KUNAL SIR 9871518388

( EDUCATION + PASSION = EDUPASSION )

B.Com H
CORPORATE ACCOUNTING

AMALGAMATION

Q1. BALANCE SHEET of Hutch Ltd.

LIABILITIES AMOUNT ASSETS AMOUNT
Equity share capital 3,50,000 Land and Building 5,00,000
Preference share capital 5,50,000 Machine 2,00,000
General reserve 2,00,000 Furniture 3,00,000
10% Debentures 7,00,000 Debtors 4,00,000
Creditors 3,00,000 Cash 2,00,000
Goodwill 5,00,000
21,00,000 21,00,000
Business of Hutch Ltd. was absorbed by Vodafone Ltd.
1. Assets were valued as under
Land and Building = 7,00,000
Machine = 1,50,000
Goodwill = 8,50,000

2. Liabilities were taken at their book value.

Calculate purchase consideration.

Q2. BALANCE SHEET of Hutch Ltd.

LIABILITIES AMOUNT ASSETS AMOUNT
Equity share capital of ₹ 10 Assets 21,00,000
each 3,50,000
Preference share capital of ₹
10 each 5,50,000
General Reserve 2,00,000
Liability 10,00,000

21,00,000 21,00,000
Business of Hutch Ltd. was absorbed by Vodafone Ltd.
(i)Vodafone Ltd. will issue 3 equity shares of Rs. 10 each at Rs. 15 per share for every 2
equity shares held in Hutch Ltd.
(ii)Vodafone Ltd. will issue 5 preference share of Rs. 10 each for every preference shares in
Hutch Ltd.

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Calculate purchase consideration.

Q3. BALANCE SHEET of ram Ltd. as on 31st December, 2013

LIABILITIES AMOUNT ASSETS AMOUNT
Share Capital of ₹ 10 each 80,000 Fixed Assets 1,00,000
Current Liabilities 40,000 Current Assets 90,000
Reserve and Surplus 70,000
1,90,000 1,90,000
Ram Ltd. was taken over by A Ltd. on above date:
1. That Fixed Assets should be taken over at 90,000
2. That Current Assets and Current Liabilities be taken over at 110% & 90% respectively.
3. That 3 Equity shares of A Ltd. would be issued for every two shares held in Ram Ltd. at
Rs. 12 each.
Calculate Purchase Consideration

Q4. X ltd. Balance Sheet as on 31st March, 2013 is as follows:

LIABILITIES AMOUNT ASSETS AMOUNT
Equity share capital 1,50,000 Fixed Assets 1,00,000
9% Debentures 1,00,000 Investments 80,000
Current Liabilities 50,000 Current Assets 1,20,000
3,00,000 3,00,000
Ram Ltd. took over X Ltd. on following conditions:
(1) Fixed assets were revalued 20% above book value.
(2) Investments were taken over at book value.
(3) Net current assets were taken over at Rs. 80,000
(4) Loans were to be discharged by new company.
Calculate Purchase Consideration.

Q5. Equity share Capital 90,000 Shares of Rs. 10 each Rs 9,00,000

Pref. Shares Capital 50,000 Shares of Rs. 10 each, Rs. 8 paid-up Rs 4,00,000
This company was taken over by Ram Ltd.
(i) That 3 equity shares would be issued for every 7 equity share held @ Rs. 15 each.
(ii) That Rs. 5 per share be given in cash to Equity Shares holders.
(iii) That Pref. shares holders to get 7 Pref. Shares of new company @ Rs. 15 each per every
5 Preference Shares held.
Calculate Purchase Consideration.

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 KUNAL SIR 9871518388
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Q6. BALANCE SHEET of X Ltd.

LIABILITIES AMOUNT ASSETS AMOUNT
Equity share capital of ₹ 10 Assets 8,00,000
each 8,00,000
12% preference shares
capital of ₹ 10 each, ₹ 6 paid
up 6,00,000
Reserve 10,00,000
Liabilities 5,60,000

X Ltd. was absorbed by Y Ltd. (new company) on the following terms:

1. Y Ltd. will issue 3 equity share of ₹ 10 each at ₹ 15 for every 4 equity shares in X ltd.
2. New company will buy ₹ 5 per preference shares in X Ltd. along with 2 preference
shares in Y Ltd. for every 1 preference share in X Ltd.
3. Assets were valued at ₹ 85,00,000.
Calculate purchase consideration

Q7. BALANCE SHEET of Hutch Ltd.

