Abyas Amalgamation IPCC G 1 & 2

ABHYAAS CA ACADEMY, Ph:84999 46555
Vijayawada 77998 59135

Sub : Advanced Accounting
Topic: Amalgamation, Absorption and Reconstruction
1) A Ltd is absorbed by B Ltd, the consideration being the takeover of liabilities, payment of cost of
absorption as part of purchase consideration not exceeding Rs.10,000, the payment of the debentures, Rs.15 per
share in cash and allotment of one 10% preference shares of Rs.10 each and five equity shares of Rs.10 each
fully paid for every four shares in A Ltd. The number of shares of A Ltd are 2 lakhs of ˆ 10 each fully paid
Compute the amount of Purchase Consideration. ( CS Dec 96)
2) You are given the Balance sheet of X Ltd as on 31st March, 2016.
Liabilities Assets
10,000 Equity shares Fixed Assets 4,00,000
of Rs.10 each 1,00,000 Investments 1,00,000
Genreral reserve 3,00,000 Current assets 2,50,000
P & L A/c 1,00,000 Preliminary expenses 60,000
Trade creditors 1,50,000 Share issue expenses 40,000
Provision for taxation 1,20,000
Proposed dividend 80,000
-------- --------
8,50,000 8,50,000
On the date of the Balance sheet the company was taken over by Y Ltd on the following terms.
a) Fixed assets are revalued at ˆ5,60,000
b) Investments have only market value ˆ 80,000
c) current assets are agreed at ˆ3,00,000 for the purpose of absorption.
d) Y Ltd agrees to pay the tax liability which is estimated at ˆ1,30,000.
e) Dividends are paid before absorption by X Ltd.
You are required to calculate purchase consideration.
3) X Ltd takes over Y Ltd in pursuance of a scheme of Amalgamation and it was agreed that the shareholders of
Y Ltd must be issued shares in X Ltd and the exchange is to be determined on the basis of intrinsic values of
the shares of the two companies concerned. The capital of Y Ltd comprises 1,00,000 equity shares of Rs. 10
each. The intrinsic values are X Ltd 40 and Y Ltd 25.In allotment fractional shares are aggregate 500.The
market value of the share of X Ltd was ˆ60.You are required to calculate purchase consideration.
4) Amar Ltd agreed to acquire the business of Kumar Ltd as on 31-12-2015. The summarised Balance sheet of
Kumar ltd. on that date was as under.
BALANCE SHEET
LIABILITIES Rs. ASSETS Rs
Share capital in fully Goodwill 50,000
paid shares of ˆ10 each 3,00,000 Land,Building,Machinery 3,20,000
General Reserve 85,000 Stock in trade 84,000
P & L a/c 55,000 Debtors 18,000
6% Debentures 50,000 Cash and Bank balance 28,000
Creditors 10,000
-------- --------
5,00,000 5,00,000
The consideration payable by Amar ltd was agreed as under:
a) Cash payment equivalent to ˆ2.50 for every share of ˆ10 in Kumar ltd.
b) Issue of 45,000 ˆ10 shares fully paid, in Amar ltd. having an agreed value of ˆ15 per share.
c) Issue of such an amount of fully paid 5% Debentures of Amar ltd at 96% as is sufficient to discharge the 6%
Debentures of Kumar ltd at a premium of 20%.
d) While arriving the agreed consideration, the directors of Amar ltd valued Land, building and Machinery at
ˆ6,00,000, the stock-in-trade at ˆ71,000 and the debtors at their book-value subject to an allowance of
5% to cover doubtful debts. The cost of liquidation of Kumar ltd. was ˆ2,500.
Amar ltd. issued to the public 5,000 shares of ˆ10 each at ˆ15 per share. The shares were fully subscribed and
paid for. You are required to draft journal entries and prepare the ledger a/c s in the books of Kumar ltd. Also
pass the opening journal entries in the books of Amar ltd and prepare the opening B/s.
(CA.Inter)
1
5) The Balance sheets of X Ltd and Y Ltd as on 31-3-2016 are as under.

X Ltd
Liabilities Assets
Equity share capital Buildings 20,00,000
60,000 Equity shares of Machineries 26,00,000
Rs. 100 each fully paid 60,00,000 Furniture 40,000
Reserves and Surplus Stock 16,00,000
General Reserve 8,00,000 Debtors 9,20,000
P & L A/c 4,80,000 Cash in hand 2,80,000
Creditors 9,60,000 Bank balance 8,00,000
---------- ---------
82,40,000 82,40,000
Y Ltd
Liabilities Assets
Equity share capital Goodwill 4,00,000
20,000 Eq.shares of 100 Machineries 16,80,000
each 20,00,000
Furniture 20,000
Capital reserve 2,00,000
Stock 7,20,000
General reserve 1,00,000
Debtors 7,20,000
P & L A/c 1,40,000
Cash in hand 20,000
12% Debentures 12,00,000
Bank balance 1,60,000
Creditors 3,80,000
Expenditure on new project 3,00,000
--------- --------
40,20,000 40,20,000_
Y ltd was absorbed by X Ltd on 1-4-2016 on the following terms.
a) Fixed assets other than Goodwill to be valued at ˆ 20,00,000 including ˆ 24,000 for furniture.
b) Stock to be reduced by ˆ 80,000 and Debtors by 5%
c) X Ltd to assume liabilities and to discharge the 12% Debentures by issue of 11% Debentures of the same
value and in addition a premium of 6% was paid in cash.
d) The new project is to be valued ˆ 3,80,000.
e) The shareholders of Y Ltd to receive cash payment of Rs.30 per share plus four equity shares in X Ltd for
every five shares held in Y Ltd
f) Both the companies declare and pay dividend 6% prior to absorption.
g) Expenses of liquidation of Y Ltd are to be reimbursed by X Ltd to the extent of ˆ20,000.The actual
expenses amounted to ˆ24,000.
Draft journal entries recording the scheme in the books of Y Ltd and prepare the Balance sheet of X Ltd after
absorption assuming X Ltd authorised capital has been increased to ˆ 80,00,000. (CA Inter 93)
6) The Balance Sheets of Rama Ltd and Krishna Ltd as at 31st December, 2015 were as follows.
BALANCE SHEET
Rama Krishna Rama Krishna
ˆ ˆ ˆ ˆ
Share Capital Fixed assets
Divided into equity (Otherthan G.W) 5,00,000 3,50,000
shares of ˆ10 each 6,00,000 4,00,000 Stock in trade 95,000 75,000
Reserves 1,50,000 1,00,000 Debtors 1,40,000 1,00,000
Profit & Loss A/c 75,000 60,000 Cash in Bank 1,17,500 60,000
Sundry Creditors 37,500 30,000 Preliminary -
Expenses 10,000 5,000
-------- -------- -------- --------
8,62,500 5,90,000 8,62,500 5,90,000
Rama Ltd., took over and absorbed Krishna Ltd., as on 1st July, 2016. No Balance sheet of Krishna Ltd was
prepared on the date of take-over. But the following information is made available to you.
i) In the six months ended 30th June, 2016 Krishna Ltd made net profit of ˆ60,000 after providing for
depreciation at 10% per annum on fixed assets.
ii) Rama ltd., during period had made net profits of ˆ 1,45,000 after providing for depreciation at 10% per
annum on the fixed assets.
iii) Both the companies had distributed dividend of 10% on 1st April, 2016.
iv) Goodwill of Krishna Ltd., on the date of take-over was estimated at ˆ25,000 and it was agreed that the s
stocks of Krishna Ltd., would be appreciated by ˆ15,000 on the date of take-over.
v) Rama Ltd, to issue shares to shareholders of krishna Ltd on the basis of the intrinsic value of the shares on
the date of take-over.
vi) Draft Balance sheet of Rama Ltd after absorption. (C.A. Inter)
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PROBLEMS ON INTER COMPANY OWINGS:
7) The following are Balance sheets of P Ltd and S Ltd as at 31-12-2015

