 1 21,50,000
2a
Non-current LiabilitiesLong term borrowings 2 6,00,000
3a
Current LiabilitiesTrade payables
Total3 4,50,000
32,00,000
1
aiii
ASSETS:
Non-current AssetsFixed AssetsTangible AssetsIntangible Assets
45
21,00,0004,80,000
2abc
Current AssetsStockTrade receivablesOther current assets (Preliminary Expenses)
Total
6 5,70,00050,000
32,00,000
24,00,000
In the form of equity
Shares18,00,000
(24,00,000 x 3/4)
In the form of debenture
6,00,000
(24,00,000 x 1/4)
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No.1 for CA/CWA & MEC/CEC MASTER MINDS
2) Long term borrowings10% debentures 6,00,000
3) Trade payableCreditors (2,00,000 + 1,50,000 + 1,00,000) 4,50,000
4) Tangible assets(10,00,000 + 5,00,000 + 6,00,000) 21,00,000
5) Intangible AssetsGoodwill(1,35,000 + 3,15,000 + 30,000) 4,80,000
6) Current Assets(3,50,000 + 1,40,000 + 80,000) 5,70,000
PROBLEM No. 5
Journal entries in books of A Ltd. (selling company)
Particulars Dr. (Rs.) Cr. (Rs.)
Realisation A/c Dr.To Patent rights A/cTo Land & Building A/cTo Plant & Machinery A/cTo Stock A/cTo Sundry debtors A/c
(Being assets taken over by Shakti Ltd.)
27,80,0002,00,0006,00,000
15,50,0003,50,000
80,000
Sundry Creditors A/c Dr.To Realisation A/c
(Being creditors transferred to Realisation A/c)
50,00050,000
Shakti Ltd. Dr.To Realisation A/c
(Being P.C. Due)
27,95,00027,95,000
Realisation A/c Dr.To Cash & bank A/c
(Being cost of liquidation charged to Realisation A/c)
5,0005,000
Realisation A/c Dr.To Cash & bank A/c
(Being creditors due paid)
50,00050,000
Shares in Shakti Ltd. A/c Dr. (1,80,000 x Rs. 12.50)Cash & Bank A/c
To Shakti Ltd.(Being shares received in payment of purchase consideration &balance in cash)
22,50,0005,45,000
27,95,000
Preference share capital A/c Dr.To Preference share holders A/c
(Being transfer of preference share capital to preference shareholdersaccount)
5,00,0005,00,000
Equity share capital A/c Dr.General reserves A/c Dr.Profits and Loss A/c Dr.
To Equity shareholder A/c(Being equity Transferred to equity share holders A/c)
15,00,0008,00,000
90,00023,90,000
Preference Share holder A/c Dr.To Cash & bank A/c
(Being preference shareholder paid)
5,00,0005,00,000
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P h : 9 8 8 5 1 2 5 0 2 5 / 2 6 w w w . m a s t e r m i n d s i n d i a . c o m
Realisation A/c (W.N.1) Dr.To Equity shareholders A/c
(Being Transfer of profit on realization to equity share holders A/c)
10,00010,000
Equity shareholders A/c Dr.
To Shares in Shakti Ltd.To Cash & bank (W.N.2)(Being distribution of shares & cash among the equity share holders)
24,00,000
22,50,0001,50,000
Name of the Company Shakti Ltd.Balance Sheet as at 01.01.2012
Particulars Note No. Rs.
I. Equity and liabilities:Share holders fundsa. Share Capitalb. Reserves and Surplus
12
29,00,0005,58,250
Total 34,58,250
II. Assets:Fixed AssetsTangible AssetsIntangible AssetsCurrent AssetsTrade receivables (Debtors)Inventories (Stock)Cash and Cash Equivalent (Bank) (WN 4)
34
56
22,15,0002,30,000
1,42,0005,89,0002,82,250
Total 34,58,250
Note to Accounts:
1. Authorised share capital:
50,000, 5% cumulative preference shares Rs. 10 each 5,00,0002,50,000 equity shares of Rs. 10 each 25,00,000
30,00,000
Issued and Subscribed:
50,000, 5% cumulative preference shares of Rs. 10 each 5,00,000
2,40,000 equity shares of Rs. 10 each fully paid 24,00,000
(out of above 2,10,000 equity shares have been 29,00,000
issued for consideration other than cash)
2. Reserve and Surplus:
Securities premium (2,40,000 x 2.50) = 6,00,000
Less: Preliminary expenses = 18,000
Less: underwriting commission = 23,750
5,58,250
NOTE: As per sec.52 of companies account, securities premium account can be used for writtenoff of preliminary expenses.
3. Tangible Assets:
Land Buildings 6,00,000
Plant & Machinery 15,50,000
Motor Vehicles 40,000
Furniture 25,000
Total 22,15,000
4. Intangible Assets:
Good will (see working note: 3) 30,000
Patent rights 2,00,000Total 2,30,000
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No.1 for CA/CWA & MEC/CEC MASTER MINDS
5. Trade receivables:
(Sundry debtors (80,000 + 62,000) 1,42,000
6. Inventories: Stock (3,50,000 + 2,39,000) 5,89,000
Working Notes:W.N 1:Dr. Realisation A/c of A Ltd. Cr.