LIABILITIES AMOUNT ASSETS AMOUNT
Equity share capital of ₹ 10 Assets 60,00,000
each 5,00,000
Preference shares of ₹ 10
each 8,00,000
Reserves 15,00,000
Liabilities 32,00,000
60,00,000 60,00,000
BALANCE SHEET of Vodafone (new)
LIABILITIES AMOUNT ASSETS AMOUNT
Equity share capital of ₹ 10 Assets 80,00,000
each 5,00,000
Reserves 35,00,000
Liabilities 40,00,000
80,00,000 80,00,000
Vodafone take over Hutch Ltd.
Market value of assets of Hutch Ltd. and Vodafone are ₹ 70,00,000and ₹ 1,00,00,000
respectively. Calculate SWAP ratio.

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Q8. The following are the balance sheets of Pratiksha Ltd. and Nidhi Ltd. as on 31st March,
2013:
BALANCE SHEET of Pratiksha Ltd.
LIABILITIES AMOUNT ASSETS AMOUNT
Share Capital: Fixed Assets 3,50,000
20,000 shares of ₹ 10 each 2,00,000 Investments 2,50,000
General reserve 2,50,000 Current Assets 3,00,000
Profit and Loss Account 1,50,000
Debentures 1,75,000
Current Liabilities 1,25,000
9,00,000 9,00,000
BALANCE SHEET of Nidhi Ltd.
LIABILITIES AMOUNT ASSETS AMOUNT
Share Capital: Fixed Assets 1,50,000
9,000 shares of ₹ 10 each 90,000 Current Assets 1,00,000
General reserve 50,000
Profit and Loss Account 40,000
Debentures 50,000
Bills Payable 20,000
2,50,000 2,50,000
Pratiksha Ltd. agrees to take over Nidhi Ltd. Find out the ratio of exchange of shares on the
basis of the book values.
Calculate purchase consideration.

Q9. Equity share capital of ₹ 10 each = ₹ 20,00,000

General reserve = ₹ 8,00,000
P & L A/C = ₹ 2,00,000
Appreciation in value of assets = 5,00,000
Calculate intrinsic value/equity share.

Q10. Equity share capital of ₹ 10 each, ₹ 8 paid up = ₹ 8,00,000

Preference share capital = ₹ 5,00,000
Liabilities = ₹ 3,00,000
General Reserve = ₹ 4,00,000
Profit and Loss A/C (Debit) = ₹ 1,00,000 (loss)
Decrease in value of assets = ₹ 2,00,000
Calculate intrinsic value/ equity share.

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Q11. Sham Ltd. Balance Sheet as on 31st March, 2013 is as follows:

LIABILITIES AMOUNT ASSETS AMOUNT
Equity share capital of ₹ 10 Fixed Assets 1,00,000
each 1,50,000 Current Assets 2,00,000
9% debenture 1,00,000
Current liabilities 50,000
3,00,000 3,00,000
Ram Ltd. agreed to take over Sham Ltd.
(1) New Company will issue necessary equity shares to old company’s shareholders.
(2) 10,000 11%Debentures of Rs. 10 each were issued at Rs. 12 each for 9% debenture
holders.
(3) Current Liabilities were also taken over.
Calculate Purchase consideration assuming intrinsic value of old & new company are Rs. 20
and 15 per share respectively.

Q12. BALANCE SHEET of Ram ltd. and Sham Ltd.

is given as on 31st March, 2013
LIABILITIES Ram Ltd Sham Ltd ASSETS Ram Ltd Sham Ltd
Equity share capital Fixed Assets 80,000 40,000
of ₹ 10 each 1,00,000 50,000 Book Debts 30,000 40,000
General reserve 10,000 20,000 Stock 20,000 10,000
Debentures 20,000 40,000 Cash in Hand 10,000 5,000
Creditors 10,000
Security premium 15,000
1,40,000 1,25,000 1,40,000 1,25,000
Ram Ltd. took over Sham Ltd. on following conditions:
(i) That necessary shares would be issued to old shareholders in accordance with intrinsic
value of shares.
(ii) That fixed assets have market value of Rs. 75,000 and 80,000 respectively, Debtors are
good, Stock is shown at cost
price whose gross realizable value is Rs. 25,000 and 12,000 respectively.
(iii) Debentures of Sham Ltd. were to be issued equivalent Debentures at premium of 10%.
Calculate Purchase Consideration.