BALANCE SHEET
P Ltd S Ltd P Ltd S Ltd
Share Capital 9,00,000 3,00,000 Plant 6,50,000 ---
Reserves 2,80,000 70,000 Furniture 75,000 30,000
Bills payable 35,000 10,000 Stock 3,05,000 2,70,000
Sundry Creditors 1,05,000 80,000 Bills Receivable 20,000 30,000
Cash at Bank 1,14,000 75,000
Debtors 1,56,000 55,000
--------- -------- --------- ---------
13,20,000 4,60,000 13,20,000 4,60,000
P Ltd takes over the business of S Ltd for ˆ4,00,000 payable in the form of equity shares at par. Included in
Bills payable of P Ltd bills of ˆ25,000 accepted in favour of S Ltd for goods purchased. S Ltd charging profit
@ 25% on cost. On the date of absorption, goods purchased from S Ltd of the invoice price of ˆ 12,500 still
remain unsold in the stock of P Ltd and of the above mentioned bills of ˆ25,000, bills for ˆ 5,000 only still
remain in S Ltd's hands, the rest having been endorsed in favour of creditors or got discounted with Bank.
Expenses of liquidation of S Ltd ˆ 6,000 were met by P Ltd.
Prepare Realisation A/c and the amount of S Ltd in P Ltd ledger and pass entries in the books of P Ltd. Also
draw balance sheet of P Ltd
8) A Ltd agree to acquire the business of B Ltd as on 31st March,2015. On the date balance sheet of B Ltd was
summarized as follows.
BALANCE SHEET
Share Capital @ 10 each 3,00,000 Goodwill 50,000
General reserve 85,000 Land Building and Plant 3,20,000
Profit and Loss A/c 55,000 Stock 84,000
10% Debentures 50,000 Debtors 18,000
Creditors 10,000 Cash and Bank 28,000
-------- --------
5,00,000 5,00,000
The debenture holders agreed to receive such 14% Debentures issued at 96 as would discharge the debentures
of B Ltd at a premium of 20%. The shareholders in B Ltd were to receive ˆ 2.50 in cash per share and
3 shares in A Ltd for every two shares held-the shares in A Ltd being considered as worth ˆ12.5 each.
There were fractions equalling 50 shares of A Ltd for which cash was paid . The directors of A Ltd
considered the various assets to be valued as follows.
Land 1,00,000 : Buildings 2,50,000 : Plant 3,50,000 : Stock 80,000 ; Debtors 18,000.
The cost of liquidation of B Ltd ultimately was ˆ5,000. Due to technical hitch, the transaction could
completed only on 1st October, 2015. Till that date B Ltd carried on trading which resulted in a profit of
ˆ20,000 ( subject ot interest) after providing ˆ15,000 as depreciation. On October, 1 Stock was ˆ90,000. Debtors
were ˆ 25,000 and Creditors were ˆ15,000. There was no addition to or sale of fixed assets. It was agreed that
the profit belong to A Ltd.
You are required to prepare as on 1-10-2015

i) Prepare Realisation A/c and shareholders A/c in the ledger of B Ltd
ii) Give journal entries in the books of A Ltd.
INTER COMPANY HOLDINGS

9) The Balance sheet of X Ltd as on 31-12-2015 was as follows.
BALANCE SHEET
Share Capital Fixed assets 13,10,000
2,00,000 Equity shares Current assets 9,70,000
of Rs.10 each 20,00,000 P & L A/c 70,000
Current liabilities 3,50,000
--------- --------
23,50,000 23,50,000
On the above mentioned date Y Ltd absorbed the business of X Ltd at Balance sheet values. Winding up costs
of ˆ9,000 were also to be borne by Y Ltd. The balance sheet of Y Ltd on that date as follows.
3
BALANCE SHEET OF Y Ltd

Share Capital Fixed assets 32,10,000
3,00,000 Eq.Shares of Investment in 50,000
ˆ 10 each 30,00,000 Equity shares of X Ltd 4,75,000
General reserve 10,00,000 Current assets 22,60,000
Current liabilities 19,45,000
--------- ---------
59,35,000 59,45,000
Y Ltd discharged the purchase consideration by allotment of 1,00,000 fully paid equity shares of Rs.10 each at
an agreed value of ˆ12 each and by payment of cash for the balance. Y Ltd had sufficient cash at bank for
payment to liquidator of X Ltd.
Show important ledger accounts in the books of X Ltd. Pass journal entries in the books of Y Ltd and draw Y
Ltd balance sheet immediately following take over of the business.
10) Following are the Balance sheets of A Ltd and B Ltd as on 31-3-2016.
BALANCE SHEET
A LTd B Ltd A Ltd B Ltd
Share Capital Fixed assets 15,00,000 3,00,000
Equity shares of Rs. Goodwill -- 1,00,000
100 each 20,00,000 10,00,000 Investments 2,50,000 ---
General reserve 15,00,000 5,00,000 Current.Assets 32,50,000 14,00,000
Cur.Liabilities 15,00,000 2,00,000
Proposed dividend --- 1,00,000
--------- --------- -------- ---------
50,00,000 18,00,000 50,00,000 18,00,000
B Ltd is absorbed by A Ltd on the following terms.