Particulars Rs. Particulars Rs.
2,00,0006,00,000
15,50,0003,50,000
80,000
50,0005,000
10,000
50,00027,95,000
To Patent rightsTo Land & buildingTo Plant & machineryTo StockTo DebtorsTo Cash
CreditorsExpenses
To Equity share holder A/c(profit)28,45,000
By Sundry creditorsBy Shakti Ltd.
28,45,000
W.N 2:Dr. Cash Account of A Ltd. Cr.
Particulars Rs. Particulars Rs.
1,60,0005,45,000
5,000
50,0005,00,0001,50,000
To Balance b/dTo Shakti Ltd
7,05,000
By Realisation A/c(Liquidation exp)
By Realisation A/c(creditors)By preference share holdersBy equity share holders (Bal.fig)
7,05,000
W.N 3:Calculation of Goodwill / Capital Reserve
Particulars Amount
Purchase Consideration of A Ltd. 27,95,000
Less: Net assets of A Ltd. (Rs. 29,40,000 – Rs. 1,60,000) (27,80,000)
Goodwill (A) 15,000
Purchase consideration of B ltd. 3,81,000
Less: Net assets of B Ltd (Rs. 4,53,000 – Rs. 70,000 – Rs. 17,000) (3,66,000)
Goodwill (B) 15,000Thus, total goodwill will be = 15,000 (A Ltd.) + Rs. 15,000 (B Ltd.) 30,000
Working note:4 Dr. Cash Account of Shakti Ltd. Cr.
Particulars Rs. Particulars Rs.
5,00,000
3,75,000
6,0005,45,000
18,00023,750
2,82,250
To 5% cumulative preferenceshare application & allotment
To Equity share applications &allotment account
8,75,000
By B Ltd.By A Ltd.By Preliminary expensesBy Underwriting commissionBy Balance c/d (B/f)
8,75,000
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I P C C _ 3 4 e _ A c c o u n t s _ G r o u p . I I _ A m a l g a m a t i o n – I I _ A s s i g n m e n t S o l u t i o n s _ _ _ _ 1 2
P h : 9 8 8 5 1 2 5 0 2 5 / 2 6 w w w . m a s t e r m i n d s i n d i a . c o m
PROBLEM No. 6
Computation of intrinsic value of shares of A Co. Ltd. and B Co. Ltd.
No. Particulars Rs.
1. Valuation of shares of A Co. Ltd.Share capitalCapital ReserveGeneral Reserve
Less: Goodwill being valuables 80,000Arrear of Depreciation 40,000Value of Net AssetsNo. of sharesIntrinsic value per share
10,00,0002,00,000
70,00012,70,000
1,20,00011,50,000
10,000115
2. Valuation of shares of B Co. Ltd.Share Capital
General Reserve
No. of SharesValue per share
8,00,000
8,00,00016,00,000
80,000Rs.20
Determination of composition of purchase consideration: The person holding every two shares in ACo. Ltd., will receive 10 shares in B Co. Ltd. plus cash for the balance. The intrinsic value of two sharesin A Co. Ltd, is Rs. 230 and that of 10 shares B Co. Ltd., is Rs. 200. Therefore for each lot of two sharesof A Co. Ltd., A shareholder will receive Rs. 30 in cash (Rs. 230-200).
B Co. Ltd, will therefore issue 50,000 share of Rs. 10 each at the agreed value of Rs. 20 each creditingRs. 5,00,000 to Capital Account and Rs. 5,00,000 to Securities premium Account.
Further, B Co. Ltd. will pay cash Rs. 1,50,000 (i.e. 5,000 x 30) for distribution amount share holders of ACo. Ltd.
Name of the Company: B Co. Ltd.Balance Sheet Date: 31.10.2009 (After absorption)
Particulars Note No. Amount
EQUITY & LIABILITIES:Share holder fundsShare capitalReserves & SurplusNon-Current liabilitiesLong term borrowings
12
3
13,00,00013,00,000
7,00,000
Current liabilitiesTrade Payables 6,70,000
Total 39,70,000
ASSETS:Non – Current Assets Fixed Assets 4 23,60,000
Current AssetsCash & Cash equivalentOther current assets
56
50,00015,60,000
Total 39,70,000
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I P C C _ 3 4 e _ A c c o u n t s _ G r o u p . I I _ A m a l g a m a t i o n – I I _ A s s i g n m e n t S o l u t i o n s _ _ _ _ 1 3
No.1 for CA/CWA & MEC/CEC MASTER MINDS
Note to Accounts:
No. Particulars Rs.
1. Share Capital
Authorised:2,00,000 shares of Rs. 10 each
Issued & Subscribed:
1,30,000 shares of Rs. 10 each fully paid (Issued for considerationother than cash 50,000 shares of Rs. 10 each fully paid)
20,00,000
13,00,000
2. Reserves & Surplus:
Securities premium
General Reserve
5,00,000
8,00,000
3. Long term borrowings:
Secured loan
Un Secured loan
5,00,000
2,00,000
4. Fixed Assets:Fixed assets 16,00,000
Addition on acquisition – 7,60,000(8,00,000-40,000) 23,60,000
5. Cash & Cash equivalent:
Cash at Bank
(2,00,000 – 1,50,000)
50,000
6. Other Current Assets:
(9,00,000 + 6,60,000)
15,60,000
PROBLEM No. 7
a. Absorption entries in the Books of A Ltd.