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( EDUCATION + PASSION = EDUPASSION )
 KUNAL SIR 9871518388
( EDUCATION + PASSION = EDUPASSION )

Q13. The balance sheets of Dreamers Ltd. as on 31st March, 2003 stood as under:
LIABILITIES AMOUNT ASSETS AMOUNT
Share Capital: 10% pref. Fixed Assets 1,30,00,000
shares of ₹ 100 each 30,00,000 Investments 24,00,000
Equity shares of ₹ 10 each 60,00,000 Current Assets 20,00,000
General reserve 36,00,000
12% debentures 28,00,000
Current Liabilities 20,00,000
1,74,00,000 1,74,00,000
Performers Ltd. signified their agreement to take over the assets and liabilities of Dreamers
Ltd. as per the following terms and conditions:
(i) Fixed assets at 90% of the book value.
(ii) Investments at 10% above the par value.
(iii)Current assets and liabilities at book value except that stock-in-trade at cost amounting
to Rs. 10 lakhs was agreed to be taken over at a discount of 20%.
(iv) 12% Debentures are to be discharged at a premium of 15% by issuing 12% debentures
of Performers Ltd.
(v) Preference shareholders are to be discharged at a premium of 15% by issuing 10%
preference shares of Rs. 100 each,
(vi) The equity shareholders in Dreamers Ltd. are to be issued 5 equity shares of Rs. 10
each in Performers Ltd. for every 3 shares held by them.
Work out the consideration for the takeover under:
• Net assets method; and
• Net payment method.

Q14. The following are the balance sheets as on 31/03/2013 of X Co. Ltd. and y Co. Ltd.:
LIABILITIES Ram Ltd Sham Ltd ASSETS Ram Ltd Sham Ltd
Equity share capital Land and Building 30,000 -
(₹ 100 per share) 1,00,000 60,000 Plant & Machinery 1,10,000 50,000
6% Debenture @ ₹
10 20,000 - Stock 16,000 8,000
Reserve Fund 34,000 - Debtors 14,000 9,000
Div. Equalization Cash 3,000 1,000
fund 4,000 -
Employees Provident
fund 3,000 -
Trade Creditors 10,000 8,000
Profit and loss A/C 2,000 -
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1,73,000 68,000 1,73,000 68,000

The two companies agree to amalgamate and form a new company called Z Ltd. which
takes over the assets and liabilities of both the companies. The authorised capital of Z Ltd.
is Rs. 10,00,000 equity shares of Rs. 10 each. The assets of X Ltd. are taken over at a
reduced valuation of 10% with the exception of land and buildings, which are accepted at
book value. Both companies are to receive 5% of the net valuation of their respective
businesses as goodwill. The entire purchase price is to be paid by Z Ltd. in fully paid shares.
In return for debentures in X Ltd., debentures of the same amount and denomination are
to be issued by Z Ltd. Calculate purchase Consideration.

Q15. Two companies A Ltd. and N Ltd. amalgamate and form a new company K Ltd. The position
of two companies is as under.
A LTD.
LIABILITIES AMOUNT ASSETS AMOUNT
Paid-up-Capital: Goodwill 70,000
30,000 Equity shares of ₹ 10 Stock 1,80,000
each 3,00,000 Debtors 2,00,000
Profit and Loss Account 50,000
10% Debentures 70,000
Sundry Creditors 30,000
4,50,000 4,50,000
N LTD.
LIABILITIES AMOUNT ASSETS AMOUNT
Paid-up-Capital: Stock 80,000
20,000 Equity Shares of ₹ 10 Debtors 2,20,000
each 2,00,000
Profit and Loss Account 42,000
Sundry Creditors 58,000
3,00,000 3,00,000
The average profits of A Ltd. and N Ltd. have been Rs. 30,000 and Rs. 20,000 respectively.
K. Ltd. agree with the two companies to take over both concerns for the sum of Rs.
6,00,000 and, to discharge all liabilities. Rs.1,00,000 to be paid in cash and balance in
shares at face value. It is agreed that the Debtors of A Ltd. and N Ltd., before being taken
over by K Ltd., will be written off to the extent of 10% of their respective book figures. The
profit on conversion is to be divided between the shareholders of A Ltd. and N Ltd. in the
same proportion as to the profits previously earned by them. Drew up Purchase Account
on the completion of the transfer in the books of K Ltd. Also show how the share capital
accounts in A Ltd. and N Ltd. should be respectively closed.