a) B Ltd declares a dividend of 10% before absorption for the payment of which it is to retain sufficient amount
of cash.
b) The Net worth of B Ltd was valued at ˆ 14,50,000
c) A Ltd holds 2,500 shares of B Ltd at a cost of ˆ 2,00,000.
c) The purchase consideration is satisfied by the allotment of fully paid shares of ˆ100 each in A LTd.
d) The stocks of B LTd include items valued at ˆ50,000 from A Ltd. ( Cost to A Ltd ˆ 37,500)
e) The creditors of B Ltd include ˆ45,000 due to A Ltd.
Show ledger accounts in the books of B Ltd and Balance sheet of A.
11) P Ltd takes over the business of V Ltd for ˆ 16,00,000 on 31st March, 2016 on which date the balance
sheets of the two companies are as follows.
P Limited
Equity share capital(10 each) 36,00,000 Goodwill 2,00,000
General reserve 8,50,000 Other fixed assets 28,00,000
Current liabilities 10,50,000 Cash at bank 5,00,000
Other current assets 20,00,000
--------- ---------
55,00,000 55,00,000
V Limited
Equity share Capital 20,00,000 Fixed assets 12,00,000
of Rs. 10 each fully paid 2,500 shares in P Ltd 30,000
at cost
Current liabilities 3,00,000 Cash at Bank 10,000
Other current assets 8,60,000
Profit & Loss A/c 2,00,000
--------- ---------
23,00,000 23,00,000
The purchase consideration is to be discharged by a cash payment of ˆ 1,00,000 and allotment of sufficient
number of fully paid equity shares in P Ltd of the face value of ˆ10 each valued at ˆ12.50 each. Expenses of
winding up ˆ 10,000 are borne by P Ltd.
You are required to
i) Prepare important ledger accounts and pass journal entries in the books of V ltd.
ii) Pass journal entries in the books of P Ltd.
iii) Draw P Ltd balance sheet
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12) You are presented with the following balance sheets of Y Ltd and Z Ltd as on 31-3-2016.
Y Limited
ˆ ˆ
Share Capital
6,000 equity shares of ˆ100 each fully paid 6,00,000 Fixed assets(Other than G.W) 8,30,000
Reserves 2,00,000 Current assets 4,00,000
12% Debentures 2,00,000 Preliminary expenses 20,000
Creditors 2,50,000
--------- ---------
12,50,000 12,50,000
Z Limited
Share capital ˆ ˆ
3,000 shares of ˆ 100 each fully paid 3,00,000 Fixed assets(Other than G.W) 2,50,000
Reserves 60,000 Current assets 2,30,000
12% Debentures 1,00,000 1,000 shares in Y Ltd 1,20,000
Creditors 1,50,000 Preliminary expenses 10,000
---------- ----------
6,10,000 6,10,000
Goodwill of Y Ltd is valued at ˆ1,20,000 and that of Z Ltd at ˆ 40,000. Y Ltd absorbs Z Ltd on the basis of
intrinsic values of the shares. State the journal entries in the books of the two companies.
13) Following are the summarized balance sheets of two companies, P Ltd and N Ltd as on 31-3-2016.
BALANCE SHEET
P Ltd N Ltd P Ltd N Ltd
Share Capital
(shares of 10 each) 5,00,000 1,80,000 Shares in P Ltd --- 1,00,000
(10,000 Shares)
Reserves 1,45,000 --- Shares in N Ltd 30,000 ---
Debentures --- 2,00,000 (4,500 shares)
Trade Creditors 3,00,000 2,00,000 Sundry assets 8,15,000 4,60,000
Debentures in
N Ltd 1,00,000 ---
P & L A/c --- 20,000
-------- -------- -------- --------
9,45,000 5,80,000 9,45,000 5,80,000
The two companies agreed that P should take over N Ltd. The debenture holders in N Ltd agreed to
convert the debentures into 14% Redeemable Preference shares of ˆ100 each. Prior to the absorption,
P Ltd declared a dividend of 20%. The dividend had not yet been paid. Shareholders in N Ltd were to receive
shares in P Ltd on the basis of the intrinsic value of shares. The sundry assets of N Ltd. had to be written up
by ˆ40,000 and those of P Ltd reduced by ˆ15,000.
Draw up the Balance sheet of P Ltd after the absorption is completed.
PROBLMES ON AMALGAMATION
14) Star and Moon had been carrying on business independently. They agreed to amalgamate and form a
new company Neptune Ltd. With an authorised share capital of ˆ2,00,000 divided into 40,000 equity
shares of ˆ5 each. On 31st December, 2015 the respective Balance Sheets of Star and Moon were as follows:
Star Moon
ˆ ˆ
Fixed Assets 3,17,500 1,82,500
Current Assets 1,63,500 83,875
---------- ---------
4,81,000 2,66,375
Less: Current Liabilities 2,98,500 90,125
---------- ---------
1,82,500 1,76,250
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Additional Information:
(a) Revalued figures of Fixed and Current Assets were as follows:
Star Moon
Fixed Assets ˆ 3,55,000 1,95,000
Current Assets ˆ 1,49,750 78,875
(b) The debtors and creditors - include ˆ 21,675 owed by Star to Moon.
The purchase consideration is satisfied by issue of the following shares and debentures:
(i) 30,000 equity shares of Neptune Ltd., to Star and Moon in the proportion to the profitability of their
respective business based on the average net profit during the last three years which were as follows:
Star Moon
2013 Profit 2,24,788 1,36,950
2014(Loss)/Profit (1,250) 1,71,050
2015 Profit 1,88,962 1,79,500
(ii) 15% debentures in Neptune Ltd., at par to provide an income equivalent to 8% return on capital
employed in their respective business as on 31st December, 2015 after revaluation of assets.
Your are required to:

(1) Compute the amount of debentures and shares to be issued to Star and Moon.
(2) A Balance sheet of Neptune Ltd., showing the position immediately after amalgamation.
(CA inter may 1996 & PCC May 2007 )
15) Super Express Ltd. and Fast Express Ltd. were in competing business. They decided to from a new company
named super Fast Express LTd. The balance sheets of both the companies are as under.
Super Express Ltd.
Balance Sheet as at 31st December, 2015
ˆ ˆ
20,000 Equity shares of Rs.100 Buildings 10,00,000
each 20,00,000 Machinery 4,00,000
Provident fund 1,00,000 Stock 3,00,000
Sundry creditors 60,000 Sundry debtors 2,40,000
Insurance reserve 1,00,000 Cash at bank 2,20,000
Cash in hand 1,00,000
--------- -----------
22,60,000 22,60,000
Fast Express Ltd.
Balance Sheet as at 31st December, 2015
ˆ ˆ
10,000 Equity shares of Good will 1,00,000
Rs. 100 each 10,00,000 Buildings 6,00,000
employees profit sharing Machinery 5,00,000
account 60,000 Stock 40,000
Sundry creditors 40,000 Sundry Debtors 40,000
Reserve account 1,00,000 Cash at bank 10,000
Surplus 1,00,000 Cash in hand 10,000
---------- ----------
13,00,000 13,00,000
The assets and liabilities of both the companies were taken over by the new company at their book values. The
companies were allotted equity shares of ˆ100 each in lieu of purchase consideration. Prepare opening balance
sheet of Super Fast Express Ltd. (C A inter may 2000)
16) A and B decide to amalgamate into Sharp Ltd. The following are their Balance sheets as on 31-12-2015
Liabilities A Ltd B Ltd Assets A Ltd B Ltd
Face value and paid up capital Investments
Share capital ( 100 each) 5,00,000 4,00,000 1000 shares in B Ltd 1,30,000 --
General reserves 2,00,000 1,00,000 2000 shares in A Ltd 2,10,000
10% Debentures 2,00,000 1,50,000 Sundry Assets 7,70,000 4,40,000
----------- ----------- ----------- -------------
9,00,000 6,50,000 9,00,000 6,50,000
Compute the amount of purchase consideration each of these companies under purchase method as per AS-14.
( IPCC Nov 2010 5 marks Gr.1)
6
17) On 31st March, 2016the Balance sheet of X Ltd was as follows.

BALANCE SHEET
Sahre Capital ˆ ˆ
50,000 12% Cumulative Goodwill 4,00,000
Preference shares of Plant and Machinery 7,00,000
Rs. 10 each fully paid 5,00,000 Furniture & Fittings 2,00,000
1,50,000 Equity Shares of Patents 1,50,000
Rs. 10 each fully paid 15,00,000 Stock 4,90,000
10% Debentures 3,00,000 Debtors 2,55,000
Creditors 2,00,000 Bank 5,000
Preference divided Preliminary expenses 8,000
arear for 3 Years Discount on issue
of debentures 12,000
--------- ----------
25,00,000 25,00,000
The following scheme of external reconstruction was agreed upon:
1) New company to be formed called Z Ltd with authorised capital of ˆ32,50,000 in equity shares of ˆ10
each.
2) One equity share, ˆ 5 paid up, in the new company to be allotted for each equity share in the old company.
3) Two equity shares, ˆ5 paid up in the new company to be allotted for each preference share in the old company.
4) Arrears of preference dividends to be cancelled.
5) Debenture holders to receive 30,000 equity shares in the new company credited as fully paid.
6) Creditors to be taken over the new company.
7) The remaining unissued shares to be taken up and paid for in full by the directors.
8) The new company to take over the old company's assets except patents, subject to writing down plant and
machinery by ˆ 2,90,000 and Stock by ˆ60,000.
9) Patents were realised by X Ltd for ˆ 10,000.
Show important ledger accounts in the books of X Ltd and open the books of Z Ltd by means of journal
entries and give the initial Balance sheet of Z Ltd. Expenses of X Ltd came to ˆ10,000. (CA Inter)
18) X Ltd and Y Ltd were carrying business independently. The companies agreed to amalgamate on and from 1-
4-2016and formed a new company called Z Ltd to take over assets and liabilities of existing companies.
The Balance sheets of two companies as on 31-3-2016as under.
X Ltd Y Ltd
Share capital share of rs. 10 each fully paid up 30,00,000 18,00,000