Particulars Dr. (Rs.) Cr. (Rs.)
Fixed assets A/c Dr.
Revaluation reserve A/c
(revaluation of fixed assets at 15% above book value)
1,05,000
1,05,000
Reserves and surplus A/c Dr.
Equity dividend A/c
(Declaration of equity dividend @10%)
60,000
60,000
Equity dividend A/c Dr.
Bank A/c
(Payment of equity dividend)
60,000
60,000
Business purchase A/c Dr.Liquidator of b ltd A/c
(Consideration payable for the business taken over fromB Ltd inclusive of liquidation expenses of Rs. 30,000)
5,20,0005,20,000
Fixed assets (115% of Rs. 2,50,000) A/c Dr.
Stock (95% of Rs. 3,20,000) A/c Dr.
Debtors Dr.
Bills receivable Dr.
Cash at Bank Dr.
(Rs. 40,000 – Rs. 30,000 dividend paid)
To Provision for bad debts (5% of Rs. 1,90,000)
To Sundry Creditors
To 12% Debentures in B Ltd.
2,87,500
3,04,000
1,90,000
1,00,000
10,000
9,500
1,25,000
1,62,000
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I P C C _ 3 4 e _ A c c o u n t s _ G r o u p . I I _ A m a l g a m a t i o n – I I _ A s s i g n m e n t S o l u t i o n s _ _ _ _ 1 4
P h : 9 8 8 5 1 2 5 0 2 5 / 2 6 w w w . m a s t e r m i n d s i n d i a . c o m
To Bills Payable
To Business purchase A/c
To Capital reserve A/c (Balancing figure)
(Incorporation of various assets and liabilities taken over from B
Ltd. at agreed values, profit being credited to capital reserve)
25,000
5,20,000
50,000
Liquidator of B Ltd. Dr.
To Equity Share Capital
To 10% Preference Share Capital
To Bank A/c
(Discharge of consideration for B Ltd.’s business and
liquidation expenses of Rs. 30,000)
5,20,000
4,00,000
90,000
30,000
12% Debentures in B Ltd.(Rs. 1,50,000 × 108%) Dr.
Discount on Issue of Debentures Dr.
To 12% Debentures
(Allotment of 12% Debentures to debenture holders at a
discount of 10% to discharge the liability on B Ltd. debentures)
1,62,000
18,000
1,80,000
Sundry Creditors Dr.
To Sundry Debtors
(Cancellation of mutual owing)
10,000
10,000
b. Statement of Consideration Payable by A Ltd.
Shares to be allotted = 30,000 /6 x 8 = 40,000
i.e. A Ltd. will issue 40,000 shares of Rs. 10each = Rs. 4,00,000 (i)
For 10% preference shares to be paid at 10% discount
90x100
000,00,1.Rs = = Rs. 90,000 (ii)
Consideration amount (I + ii) = Rs. 4,90,000
Note: It has been assumed that dividend on equity shares have been paid by both the companies.
PROBLEM No. 8
Name of the Company: Z Ltd.Balance Sheet date: 31-03-2003
Particulars Note No. Rs.
Equity and Liabilities:
a) Share holders funds:a. Share Capitalb. Reserves & Surplus
1 12,00,000-
b) Current liabilities:a. Trade payables (Creditors) 1,50,000
Total 13,50,000
Assets:
I. Non – Current Assets:a. Tangible Assetsb. Intangible AssetsNon – Current Investment
23
5,00,0001,34,0001,00,000
II. Current Assets:InventoriesTrade receivables
Cash & Cash equivalents
45
3,46,0002,30,000
40,000Total 13,50,000
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I P C C _ 3 4 e _ A c c o u n t s _ G r o u p . I I _ A m a l g a m a t i o n – I I _ A s s i g n m e n t S o l u t i o n s _ _ _ _ 1 5
No.1 for CA/CWA & MEC/CEC MASTER MINDS
Notes to Accounts:
No. Particulars Amount
1. Share Capital
1,20,000 Equity Shares of Rs. 10 each (all the above share areissued for consideration other than cash)
12,00,000
2. In Tangible AssetsGoodwill (96,000 + 38,000)
1,34,000
3. Non Current InvestmentInvestment in 6% tax free G.P Notes 1,00,000
4. Inventories(2,04,000 + 1,42,000) 3,46,000
5. Trade receivables(1,70,000 + 60,000) 2,30,000
Capitalization of Z Ltd.