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 KUNAL SIR 9871518388
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Q16. The following is the balance sheet of P Ltd. as on 31 March 2013:

LIABILITIES AMOUNT ASSETS AMOUNT
Equity Shares of ₹ 100 each 50,00,000 Fixed Assets 40,00,000
13% Preference Shares of ₹ Investments 1,50,000
100 each 10,00,000 Stock 25,50,000
General Reserve 2,50,000 Debtors 7,00,000
14% Debentures 6,00,000 Bank 2,00,000
Sundry Creditors 5,00,000
Bills payable 2,00,000
Provision for tax 50,000
76,00,000 76,00,000
Additional Information:
(a) T Ltd. takes over P Ltd. on 15 April 2013.
(b) 13% Preference shareholders of P Ltd. are discharged at a premium of 10% by issuing
14% preference shares of Rs. 100 each.
(c) The net assets value of per equity share of P Ltd. is Rs. 250 and that of T Ltd. is Rs. 400. T
Ltd. will issue equity shares to satisfy the equity shareholders of P Ltd. on the basis of
intrinsic value. However the purchase consideration to be based on the basis of par value
only. The face value of equity share of T Ltd. is Rs.100.
(d) Debenture holders of P Ltd. are to be discharged at a premium of 15% by issuing 14%
debentures in T Ltd. Compute the purchase consideration.

Q17. Balance Sheet of Hutch LTD.

LIABILITIES AMOUNT ASSETS AMOUNT
Equity share capital 8,00,000 Assets 40,00,000
General Reserve 11,00,000
Liabilities 21,00,000
40,00,000 40,00,000
Business of Hutch Ltd. was absorbed by Vodafone Ltd. for purchase consideration of ₹
24,00,000 payable in cash. Close the books of Hutch Ltd.

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Q18. BALANCE SHEET OF X LTD.
LIABILITIES AMOUNT ASSETS AMOUNT
Equity share capital @ 10 5,00,000 Fixed Assets 12,00,000
General reserve 7,00,000 Investment 8,00,000
8% debenture 9,00,000 Bank 2,00,000
Creditors 4,00,000 Other current assets 3,00,000
25,00,000 25,00,000
X Ltd. was absorbed by Y Ltd. on following terms and conditions:
(i) 3 equity shares in new company will be issued for every 2 equity in old company @ Rs.
16 each.
(ii) Investments were sold by Y Ltd. For Rs. 8,60,000.
(iii) 8% debentures were paid in cash by Y ltd.
You are required to close the books of X Ltd.

Q19. Balance sheet of TATA Ltd. is given below:

BALANCE SHEET OF TATA LTD.
LIABILITIES AMOUNT ASSETS AMOUNT
Equity share capital @ ₹ 10 4,00,000 Building 7,00,000
Preference Share Capital @ ₹ Furniture 2,00,000
10 3,00,000 Machinery 4,00,000
General Reserve 2,00,000 Debtors 3,00,000
Bank 1,00,000
12% Debentures 7,00,000 Goodwill 2,50,000
Bank Loan 3,50,000 Discount on shares 1,50,000
Provision for doubtful debt 1,50,000
21,00,000 21,00,000
TATA Ltd. was absorbed by IOCM ltd. 0n following terms and conditions.
(i) X Ltd. will issue 3 equity shares @ Rs. 12 for every 2 shares in TATA Limited.
(ii) X Ltd. will pay Rs. 5 in cash for each equity share in TATA ltd.
(iii) X Ltd. will issue 25,000 12% preference shares @ Rs. 14 each to preference
shareholders of TATA limited.
(iv) While calculating purchase consideration assets of TATA ltd. were valued as under
Building = 9,00,000
Furniture = 1,50,000
Machinery = 4,50,000
Goodwill = 2,00,000
(v) X Ltd. will issue 15% debentures of Rs. 7,50,000 for 12% debentures in TATA limited.
(vi) Expenses on liquidation amounted to Rs. 12,000 paid by X Ltd. Close the books of TATA
ltd.