Securities premium 6,00,000 -
General reserved 9,00,000 7,50,000
Profit & Loss A,c 5,40,000 4,80,000
10% Debentures 15,00,000 --
Secured Loan -- 9,00,000
Sundry creditors 7,80,000 5,10,000
------------ ------------
73,20,000 44,40,000
Land & Building 27,00,000 13,50,000

Plant & Machinery 15,00,000 11,40,000
Investments (15,000 shares of Y Ltd) 2,40,000 --
Stock 15,60,000 10,50,000
Debtors 12,30,000 7,80,000
Cash at Bank 90,000 1,20,000
------------ -------------
73,20,000 44,40,000
Following are the additional information
i) for the purpose of amalgamation the shares of existing companies are valued as follows.
X Ltd 18 per share Y Ltd 20 per share
ii) A contingent liability of X Ltd Rs. 1,80,000 to be treated as actual existing liability.
iii) The shareholder of X ltd and Y Ltd are to be paid shares in Z ltd at a premium of Rs. 6 per share.
iv) The face value of shares in Z Ltd be Rs. 10 per share.
Required:
i) Calculate purchase consideration ( i.e number of shares to be issued to X Ltd and Y Ltd.)
ii) Prepare Realisation A/c and Shareholder A/c in the books of X Ltd and Y Ltd.
iii)Prepare Balance sheet of Z Ltd after amalgamation. (IPCC Nov 2011 Gr. 2 16 M)
7
19) The business of Rundown Ltd was being carried on continuously at losses. The following are the extracts
from the Balance Sheet of the company as on 31-3-2016
Authorised,Issued and subsc- Goodwill 50,000

ribed Capital Plant 3,00,000
30,000 equity shares of Loose tools 10,000
ˆ10 each fully paid 3,00,000 Debtors 2,50,000
2,000 8% Cum.pref shares Stock 1,50,000
of ˆ100 each fully paid 2,00,000 Cash 10,000
Securities premium 90,000 Bank 35,000
Unsecured loan (from director) 50,000 Preliminary expenses 5,000
Sundry creditors 3,00,000 P & L A'c 2,00,000
Outstanding expenses(inclu-
ding directors remuneration
ˆ 20,000 ) 70,000
--------- ----------
10,10,000 10,10,000
Note: Dividends on Cum.Pref shares are in arrears for three years
The following scheme of reconstruction has been agreed upon and duly approved by the court.
a) Equity shares to be converted into 1,50,000 shares of ˆ2 each
b) Equity shareholders to surrender to the company 90% of their value
c) Pref.shareholders agree to forego their rights to arrear dividends in consideration of which 8% Pref. shares
are
to be converted into 9% Pref. shares.
d) Sundry creditors agree to reduce their claim by 1/5 th in consideration of their getting shares of ˆ35,000 out of
the surrendered Equity shares.
e) Directors agree to forego the amounts due on account of Unsecured Loan and Directors remuneration.
f) Surrendered shares not otherwise utilised to be cancelled.
g) Assets to be reduced as under
Goodwill by ˆ50,000 ; Plant by ˆ40,000 : Tools by ˆ 8,000 Sundry debtors byˆ15,000 ; Stock by ˆ 20,000
h) Any surplus after meeting the losses should be utilised in writing down the value of the plant further.
i) Expenses of reconstruction amounted to ˆ10,000
j) Further 50,000 equity shares were issued to the existing members for increasing the working capital. The issue
was fully subscribed and paid up.
k) Authorised share capital was suitably increased.

A member holding 100 Equity shares opposed the Scheme and his shares were taken over by a director on
payment of ˆ 1,000 as fixed by the court.
You are required to pass the Journal entries for giving effect to the above arrangement and also draw the
resultant B/S. ( CWA Dec 2002)
20) The abstract of the Balance sheet of the AXE Ltd as at 31 st March, 2016are as follows.
Liabilities
Equity shares of ( ˆ 100 each) 15,00,000
12% Preference share capital (ˆ 100 each) 8,00,000
On 31st March, 2016 BXE Ltd agreed to take over AXE Ltd on the following terms.
a) For each preference share in AXE Ltd ˆ10 in cash and one 9% preference share of ˆ 100 each in BXE Ltd.
b) For each equity share in AXE Ltd ˆ20 in cash and one equity share in BXE Ltd of ˆ 100 each. It was
decided that the share in BXE Ltd will be issued at market price ˆ140 per share.
c) Liquidation expenses of AXE Ltd are to be reimbursed by BXE Ltd to the extent of ˆ 10,000. Actual
expenses amounted to ˆ12,500.
You are required to compute the purchase consideration. ( IPCC May 2011 Gr.1)
8
21) The following is the Balance Sheet of Weak Ltd as on 31-3-2016.

BALANCE SHEET
Share Capital Buildings 2,00,000
20,000equity shares of Debtors 55,000
Rs.10 each fully paid 2,00,000 Machinery 1,30,000
10% Cumulative Preference Patents 40,000
shares of Rs. 100 each fully paid 50,000 Inventories 80,000
8% Debentures 1,00,000 Preliminary expenses 10,000
Trade creditors 3,30,000 Profit & Loss A/c 1,85,000
Creditors for expenses 20,000
-------- ----------
7,00,000 7,00,000
------- ----------
With a view to reconstruction the company it is agreed:-
a) To reduce i) Equity share by ˆ 9 each, ii) 10% Preference shares by ˆ40 each iii) 8% Debentures by 10% iv)
Trade creditors claims by 1/3, v) machinery to ˆ70,000 and vi) inventories by ˆ10,000
b) to provide ˆ15,000 for bad debts.