Particulars X Ltd. Y Ltd.Fixed Assets 4,00,000 1,00,000
Investments 1,00,000 -
Stock 2,04,000 1,42,000
Debtors 1,70,000 60,000
Cash & Bank Balance 30,000 10,000
Total 9,04,000 3,12,000
Goodwill 96,000 38,000
(-) Creditors 1,00,000 50,000
NAV / PC 9,00,000 3,00,000
No. of shares issued 50,000 20,000
Intrinsic value per share 18 15
No. of shares to be issued by Z Ltd. @ Rs. 10 each 90,000 30,000
Exchange Ratio(X Ltd. 9 shares for every 5 shares held)(Y Ltd. 3 shares for every 2 shares held)
9:5 3:2
Purchase consideration 9,00,000 3,00,000
Assumption: It is assumed that Face value of each share of Z Ltd. is Rs.10
Working Note:
Calculation of Goodwill:
Particulars X Ltd. Y Ltd.
Share Capital 5,00,000 2,00,000
General reserve 2,00,000 20,000
Profit & Loss A/c 1,00,000 30,000
8,00,000 2,50,000
Less: Non – Trade investments 1,00,000 -
1. Trading Capital employed 7,00,000 2,50,000
2. Normal Profits (Capital Employed x 15%) 1,05,000 37,500
3. Average profit (Trading) (W.N-2) 1,29,000 47,000
Less: Normal Profit 1,05,000 37,500
Super Profit(3 – 2) 24,000 9,500Goodwill (Super profit x 4) 96,000 38,000
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I P C C _ 3 4 e _ A c c o u n t s _ G r o u p . I I _ A m a l g a m a t i o n – I I _ A s s i g n m e n t S o l u t i o n s _ _ _ _ 1 6
P h : 9 8 8 5 1 2 5 0 2 5 / 2 6 w w w . m a s t e r m i n d s i n d i a . c o m
Working note: 2Computation of Average Trading Profit:
Particulars X Ltd. Y Ltd.
2001 1,30,000 45,000
2002 1,25,000 40,0002003 1,50,000 56,000
Total 4,05,000 1,41,000
Average profit for 3 years 1,35,000 47,000
X Ltd. : 4,05,000 / 3Y Ltd. : 1,41,000 / 3
Less: Income from Non Trade 6,000 -
Investments (6% on Rs. 1,00,000)
Average Trading Profit 1,29,000 47,000
PROBLEM No. 9
In the books of A Ltd. Ledger accountsDr. Realiztion A/c Cr.
Particulars Rs. Particulars Rs.
1,50,00070,00080,00080,000
30,0003,00,000
50,000
To Fixed Assets A/cTo Stock A/cTo Debtors A/cTo Cash and Bank A/c
3,80,000
By CreditorsBy AB Ltd.By Equity Share holder A/c
(Loss)
3,80,000
Dr. AB Ltd. A/c Cr.
Particulars Rs. Particulars Rs.3,00,000 3,00,000To Realization A/c
3,00,000
By Equity Shares of AB Ltd.
3,00,000
Dr. Equity Shares of AB Ltd. A/c Cr.
Particulars Rs. Particulars Rs.
3,00,000 3,00,000To AB Ltd. A/c
3,00,000
By Equity Shares holders
3,00,000
Dr. Equity Share holder A/c Cr.
Particulars Rs. Particulars Rs.
50,0003,00,000
2,50,00060,00040,000
To Realization A/c (Loss)To Equity Shares of AB Ltd.
3,50,000
By Equity Share CapitalBy ReservesBy Profit & Loss A/c
3,50,000
In the Books of B Ltd. Ledger accountsDr. Realization A/c Cr.
Particulars Rs. Particulars Rs.
1,30,000
75,00040,000
30,000
20,0002,00,000
55,000
To Fixed Assets(1,20,000 + 10,000)To Stock (80,000 – 5,000)To Debtors
To Cash & Bank A/c2,75,000
By CreditorsBy AB Ltd. A/cBy Equity Share holders
(Loss)
2,75,000
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I P C C _ 3 4 e _ A c c o u n t s _ G r o u p . I I _ A m a l g a m a t i o n – I I _ A s s i g n m e n t S o l u t i o n s _ _ _ _ 1 7
No.1 for CA/CWA & MEC/CEC MASTER MINDS
Dr. AB Ltd. A/c Cr.
Particulars Rs. Particulars Rs.
2,00,000 2,00,000To Realization A/c
2,00,000
By Equity Shares of AB Ltd.
2,00,000
Dr. Equity Shares of AB Ltd. A/c Cr.
Particulars Rs. Particulars Rs.
2,00,000 2,00,000To AB Ltd.
2,00,000
By Equity Share holders
2,00,000
Dr. Equity Share holders A/c Cr.
Particulars Rs. Particulars Rs.
55,0002,00,000
1,50,00040,00065,000
To Realization A/c (Loss)To Equity Share of AB Ltd.
2,55,000
By Equity Share CapitalBy ReservesBy Profit & Loss A/c
(60,000+10,000-5,000)2,55,000
Journal Entries in the Books of AB Ltd.Nature of Amalgamation: Amalgamation in nature of merger
Method of Accounting: Pooling Interest MethodMethod of Purchase Consideration: Payment Method
Particulars Debit Credit
For Take over of A Ltd.Business Purchase A/c Dr.