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Q20. Balance sheet of Rat Ltd. is given below:
BALANCE SHEET OF RAT LTD.
LIABILITIES AMOUNT ASSETS AMOUNT
Equity share capital @ 10 6,00,000 Fixed Assets 8,00,000
General reserve 1,00,000 Investment 3,00,000
Security premium 2,00,000 Bank 2,00,000
8% Debentures 4,00,000 Bills Receivable 1,00,000
Creditors 2,00,000 Debtors 4,00,000
Bank Loan 10,00,000 Stock 5,00,000
Profit and Loss A/C 2,00,000
25,00,000 25,00,000
Cat Ltd. took over the business of Rat Ltd. on following terms and conditions.
(i) All assets and liabilities of Rat Ltd. was taken over by Cat Ltd. except investment and
creditors.
(ii) Business of Rat Ltd. was valued at Rs. 13,00,000 payable in equity shares of Rs. 13 each.
(iii) Investments were sold at 80% of its book value.
(iv) Creditors were paid at a discount of 10%
(v) Expenses on liquidation of Rat Ltd. Rs. 30,000 paid by Rat Ltd.
(vi) Cat Ltd. Issued 12% debentures to 8% debentures of Rat Ltd. of Rs. 4,00,000.
Close the books of Rat Ltd.

Q21. Following is the balance sheet of Anath Ltd. as on 31st March, 2013:
LIABILITIES AMOUNT ASSETS AMOUNT
90,000 Equity shares of ₹ 10 Buildings 4,25,000
each 9,00,000 Plant and Machinery 2,25,000
General Reserve 1,20,000 Furniture 75,000
Profit and loss Account 52,000 Trade Marks 35,000
12% Debentures 4,00,000 Investments 1,15,000
Creditors 3,18,600 Debtors 3,00,000
Stock 5,60,000
Bank 55,600
17,90,600 17,90,600
Anath Ltd. was absorbed by Nath Ltd. on the following terms and conditions:
(i) Assume all liabilities and to acquire all assets except investments which were sold by
Anath Ltd. at 90% of book value.
(ii) Discharge the debentures of Anath Ltd. at a discount of 10%, by the issue of 14%
Debentures of Rs. 100 each in Nath Ltd.
(iii) Trade marks were found useless.
(iv) Issue of one equity share of Rs. 10 in Nath Ltd. issued at Rs. 12 and a cash payment of
Rs. 3 for every share in Anath Ltd.
(v) Pay the cost of absorption Rs. 5,600 as part of purchase consideration.
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(vi) Anath Ltd. sold in the open market half of the shares received from Nath Ltd. at Rs. 15
per share. Show the necessary ledger accounts in the books of Anath Ltd.

Q22. The balance sheet of A company Ltd. on 31st March, 2013 was as under:
LIABILITIES AMOUNT ASSETS AMOUNT
Share capital (Authorized & Land and Buildings 40,000
issued): 625 equity shares of Plant and Machinery 1,24,000
₹ 60 each fully paid 37,500 Sundry Debtors 40,000
Debentures & Interest A/C 1,10,000 Discount on debenture 5,000
Sundry Creditors 30,000 Debentures fun investments
General Reserve 21,500 (at cost) 20,000
Debenture redemption fund 20,000 Cash in hand 1,000
Profit and Loss A/C 11,000
2,30,000 2,30,000
A Company Ltd. was absorbed by B Company Ltd. on the following terms :
(i) B Company Ltd. to take over land and buildings, plant and machinery and investments at
book values; sundry debtors at Rs. 35,000 and goodwill at Rs. 31,000;
(ii) B Company Ltd. to take over sundry creditors;
(iii) Purchase price to be satisfied by the issue of 1,250 fully paid equity shares of Rs. 60
each of which the market value was Rs. 70 each and balance in cash, if any.
(iv)Liability to debenture holders including interest, to be met by the issue of Rs. 1,20,000,
12% debentures by the B Company Ltd.
The cash Rs. 1,000 just sufficient for the expenses, which A Company Ltd. had to meet.
The transaction with B Company Ltd. and the distribution to shareholders was completed
on 30 April 2013. Pass entries giving effect to the above scheme in journals of OLD
COMPANY.

Q23. Equity share capital in old company = 1,00,000 shares

Preference share capital in old company = 40,000 shares
Equity shareholders holding 92,000 shares agree to become equity share holders of new
company.

Q24. Equity share capital of Hutch Ltd. (old company) = 40,000 shares
Shareholders holding 39,000 shares agreed to become equity shareholders of new
company. New company issued equity shares in the ratio 2:1. Remaining shareholders
(1,000) are paid in cash. Comment, whether it is in nature of merger or purchase as per
condition 4 & 5.

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Q25. Equity shares of Hutch Ltd. (old company): 2,00,000 shares

1,95,000 equity shares Dissenting shareholders

agreed to become equity share 5,000 shares
holders in new company

paid in cash
new company paid

equity shares 1:1 ₹ 5 per share paid in cash

Comment, whether it is in nature of merger or purchase as per condition 4 & 5.

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