c) to write off the intangible assets and
d) to raise the rate of preference dividend to 14% and the rate of debenture interest to 12.5%.
Assuming that the aforesaid proposals approved and duly sanctioned pass the Journal entries to give effect to
the above, and show the Company's Post-reconstruction Balance Sheet.
22) Sun Ltd and Moon Ltd were amalgamated on and from 1st April, 2016. A new company Star ltd was formed
to take over the business of the existing business. The Balance sheet of Sun Ltd and and Moon Ltd as at 31 st
March, 2016 are given below.
BALANCE SHEET ( Rs in lakhs)
Sun Moon Sun Moon
Ltd Ltd Ltd Ltd
Equity shares of Rs. 100 each 400 375 Fixed Assets
12% Preference shares of Rs.100 150 100 Land & Building 275 200
Reserves & Surplus Plant & Machinery 175 125
Revaluation Reserve 75 50 Investments 75 25
General Reserve 85 75 Current Assets, Loans & Advances
Investment allowance Reserve 25 25 Stock 175 125
P & L A/c 25 15 Sundry debtors 125 150
Secured Loans Bills Receivable 25 25
10% Debentures of Rs.100 each 30 15 Cash and Bank balances 150 100
Current Liabilities & Provisions
Sundry creditors 135 60
Acceptances 75 35
-------- ------ -------- --------
1,000 750 1,000 750
Additional information :
(a) Star Ltd. will issue 5 equity shares for each equity share of Sun Ltd. And 4 equity shares for each equity share
of Moon Ltd. The shares are to be issued @ Rs. 30 each, having a face value of Rs. 10 per share.
(b) Preference shareholders of the two companies are issued equivalent number of 15% preference shares of Star
Ltd. at a price of Rs. 150 per share (face value Rs. 100).
(c) 10% Debentureholders of Sun Ltd. and Moon Ltd. are discharged by Star Ltd., issuing such number of its 15%
Debentures of Rs. 100 each so as to maintain the same amount of interest.
(d) Investment allowance reserve is to be maintained for 4 more years.
(e) Liquidation expenses are :
Sun Ltd. Rs. 2,00,000 Moon Ltd. Rs. 1,00,000
It was decided that these expenses would be borne by Star Ltd.
(f) All the assets and liabilities of Sun Ltd. and Moon Ltd. are taken over at book value.
(g) Authorised equity share capital of Star Ltd. is Rs. 5,00,00,000, divided into equity shares of Rs. 10 each. After
issuing required number of shares to the Liquidators of Sun Ltd. and Moon Ltd., Star Ltd. issued balance
shares to Public. The issue was fully subscribed. Required :
Prepare the Balance Sheet of Star Ltd. as at 1st April, 2015 after amalgamation has been carried out on the basis
of Amalgamation in the nature of Purchase. (IPCC Nov 2009 Gr.II 16 marks)
9
23)The summarized Balance Sheet of SRISHTI Ltd as on 31st March 2016, was as follows:
Liabilities ˆ Assets `ˆ
Equity Shares of10 fully paid 30,00,000 Goodwill 5,00,000
Export Profit Reserves 8,50,000 Tangible Fixed Assets 30,00,000
General Reserves 50,000 Stock 10,40,000
Profit and Loss Account 5,50,000 Debtors 1,80,000
9% Debentures 5,00,000 Cash & Bank 2,80,000
Trade Creditors 1,00,000 Preliminary Expenses 50,000
---------- -----------
Total 50,50,000 Total 50,50,000
ANU Ltd agreed to absorb the business of SRISHTI Ltd with effect from 1st April, 2016.
(a) The Purchase Consideration settled by ANU Ltd as agreed:
(i) 4,50,000 Equity Shares of ˆ10 each issued by ANU Ltd by valuing its Shares at ˆ15 per Share.
(ii) Cash Payment equivalent to ˆ 2.50 for every Share in SRISHTI Ltd.
(b) The issue of such an amount of fully paid 8% Debentures in ANU Ltd at 96%, as is sufficient to discharge 9%
Debentures in SRISHTI Ltd at a premium of 20%.
(c) ANU Ltd will take over the Tangible Fixed Assets at 100% more than the Book Value, Stock at ˆ7,10,000
and Debtors at their face value, subject to a provision of 5% for Doubtful Debts.
(d) The actual cost of liquidation of SRISHTI Ltd was ˆ75,000. Liquidation Cost of SRISHTI Ltd is to be
reimbursed by ANU Ltd to the extent of ˆ50,000.
(e) Statutory Reserves are to be maintained for 1 more year.
You are required to –
i) Close the books of SRISHTI Ltd, by preparing Realisation Account, ANU Ltd Account, Shareholders Account
and Debenture Account, and
(ii) Pass Journal Entries in the books of ANU Ltd regarding acquisition of business. (IPCC May 2014 16M)
24) Given below is the Balance sheets of Vasudha Ltd and Vaishali Ltd as on 31-3-2016.
Liabilities Vasudha Ltd Vaishali Ltd Assets Vasudha Ltd Vaishali Ltd
. Issue share capital Factory Building 2,10,000 1,60,000
Shares of Rs. 10 each 5,40,000 4,03,300 Debtors 2,86,900 1,72,900
General reserve, 1,01,000 65,000 Stock 91,500 82,500
Profit & loss A/c 66,000 43,500 Goodwill 50,000 35,000
Sundry creditors 44,400 58,200 Cash at Bank 98,000 1,09,590
Preliminary expenses 15,000 10,010
---------- ----------- ----------- -----------
7,51,400 5,70,000 7,51,400 5,70,000
Goodwill of the Companies Vasudha Ltd and Vaishali Ltd is to be valued Rs. 75,000 and Rs. 50,000 respectively.
Factory Building of Vasudha Ltd is Worth Rs. 1,95,000 and Vaishali Ltd Rs. 1,75,000. Stock of Vaishali Ltd has
been shown at 10% above cost.
It is decided that Vasudha Ltd will absorb Vaishali Ltd with liquidating later, by taking over its entire business
by issue of Shares at the Intrinsic value. You are required to draft the Balance sheet of the two companies after
putting through scheme. (IPCC May 2012 Gr. 2 16 M)
25) Given below are the Balance Sheet of two Companies as on 31st December 2015.
A Limited
Equity & Liabilities ˆ ` Assets ` ˆ
Share Capital: Issued and Fully paid up Patent 1,00,000
50,000 8% Cumulative Preference Shares of ` 10 each 5,00,000 Building 5,40,000
1,50,000 Equity Shares of ` 10 each 15,00,000 Plant and Machinery 15,10,000
General Reserve 7,65,000 Furniture 75,000
Profit and Loss Account 1,25,000 Investment 1,55,000
Sundry Creditors 60,000 Stock 3,58,000
Sundry Debtors 72,000
Cash and Bank 1,40,000
Total 29,50,000 Total 29,50,000
B Limited
Equity & Liabilities ` Assets `
Share Capital: Issued and Fully paid up Goodwill 62,000
50,000 Shares of ` 10 each 5,00,000 Motor Car 1,26,000
Profit and Loss Account 45,000 Furniture 58,000
Cash and Bank 20,000
Total 5,76,000 Total 5,76,000
10
ABHYAAS CA ACADEMY , Ph:84999 46555
It has been agreed that both these Companies should be wound up and a New Company AB Ltd should be
formed, to acquire the Assets of both the Companies on the following terms and conditions:
i) AB Ltd is to have an Authorized Capital of ˆ36,00,000, divided into 60,000 8% Cumulative Preference
Shares of ˆ10 each and 3,00,000 Equity Shares of ˆ10 each.
ii) AB Ltd is to purchase the whole of the assets of A Ltd (except Cash and Bank balances) for ˆ 28,25,000, to be
settled as to ˆ5,75,000 in cash, and as to the balance by issue of 1,80,000 Equity Shares, credited as fully paid,
to be treated as valued as ˆ12.50 each.
iii) AB Ltd is to purchase the whole of the assets of B Ltd (except Cash and Bank balances) for ˆ4,91,000, to be
settled as to ˆ16,000 in cash, and as to the balance by issue of 38,000 Equity Shares, credited as fully paid, to
be treated as valued at ˆ12.50 each.
iv) A Ltd and B Ltd both are to be wound up, the two Liquidators distributing the Shares in AB Ltd in kind
among the Equity Shareholders of the respective Companies.
v) The Liquidator of A Ltd is to pay the Preference Shareholders ˆ12 in cash for every Share held, in full
satisfaction of their claims.
vi) AB Ltd is to make a Public Issue of 60,000, 5% Cumulative Preference Shares at a premium of 10%, and
30,000 Equity Shares at the Issue Price of ˆ12.50 per Share, all amount payable in full on application.
It is estimated that the costs of liquidation (including the Liquidators’ Remuneration) will be ˆ10,000 in case of A
Ltd and ˆ5,000 in case of B Ltd and that the Preliminary Expenses of AB Ltd will amount to ˆ 24,000 exclusive of
the Underwriting Commission of ˆ 38,900 payable on the Public Issue.
You are required to prepare the initial Balance Sheet of AB Ltd, on the basis that all Assets other than Goodwill
are taken over at the Book Value. (IPCC May 2016 16 M)
26) BALANCE SHEET OF A LTD. as on 31-3-2016