To liquidator of A Ltd. A/c(Being purchase consideration due)
3,00,0003,00,000
Fixed Assets A/c Dr.Stock A/c Dr.Debtors A/c Dr.Cash & Bank A/c Dr.
To Creditors A/cTo Business purchase A/cTo General Reserve A/cTo P & L A/c
(Being incorporation of asset and liabilities at book value)
1,50,00070,00080,00080,000
30,0003,00,000
10,00040,000
Part – I
Liquidator of A Ltd. A/c Dr.To Equity Share Capital A/c
(Being P.C discharged)
3,00,0003,00,000
Part - II For Take over of B Ltd.Business Purchase A/c Dr.To liquidator of ‘B’ Ltd. A/c
(Being P.C due)Fixed Assets A/c (1,20,000 + 10,000) Dr.Stock A/c (80,000 – 5,000) Dr.Debtors A/c Dr.Cash & Bank A/c Dr.
To Creditors A/cTo B.P A/cTo P & L (W.N-1)To General Reserve (40,000 – 40,000)
(Being incorporation of assets & liabilities at book value)
2,00,000
1,30,00075,00040,00030,000
2,00,000
20,0002,00,000
55,000Nil
Liquidator of B Ltd. A/c Dr.To Equity Share Capital A/c
2,00,0002,00,000
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I P C C _ 3 4 e _ A c c o u n t s _ G r o u p . I I _ A m a l g a m a t i o n – I I _ A s s i g n m e n t S o l u t i o n s _ _ _ _ 1 8
P h : 9 8 8 5 1 2 5 0 2 5 / 2 6 w w w . m a s t e r m i n d s i n d i a . c o m
Name of the Company: AB Ltd.Balance Sheet date:
Particulars Note No. Amount (Rs.)
Equity & Liabilities:Share holders fundsa. Share Capitalb. Reserve & Surplus
12
5,00,0001,05,000
Current Liabilities:Trade payables 3 50,000
Total 6,55,000
Assets:Fixed Assets (1,50,000 + 1,30,000) 2,80,000
Current Assets:InventoriesTrade Receivables
Cash & Cash Equivalent
45
6
1,45,0001,20,000
1,10,000Total 6,55,000
Note to Accounts:
Particulars Amount
1. Share Capital50,000 shares of Rs. 10 each(all the above shares were issued for consideration other than cash)
5,00,000
2. Reserves & Surplusa. General Reserve(60,000-50,000) loss on mergerb. Profit & Loss A/c (40,000 + 55,000)
10,00095,000
3. Trade Payables (30,000 + 20,000) 50,000
4. Inventories (70,000 + 75,000) 1,45,000
5. Trade receivables (80,000 + 40,000) 1,20,000
6. Cash & Cash EquivalentCash & Bank (80,000 + 30,000)
1,10,000
Working note 1: Calculation of Profit & Loss on Merger
Particulars A LTd. B LTd.
Paid up share capital 2,50,000 1,50,000
Where as agreed PC 3,00,000 2,00,000
Loss on merger 50,000 50,000
Free reserves of Selling company
General reserve (50,000) (40,000)
Profit & loss A/c - (10,000)
Balance of General Reserve A/c(60,000-50,000) 10,000 -
Balance of Profit & Loss A/c 40,000 55,000[(60,000+10,000–5,000)–10,000]
C o p y R i g h t s R e s e r v e d
T o M A S T E R M I N D S , G u n t u r
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No.1 for CA/CWA & MEC/CEC MASTER MINDS
PROBLEM No. 10
Journal Entries In the books of MN Ltd.Nature of Amalgamation: Amalgamation in nature of merger
Method of Accounting: Pooling Interest MethodMethod of Purchase Consideration: Payment Method
Part – I
Journal Entries for taking over the business of M Ltd. (Rs. In lakhs)
Particulars Dr. Cr.
Business purchase A/c Dr.
To Liquidator of M Ltd.(1,200+7,200)
(Being Consideration payable to liquidator of M Ltd. taken over)
8,400
8,400
Plant & Machinery Account Dr.
Furniture & Fixture A/c Dr.
Stock Account Dr.
Sundry Debtor A/c Dr.
Cash at Bank A/c Dr.
Profit & Loss A/c (Refer. W.N) Dr.
To Trade Creditor A/c
To Provision A/c
To Business Purchase A/c
(Being incorporation of all the assets & liabilities & and the excess ofconsideration over the share capital being adjusted against reverses and surplus)
4,125
2,400
2,370
1,044
1,542
120
2,421
870
8,400
Liquidator of M Ltd. Account Dr.
To Equity share capital A/c
To 11% preference share capital A/c
(Being allotment of fully paid shares in discharge of purchase consideration)
8,400
7,200
1,200
Part – II
Journal Entries for taking over the business of N Ltd (Rs. In lakhs)
Particulars Dr. Cr.
Business purchase A/c Dr.To Liquidator of N Ltd.(90x10)
(Being Consideration payable to liquidator of two companies taken over)
900900
Plant & Machinery Account Dr.Furniture & Fixture A/c Dr.Motor Vehicles Account Dr.Stock Account Dr.
Sundry Debtor A/c Dr.Cash at Bank A/c Dr.Preliminary Expenses A/c Dr.Discount on issue of Debenture A/c Dr.
To 8% Redeemable Debenture of N Ltd. A/cTo Trade Creditor A/cTo Provision A/cTo Business Purchase A/c
(Being incorporation of all the assets & liabilities & and the excess ofconsideration over the share capital being adjusted against reverses andsurplus)
46818351
444
237240336
30036993
900
Liquidator of N Ltd. Account Dr.To Equity share capital A/c
(Being allotment of fully paid shares in discharge of purchase consideration)
900900
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I P C C _ 3 4 e _ A c c o u n t s _ G r o u p . I I _ A m a l g a m a t i o n – I I _ A s s i g n m e n t S o l u t i o n s _ _ _ _ 2 0
P h : 9 8 8 5 1 2 5 0 2 5 / 2 6 w w w . m a s t e r m i n d s i n d i a . c o m
Part – III
Other Journal Entries (Rs. In lakhs)
Particulars Dr. Cr.
Profit & Loss A/c Dr.To Bank A/c
(Being Payment of liquidation expenses of M Ltd. And N Ltd.)
6 6
Preliminary Expenses A/c Dr.
To Bank A/c
(Being Expenses on incorporation of MN Ltd.)
15
15
8% Redeemable Debenture of N Ltd. A/c Dr.
To 8.5% Redeemable Debenture A/c
(Being Conversion of 8% Debentures of N Ltd. in to 8.5% Debentures)
300
300
Name of Company: MN Ltd.
Balance Sheet (Rs. In lakhs)Particulars
NoteNo.
Amount(Rs.)
1.
2.
3.
Equity & Liabilities:
Share holders fundsa. Share Capitalb. Reserves & SurplusNon – Current liabilities
a. Long term borrowingsCurrent liabilities
a) Trade payables (creditors)b) Short-term provisions
Total
12
3
9,300(126)
300
2,790963
13,227
1.
2.
Assets:Non – Current Assets:
a. Fixed Assetsi. Tangible Assetsii. In Tangible Assets
Current Assets:
a) Inventories (Stock)b) Trade receivablesc) Cash & Cash Equivalentd) Other Current Assets
Total
4
56
7,317
2,814
1,2811,761
5413,227
Notes to Accounts:
Particulars Amount
1. Share Capital
Authorised shares of Rs. 10 each issued, subscribed & paid up:
810 lakhs equity shares of Rs. 10 each fully paid
120 Lakhs 11%, preference shares of Rs. 10 each fully paid
(All the above mentioned shares have been issued for consideration otherthan cash)
15,000
8,100
1,200
2. Reserves & Surplus
Profit & Loss A/c (600 + 2,100 + 780 – 3,600 – 6) (126)
3. Long term borrowing
8.5% Redeemable Debentures 300
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I P C C _ 3 4 e _ A c c o u n t s _ G r o u p . I I _ A m a l g a m a t i o n – I I _ A s s i g n m e n t S o l u t i o n s _ _ _ _ 2 1
No.1 for CA/CWA & MEC/CEC MASTER MINDS
4. Tangible Assets
Plant & Machinery (4,215 + 468)
Furniture & Fixtures (2,400 + 183)
Motor Vehicles
4,683
2,583
51
5. Cash & Cash Equivalent
Cash at Bank (1,782 – 6 - 15) 1,761
6. Other Current Assets
i. Discount on issue of Debentures
ii. Preliminary expenses (33 +15)
6
48
Working Note: Computation of Profit or Loss on merger M Ltd. N Ltd.1. PC Agreed 8,400 9002. Paid up capital 4,800 9003. Loss on merger 3,600 -
The above loss on merger is completely adjusted against free reserves of M Ltd. of Rs.3,480
PROBLEM No. 11
WN: 1
Calculation of purchase consideration:
Particulars Amount
To Preference shareholders: 1,00,000 shares of Rs.11 each 11,00,000
To Equity shareholders:
In the form of shares (2,50,000x11) 27,50,000
In the form of cash (2,50,000x4) 10,00,000 37,50,000
Total purchase consideration 48,50,000
WN: 2
Calculation of purchase consideration:
Particulars Amount
Building 12,00,000
Plant & Machinery 10,00,000
Stock 7,00,000
Sundry Debtors 9,00,000
Bank 6,60,000
Less:
Creditors (4,00,000)
Workmen profit sharing fund (3,30,0000
Net assets taken over 37,60,000
WN: 3
Calculation of profit or loss on amalgamation:
Particulars Amount
Purchase consideration 48,50,000
Net assets taken over (37,60,000)
Loss on amalgamation 10,90,000
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P h : 9 8 8 5 1 2 5 0 2 5 / 2 6 w w w . m a s t e r m i n d s i n d i a . c o m
In the books of y ltdRealisation A/c
Particulars Amount Rs. Particulars Amount Rs.
To Good will 8,00,000 By Creditors 4,00,000
To Building 7,00,000 By Workmen Profit sharing fund 3,00,000
To Plant & Machinery 13,00,000 By X Ltd. A/c (PC) 48,50,000
To Stock 7,00,000
To Sundry Debtors 9,00,000
To Bank 6,60,000
To Preference shareholders 1,00,000
To (Profit) Eq. share holders A/c 3,90,000
Total 55,50,000 Total 55,50,000
Dr. X ltd A/c Cr.