60,000 equity shares
of ˆ10 each 6,00,000 Freehold premises 2,20,000
Profit prior to incorporation 21,000 Machinery 1,77,000
Contingency reserve 1,35,000 Furniture & Fittings 90,800
P & L Appr. A/c 1,26,000 Stock 3,87,400
Acceptances 20,000 Debtors 80,000
Creditors 1,13,000 R.B.D 4,000 76,000
Provision for I.T 1,10,000 Cash in hand 2,300
Cash at bank 1,56,500
Bills receivable 15,000
11,25,000 11,25,000
A Ltd was wound up as at the date of the above noted balance sheet. B Ltd took over the following assets at
values noted against them.
Freehold premises 4,00,000 ; Furniture & Fittings 80,000 ; Machinery 1,60,000 ; Stock 3,45,000
Bills receivable 15,000
One-fourth of the purchase consideration was satisfied by allotment of fully paid preference shares of ˆ100
each at par which carried 10% dividend on cumulative basis. The balance was paid in the form of B
Ltd's equity shares of ˆ10 each ˆ8 paid up.
Sundry debtors realised ˆ79,500. Acceptances were settled for ˆ 19,000. Income tax authorities fixed the
taxation liability at ˆ1,11,600. Creditors were finally settled with the remaining cash balance after meeting
liquidation expenses amounting to ˆ 4,000. You are required to:
1) Calculate the number of equity shares and preference shares to be allotted by B Ltd in discharge of
purchase consideration.
2) Prepare Journal entries in the books of B Ltd.
3) Prepare the ledger accounts in the books of A Ltd. (IPCC May 2010 16 M)
27) The paid-up capital of Toy Ltd. amounted to ˆ2,50,000 consisting of 25,000 equity shares of ˆ10 each.
Due to losses incurred by the company continuously, the directors of the company prepared a scheme for
reconstruction which was duly approved by the court. The terms of reconstruction were as under:
i) In lieu of their present holdings, the shareholders are receive:
a) Fully paid equity shares equal to 2/5th of their holding.
b) 5% preference shares fully paid-up to the extent of 20% of the above new equity shares.
c) 3,000 6% Debentures of ˆ10 each
ii)An issue of 2,500 first debentures of ˆ10 each was made and fully subscribed in cash.
iii) The assets were reduced as follows.
a) Goodwill from ˆ1,50,000 to ˆ 75,000
b) Machinery from ˆ50,000 to ˆ 37,500
(c) Leasehold premises from ˆ75,000 to ˆ 62,500.
Show the journal entries to give effect to the above scheme of reconstruction. (C.A. inter Nov 1995).
11
28) The Balance sheet of Mars Ltd as on 31st March 2016 was as follows.
ˆ ˆ
1,00,000 equity shares of Rs10 each 10,00,000 Fixed Assets
Reserve and Surplus Land and Building 7,64,000
Capital Reserve 42,000 Current Assets
Contingency reserve 2,70,000 Stock 7,75,000
P & L Appr. A/c 2,52,000 Debtors 1,60,000
Current Liabilities & Provisions RBD 8,000 1,52,000
Bills payable 40,000 Bills receivable 30,000
Sundry creditors 2,26,000 Cash at bank 3,29,000
Provision for tax 2,20,000
------------ ------------
20,50,000 20,50,000
On 1st April,2016 Jupiter Ltd agreed to absorb Mars Ltd on the following terms and conditions.
1) Jupiter Ltd will take over the assets as the following values.
Land and Building ˆ 10, 80,000 ; Stock ˆ 7,70,000 ; Bills receivable ˆ 30,000
2) Purchase consideration will be settled by Jupiter Ltd as under.
4,100 fully paid 10% preference shares of ˆ100 each will be issued and the balance will be settled by
issuing equity shares of ˆ 10 each ˆ8 paid up.
3) Liquidation expenses are to be reimbursed by Jupiter Ltd to the extent of ˆ5,000.
4) Sundry debtors realised ˆ1,50,000. Bills payable were settled for ˆ 38,000. Income tax authorities fixed
the taxation liability at ˆ2,22,000. Creditors were finally settled with the remaining cash balance after
meeting liquidation expenses amounting to ˆ 8,000.
You are required to:
1) Calculate the number of eq. shares & pref. shares to be allotted by Jupiter Ltd in discharge of PC.
2) Prepare Realization A/c, Bank A/c and Eq. shareholders A/c and Jupiter Ltd A/c in the books of Mars Ltd.
(IPCC May 2011 16 M)
29) The following are the Balance Sheets of M Ltd. and N Ltd. As at 31st March, 2016 :
(ˆ in lakhs)
Liabilities M Ltd. N Ltd.
Fully paid equity shares of ˆ 10 each 3,600 900
10% preference Shares of ˆ10 each, fully paid up 1,200 —
Capital Reserve 600 —
General Reserve 2,100 —
Profit and Loss Account 780 —
8% Redeemable debentures of ˆ 1,000 each — 300
Trade Creditors 2,421 369
Provisions 870 93
------- ------
11,571 1,662
Assets
Plant and Machinery 4,215 468
Furniture and Fixtures 2,400 183
Motor Vehicles — 51
Stock 2,370 444
Sundry Debtors 1,044 237
Cash at Bank 1,542 240
Preliminary Expenses — 33
Discount on Issue of Debentures — 6
------- --------
11,571 1,662
A new Company MN Ltd. was got incorporated with an authorised capital of ˆ15,000 lakhs divided into shares of
ˆ 10 each. For the purpose of amalgamation in the nature of merger, M Ltd. and N Ltd. were merged into
MN Ltd. on the following terms :
i) Purchase consideration for M Ltd.’s business is to be discharged by issue of 120 lakhs fully paid 11%
preference shares and 720 lakhs fully paid equity shares of MN Ltd. to the preference and equity shareholders
of M Ltd. in full satisfaction of their claims.
(ii) To discharge purchase consideration for N Ltd.’s business, MN Ltd. to allot 90 lakhs fully paid up equity
shares to shareholders of N Ltd. in full satisfaction of their claims.
(iii) Expenses on the liquidation of M Ltd. and N Ltd. amounting to ˆ6 lakhs are to be borne by MN Ltd.
(iv) 8% redeemable debentures of N Ltd. to be converted into 8.5% redeemable debentures of MN Ltd.
(v) Expenses on in corporation of MN Ltd. were ˆ 15 lakhs.
You are requested to :
(a) Pass necessary Journal Entries in the books of MN Ltd. to record above transactions, and
(b) Prepare Balance Sheet of MN Ltd. after merger. (IPCC Nov 2009 GR.I 16 marks)
12
30) The summarized Balance sheet of Bad Luck Ltd as on 31 st March, 2016 was as follows.
Note Amount Amount
A.Equity and Liabilities
1) Shareholders Fund
a) Share capital 1 7,50,000
b) Reserves and Surplus 2 (10,00,000) (2,50,000)
2) Non-Current Liabilties
Long term borrowings 3 5,00,000
3) Current Liabilities
a) Short term borrowings 4 5,00,000
b) Trade payables 2,50,000 7,50,000
Total 10,00,000
B. Assets
1. Non-current Assets
a) Fixed Assets
i) tangible assets 5 5,50,000
ii) Intangible assets 6 1,50,000 7,00,000
2. Current Assets
a) Inventories 1,50,000
b) Trade receivables 1,25,000
c) Deferred Revenue Expenditure 25,000 3,00,000
Total 10,00,000
Notes to Accounts Amount Amount

1) Share capital
Authorised, Issued & fully paid 5,000 Eq.Shares of Rs. 100 each 5,00,000
2,500 8% preference shares of Rs. 100 each 2,50,000 7,50,000
2) Reserves and Surplus

Profit and Loss A/c (10,00,000)
3) Long term borrowings

4) Short term borrowings

-Loan from directors 3,00,000
- Bank overdraft 2,00,000 5,00,000
5) Tangible assets
Freehold property 4,00,000
Plant 1,50,000 1,50,000
6) Intangible assets
Goodwill 1,00,000
Trademark 50,000 1,50,000
The following scheme of reconstruction was framed , approved by the Court, all the concerned parties and
implemented.
i) The preference shares to be written down to Rs. 25 each and the equity shares to Rs.20 each. Each class of
shares then to be converted into shares of Rs. 100 each.
ii) The debenture holders to take over free hold property (book value Rs. 2,00,000) at a valuation of Rs. 2,50,000
in part payment of their holdings. Remaining free hold property to be revalued at Rs.6,00,00.
iii) Loan from directors to be waived in full.