Particulars Amount Rs. Particulars Amount Rs.
48,50,000 10,00,000
38,50,000
To Realisation A/c
48,50,000
By cash
By Equity shares in x ltd
48,50,000
Dr. Bank A/c Cr.
Particulars Amount Rs. Particulars Amount Rs.
10,00,000 10,00,000To X ltd
10,00,000
By Equity shareholders
10,00,000
Dr. Preference shareholders A/c Cr.
Particulars Amount Rs. Particulars Amount Rs.
11,00,000 10,00,000
1,00,000
To Equity shares in x ltd
11,00,000
By Preference share capital
By Realisation A/c(bal. fig)
11,00,000
Dr. Equity shareholders A/c Cr.
Particulars Amount Rs. Particulars Amount Rs.
40,00010,00,00027,50,000
20,00,0006,00,0008,00,0003,90,000
To Preliminary expensesTo cashTo Equity shares in Y Ltd
37,90,000
By Equity share capitalBy General reserveBy Profit & Loss A/cBy Profit on Realisation a/c
(bal. fig)
37,90,000
Dr. Equity shares in x ltd A/c Cr.
Particulars Amount Rs. Particulars Amount Rs.
38,50,000 11,00,000
27,50,000
To X ltd
38,50,000
By Preference share holders
By Equity share holders
38,50,000
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I P C C _ 3 4 e _ A c c o u n t s _ G r o u p . I I _ A m a l g a m a t i o n – I I _ A s s i g n m e n t S o l u t i o n s _ _ _ _ 2 3
No.1 for CA/CWA & MEC/CEC MASTER MINDS
In the books of x ltdJournal entries
Date Particulars Debit Rs. Credit Rs.
Business purchase A/c Dr.To Liquidator of y ltd A/c(Being purchase of business)
48,50,000 48,50,000
Building A/c Dr.Plant & Machinery A/c Dr.Stock A/c Dr.Debtors A/c Dr.Bank A/c Dr.Goodwill (bal. fig) A/c Dr.
To Creditors A/cTo workmen Profit sharing fundTo Business purchase A/c
(Being assets and liabilities take over and purchase
consideration due)
12,00,00010,00,000
7,00,0009,00,0006,60,000
10.90,0004,00,0003,00,000
48,50,000
Liquidator of y Ltd A/c Dr.To Bank A/cTo Equity share capital A/cTo Securities premium A/c
(Being payment purchase. consideration)
51,85,00010,00,00035,00,000
3,50,000
Goodwill A/c Dr.To cash a/c
(Being liquidation expenses paid)
5,0005,000
Workmen Profit sharing fund A/c Dr.Goodwill A/c Dr.
To cash A/c(Being payment made for workmen’s profit sharing fundat 10% premium)
3,00,00030,000
3,30,000
PROBLEM No. 12
Particulars(Rs. In crores)(CAMIH Ltd)
(Rs. In crores)(Small Ltd)
40200200
75429200
GoodwillFixed AssetsWorking Capital
Less: Secured Loans
Intrinsic worth available for both equity and preferenceshareholders
Less:
Preference share capital
Intrinsic worth available to equity shareholders
No. of equity shares issued intrinsic value per share
Intrinsic value per share
440(100)
340
-
340
5
68
704(100)
604
(60)
544
4
136
No. of equity shares to be issued = 340 CroresRs.136
= 2.5 CroresIt is given that entries to be recorded at par value.
2.5 crores x 10 = 25,00,00,000
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I P C C _ 3 4 e _ A c c o u n t s _ G r o u p . I I _ A m a l g a m a t i o n – I I _ A s s i g n m e n t S o l u t i o n s _ _ _ _ 2 4
P h : 9 8 8 5 1 2 5 0 2 5 / 2 6 w w w . m a s t e r m i n d s i n d i a . c o m
Balance Sheet
Particulars Note No. Amount
EQUITY AND LIABILITIES:Share capital
Reserves and surplus (200 + 150 + 25 (capital reserve)
Non-current LiabilitiesLong term borrowings (100 + 100)
Current LiabilitiesTrade payables
Total
125
375
200
700
ASSETS:Non-current assetsFixed assets (150 + 150)Tangible assetsIntangible assets
Current assetsInventoriesTrade receivablesCash and cash equivalentsOther currents assets
Total
300
400
700
Notes to AccountsRs. inCrores
6065
(1) Share capital10% preference shares of 100 each6.5 crores of equity shares of Rs.10 each fully paid up
(Of the above 2.5 crores of equity shares are issued other than cash)125
Computation of profit or loss on Merger:
ParticularsRs. inCrores
Paid up capitalPurchased considerationProfit on merger
5025
25
PROBLEM – 13
Name of the Company : Huge Ltd (After Merger)
ParticularsNotes
No.Rs.
1 2 3
1 ab
EQUITY AND LIABILITIES:Shareholder’s fundsShare capitalReserves and Surplus
12
9,24,00014,80,960
2a
Non-current liabilitiesLong term borrowings 3 2,00,000
3a
b
Current liabilitiesTrade Payable (Creditors)
Short term provisions TOTAL 4
85,000
1,60,00028,49,960
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I P C C _ 3 4 e _ A c c o u n t s _ G r o u p . I I _ A m a l g a m a t i o n – I I _ A s s i g n m e n t S o l u t i o n s _ _ _ _ 2 5
No.1 for CA/CWA & MEC/CEC MASTER MINDS
1 a
bc
(i)
(ii)
ASSETS:Non current assetsFixed assetsTangible assets
Intangible assets (Good will)Non-current investmentsOther non-current assets
5
6
13,50,000
3,80,0002,50,000
40,000
2
abcd
Current AssetsInventories (Stock)Trade receivables (Debtors)Cash & Cash equivalents (4,05,000 - 40)Short term loans and advancesTOTAL
7
1,70,0001,55,0004,04,9601,00,000
28,49,960
Note to Accounts:
Particulars Rs. 1. Share capital
92,400 equity shares of Rs.10 each(Of which 22,400 shares were issued forconsideration other than cash)
2. Reserves and surplus Security premiumGeneral reserveProfit and loss A/c 2,00,000Add: Proposed dividend cancelled 1,40,000Export profit reserve (70,000 + 40,000)
3. Long term borrowingsSecured 12% debentures (1,00,000 + 1,00,000)
4. Short term provisionProvision for tax ( 1,00,000 + 60,000)
5. Intangible assetsGood will (W. No)
6. Other non- current assetAmalgamation adjustment A/c
7. Short term loans and advances(Advance tax 80,000 + 20,000)
9,24,000
6,80,9603,50,000
3,40,0001,10,000
2,00,000
1,60,000
3,80,000
40,000
1,00,000
WORKING NOTES:
Calculation of purchase consideration:
Equity shares of Big Ltd. 25,000 shares
Intrinsic value per share of Big Ltd. (W.N.2) Rs. 36.2 Value of shares Rs. 9,05,000
Intrinsic value per share of Huge Ltd. (W.N.2) Rs. 40.4
No. of shares to be issued by Huge Ltd. Rs.9,05,000 / Rs.40.4 = 22,400.99 shares i.e. 22,400 sharesand cash for fraction i.e. 0.99 x Rs.40.4= Rs. 40
PURCHASE CONSIDERATION:
i. 22,400 shares @ Rs.40.4
Capital [Rs.10 / Share] 2,24,000
Premium [Rs.30.4 / Share] 6,80,960 9,04,960
ii. Cash for fraction 40
iii. Total purchase consideration payable 9,05,000
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P h : 9 8 8 5 1 2 5 0 2 5 / 2 6 w w w . m a s t e r m i n d s i n d i a . c o m
Intrinsic Value Per Share:
Huge Ltd. ( Rs. ) Big Ltd. ( Rs. )Particulars
Rs. Rs. Rs. Rs.
ASSETS:i. Goodwill (W.N.3)ii. Sundry fixed assetsiii. Investmentsiv. Inventoryv. Trade receivablesvi. Advance taxvii. Cash and bank balanceLIABILITIES:i. 12% Debenturesii. Trade payablesiii. Provision for taxNet assetsNo. of sharesIntrinsic value per share (upto one decimal)
13,65,0009,50,0002,00,0001,20,000
75,00080,000
2,75,000
1,00,00040,000
1,00,000
30,65,000
(2,40,000)28,25,000
70,00040.4
3,80,0004,00,000
50,00050,00080,00020,000
1,30,000
1,00,00045,00060,000
11,10,000
(2,05,000)9,05,000
25,00036.2
Valuation of Goodwill
a. Capital Employed:
Huge Ltd. ( Rs. ) Big Ltd. ( Rs. )Particulars
Rs. Rs. Rs. Rs.ASSETS:i. Sundry fixed assetsii. Investment (Non-trade)iii. Inventoryiv. Trade receivablesv. Advance taxvi. Cash and bank balanceLIABILITIES:i. 12% Debenturesii. Sundry creditorsiii. Provision for taxCapital employed
9,50,000-
1,20,00075,00080,000
2,75,000
1,00,00040,000
1,00,000
15,00,000
(2,40,000)12,60,000
4,00,000-
50,00080,00020,000
1,30,000
1,00,00045,00060,000
6,80,000
(2,05,000)4,75,000
Average Pre-Tax Profit:
ParticularsHuge Ltd.
( Rs. )
Big Ltd.
( Rs. )
20102011
2012Total (a + b + c)Simple Average [Total / 3]Less: Non-trading income(2,00,000 @ 25%)(50,000 @ 18%)Average profit
5,00,0006,50,000
5,75,00017,25,0005,75,000
(50,000)
5,25,000
1,50,0002,10,000
1,80,0005,40,0001,80,000
(9,000)1,71,000
ParticularsHuge Ltd.
( Rs. )
Big Ltd.
( Rs. )
Capitalized value of average profits(average profit / NRR)Capital employedGoodwill
26,25,00012,60,00013,65,000
8,55,0004,75,0003,80,000
THE END