iv) Stock of Rs. 50,000 to be written off Rs.12,500 to be provided for bad debts.
v) Profit and loss a/c written off, trade mark, goodwill and deferred revenue expenditure to be written off.
Pass journal entries for all the above mentioned transactions,. Also prepare Capital Reduction A/c and company’s
Balance sheet immediately after reconstruction.
(IPCC May 2013 16 M Gr.2)
13
31) The following were the Balance Sheets of P Ltd. and V Ltd. as at 31st March,2016:
Liabilities P Ltd. V Ltd.
(ˆ in lakhs) (ˆin lakhs)
Equity Share Capital (Fully paid
Share of ˆ10 each) 15,000 6,000
Securities Premium 3,000 ---
Foreign Projects Reserve --- 310
General Reserve 9,500 3,200
Profit and Loss Account 2,870 825
12% Debentures --- 1,000
Bills payable 120 ---
Sundry Creditors 1,080 463
Sundry Provisions 1,830 702
------ ------
33,400 12,500
------ ------
Assets P Ltd. V Ltd.
(ˆ in lakhs) (ˆ in lakhs)
Land and Buildings 6,000 ---
Plant and Machinery 14,000 5,000
Furniture, Fixtures and Fittings 2,304 1,700
Stock 7,862 4,041
Debtors 2,120 1,020
Cash at Bank 1,114 609
Bills Receivable -- 80
Cost of Issue of Debentures --- 50
------ -------
33,400 12,500
All the bills receivable held by V Ltd. were P Ltd.'s acceptances.
On 1st April, 2016 P Ltd. took over V Ltd. in an amalgamation in the nature of merger. It was agreed that in
discharge of consideration for the business. P Ltd. would allot three fully paid equity shares of ˆ 10 each at par
for every two shares held in V Ltd. It was also agreed that 12% debentures V Ltd. would be converted into
13% debentures in P Ltd. of the same amount and denomination. Pass Journal and prepare Balance sheet after
amalgamation. Expenses of amalgamation amounting to ˆ1 lakh were borne by P ltd.
(CA.May 2001 & CWA Dec 2006)
32) The summarized Balance Sheet of M/s. A Ltd. and M/s. B Ltd. as on 31.3.2016 were as under:
Liabilities A Ltd ` B Ltd ` Assets A Ltd B Ltd
Share Capital: Freehold Property 3,00,000 2,40,000
40,000 Equity Shares of 10 each, Fully paid 4,00,000 – Plant & Machinery 60,000 40,000
30,000 Equity Shares of 10 each, Fully paid – 3,00,000 Motor Vehicle 30,000 20,000
General Reserve 2,40,000 – Trade Receivables 2,00,000 80,000
Profit & Loss Account 50,000 50,000 Inventory 2,30,000 1,80,000
Trade Payables 2,10,000 1,30,000 Cash at Bank 80,000 40,000
6% Debentures – 1,20,000
9,00,000 6,00,000 9,00,000 6,00,000
A Ltd and B Ltd carry on business of similar nature and they agreed to amalgamate. A New Company, M/s. AB
Ltd is formed to take over the Assets and Liabilities of A Ltd and B Ltd on the following basis:
Assets and Liabilities are to be taken on Book Value, with the following exceptions:
(a) Goodwill of A Ltd and B Ltd is to be valued at ˆ1,40,000 and ˆ40,000 respectively.
(b) Plant and Machinery of A Ltd are to be valued at ˆ 1,00,000.
(c) The Debentures of B Ltd are to be discharged by the issue of 6% Debentures of AB Ltd at a premium of 5%.

i) Compute the basis on which Shares in AB Ltd will be issued to Shareholders of the existing Companies
assuming the value of each Share of AB Ltd is ˆ 10.
ii) Draw up a Balance Sheet of AB Ltd as on 1st April 2016, when amalgamation is completed.
iii) Pass Journal Entries in the Books of AB Ltd for acquisition of A Ltd and B Ltd. (IPCC May 2015 Gr 2)

14
33) The following was the Balance Sheet of V Ltd. as on 31st March, 2016:
16m
Particulars Note No. Amount
Rs. (in lakhs)
Equity and Liabilities
(1) Shareholders’ Funds
(a) Share Capital 1 1,150
(b) Reserves and Surplus 2 (87)
(2) Non – current Liabilities
(a) Long-term Borrowings 3 630
(3) Current Liabilities
Trade Payables 170
Total 1,863
Assets
(1) Non-current assets
Tangible Assets 4 1,152
(2) Current Assets
Inventories 380
Trade Receivables 256
Cash and Cash equivalents 75
Total 1,863
Notes:
Notes:
(1) Share Capital
Authorised: ?
Issued, Subscribed and Paid up:
80lakh Equity shares of Rs.10 each, fully paid up 800
35 lakh 12% Cumulative Preference shares of Rs.10 each, fully paid up 350
Total 1,150
(2) Reserves and Surplus
Debit Balance of Profit & Loss Account (87)
Total (87)
(3) Long-Term Borrowings

10% Secured Cumulative Debenture of Rs.100 each, fully paid up 600
Outstanding Debenture Interest 30
Total 630
(4) Tangible Assets
Land and Buildings 445
Plant and Machinery 593
Furniture, Fixtures and Fittings 114
Total 1,152
(5) Cash and Cash Equivalents
Balance at Bank 69
Cash in hand 6
Total 75
On 1st April, 2016 P Ltd. took over the entire business of V Ltd on the following terms:
V Ltd.’s equity shareholders would receive 4 fully paid equity shares of P Ltd. of Rs.10 each issued at a premium
of Rs.2,50 each for every five shares held by them in V Ltd.
Preference shareholders of V Ltd. would get 35lakh 13% Cumulative Preference Shares of Rs.10 each fully paid
up in P Ltd., in lieu of their present holding.
All the debentures of V Ltd. would be converted into equal number of 10.5% secured cumulative debentures of
Rs.100 each, fully paid up after the take over by P Ltd., which would also pay outstanding debenture interest in
cash.
Expenses of amalgamation would be borne by P Ltd., Expenses came to be Rs.2lakh. P Ltd.discovered that its
creditors included Rs.7lakhs due to V Ltd. for goods purchased. Also P Ltd.’s stock included goods of the invoice
price of Rs.5lakh earlier purchased from V Ltd.,which had charged profit @ 20% of the invoice price.

(i) Prepare Realisation A/c in the books of V Ltd.
(ii) Pass journal entries in the books of P Ltd assuming it is to be amalgamation in the nature of merger.
(IPCC Nov 2012 Gr 1 16M)
34) The Balance sheet of M/s Cube Ltd as on 31-3-2016 is given below.
15
Particulars Amount
Note No ( in lakhs)
Equity & Liabilities
Shareholders funds
Share capital 1 700
Reserves & Surpluses 2 (261)
Non-current liabilities
Long term borrowings 3 350
Current liabilities
Trade payables 4 51
Other liabilities 5 12
Total 852
Assets
Non-current Assets
Fixed Assets
Tangible assets 6 375
Current Assets
Current investments 7 100
Inventories 8 150
Trade receivables 9 225
Cash & Cash equivalents 10 2
852
Note
1. Share capital
Authorised 100 lakh Equity shares of Rs. 10 each 1,000
4 lakh 8% Preference shares of 100 each 400
Issued subscribed and paid up
50 lakh Equity shares of Rs. 10 each fully paid up 500
2 lakh 8% Preference shares of Rs. 100 each fully paid up 200

700
2. Reserves and Surpluses
Debit balance in P & L A/c (261)
3. Long term borrowings
6% Debentures ( secured by Freehold property) 200
Directors loan 150
350
4 Trade payables
Sundry creditors for goods 51
5. Other current liabilities
Interest accrued and due on 6% Debentures 12
6. Tangible assets
Freehold property 275
Plant & Machinery 100
375
7. Current Investment
Investment in Equity instruments 100
8. Inventories
Finished goods 150
9. Trade receivables
Sundry debtors for goods 225
10 Cash & Cash equivalents
Balance with Bank 2
The Board of directors of the company decided upon the following scheme of reconstruction with the consent of
respective shareholders.
a) Preference shares are to be written down to Rs. 80 each and Equity shares to Rs. 2 each.
b) Preference Shares Dividend in arrears for 3 years to be waived by 2/3 rd and for 1/3rd Equity shares of Rs. 2
each to be allotted.
c) Debenture holders agreed to take one Freehold property at its book value of Rs. 150 lakh in part payment of
their holding . Balance Debentures to remain as liability of the company.
d) Interest accrued and due on Debentures to be paid in cash.
e) Remaining Freehold property to be valued at Rs. 200 lakhs.
f) 70% of Directors loan to be waived and for the balance, Equity shares of Rs. 2 each to be allowed.
g) 40% of Sundry Debtors and 80% of inventories to be written off.
h) Company’ contractual commitment amounting to Rs. 300 l;akh have been settled by paying 5% penalty of
contract value.
You are required to
a) Pass journal entries for all the transactions related to internal construction.
b) Prepare Reconstruction A/c
c) Prepare notes on Share capital and Tangible assets to Balance sheet immediately after the implementation of
scheme of internal construction. ( IPCC May 2013 16 M)
16
35) Platinum Ltd has decided to reconstruct the Balance sheet since it has accumulated losses. The following is
the Balance sheet of the company as on 31st March 2016 before reconstruction.
Equity and liabilities Assets

Share capital Goodwill 22,00,000
50,000 shares of 50 each fully paid up 25,00,000 Land & Building 42,70,000
1,00,000 shares of 50 each 40 paid up 40,00,000 Machinery 8,50,000
Capital Reserve 5,00,000 Computers 5,20,000
8% Debentures of Rs. 100 each 4,00,000 Stock 3,20,000
12% Debentures of Rs. 100 each 6,00,000 Trade Debtors 10,90,000
Trade creditors 12,40,000 Cash at bank 2,68,000
Outstanding expenses 10,60,000 Profit & Loss A/c 7,82,000
----------- ------------
1,03,00,000 1,03,00,000
Following is the interest of Mr.Shiv and Mr.Ganesh in Platinum Limited
Particulars Shiv Ganesh
8% Debentures 3,00,000 1,00,000
12% Debentures 4,00,000 2,00,000
7,00,000 3,00,000
Following scheme of internal Reconstruction was framed and implemented , as approved by court and
Concerned parties.
1) Uncalled capital is to be called up in full and then all the shares to be converted into Eq. shares of 40 each.
2) The existing shareholders agree to subscribe in cash fully paid up Equity shares of Rs. 40 each for Rs.
12,50,000.
3) Trade creditors are given option to accept fully paid equity shares of Rs. 40 each for the amount due to them or
to accept 70% of the amount due to them in cash in full settlement of their claim. Trade creditors for Rs.
7,50,000 accept Equity shares and rest of them opted for cash toward fully and final settlement of their claim.
4) Shiv agrees to cancel Debentures amounting to Rs. 2,00,000 out of Total Debentures due to him and agree 15%
Debentures for the balance amount due. He also agree to subscribe further 15% Debentures in cash amounting
to Rs. 1,00,000..
5) Ganesh agrees to cancel Debentures amounting to Rs. 50,000 out of Total Debentures due to him agree to
accept 15% Debentures for the balance amount due.
6) Land & Building to be revalued at Rs. 51,84,000 Machinery at Rs. 7,20,000 Computers Rs. 4,00,000 Stock at
Rs./3,50,000 Trade debtors at 10% less to as they are appearing in Balance sheet as above.
7) Outstanding expenses are fully paid in cash.
8) goodwill and Profit and loss A/c will be written off and balance if any of Capital Reduction A/c will be
adjusted against capital reserve.
You are required to pass necessary journal entries for the above transactions and draft the company Balance
sheet immediately after reconstruction. (IPCC May 2012 16M)
36) X Ltd whose Balance Sheet as on 31-3-2016 appears below formulated a scheme of reconstruction, details
of which as follows and secured approval of all concerned.
Rs. Rs.
Equity Share Capital Fixed Assets 5,60,000
50,000 Equity shares Patents and copyrights 40,000
of ˆ20 each 10 paid 5,00,000 Investments at cost 32,500
8% Preference share (Market value ˆ 27,500)
Capital Current Assets 4,24,500
4,000 Shares of ˆ100 Profit & Loss A' c 2,14,000
each ˆ 75 paid up 3,00,000
Interest on above 54,000
Bank overdraft 75,000
Sundry creditors (including 42,000
interest of 7,500 to Bank)
---------- --------
12,71,000 12,71,000
Preference dividend is in arrears for one year
17
a) Preference shareholders to give their claims, inclusive of dividend to the extent of 30% and desire to be paid
off.
b) Debenture holders agree to give up their claims to interest outstanding in consideration of their rate of interest
being enhance at 10%.
c) Bank agree to give up 50% of their interest outstanding in consideration of their being paid off at once.
d) Sundry creditors would like to grant a discount of 5% if they were to be paid off immediately.
e) Balance on P & L A/c, patents and Copyrights and 25% of the total debtors of ˆ60,000 to be written off.
Fixed assets to be written off by ˆ7,000. Investments to reflect their market value.
f) To the extent no specifically state, equity shareholders suffer on reduction their rights.
g) Cost of reconstruction ˆ 1,675.
Pass journal entries in the books of the company assuming that the scheme has been put through fully with the
equity shareholders bringing in necessary cash to pay off the parties and leave a working capital of ˆ10,000.
Draw up Balance sheet after reconstruction.
37)The financial position of two Companies Abhay Ltd and Asha Ltd as on 31.03.2016 is as follows –
Balance Sheet as on 31.3.2016
Particulars Abhay Ltd Asha Ltd
Sources of Fund
Share Capital – Issued and Subscribed: 15,000 Equity Shares at ` 100, fully paid 15,00,000
10,000 Equity Shares at ` 100, fully paid 10,00,000
General Reserve 2,75,000 1,25,000
Profit & Loss 75,000 25,000
Securities Premium 1,50,000 50,000
Contingency Reserve 45,000 30,000
12% Debentures, at ` 100 fully paid – 2,50,000
Sundry Creditors 55,000 35,000
Total 21,00,000 15,15,000
Particulars Abhay Ltd Asha Ltd

Application of Funds
Land and Buildings 8,50,000 5,75,000
Plant and Machinery 3,45,000 2,25,000
Goodwill – 1,45,000
Inventory 4,20,000 2,40,000
Sundry Debtors 3,05,000 2,85,000
Bank 1,80,000 45,000
Total 21,00,000 15,15,000
They decided to merge and form a New Company Abhilasha Ltd. as on 1.4.2015 on the following terms:
1) Goodwill to be valued at 2 years purchase of the Super Profits. The Normal Rate of Return is 10% of the
Combined Share Capital and General Reserve. All Other Reserves are to be ignored for the purpose of
Goodwill. Average Profits of Abhay Ltd is ˆ2,75,000 and Asha Ltd is ˆ1,75,000.
2. Land and Buildings, Plant and Machinery and Inventory of both Companies to be valued at 10% above Book
Value and a Provision of 10% to be provided on Sundry Debtors.
3. 12% Debentures to be redeemed by the issue of 12% Preference Shares of Abhilasha Ltd (Face Value of
ˆ100) at a Premium of 10%.
4. Sundry Creditors to be taken over at Book Value. There is an Unrecorded Liability of ˆ 15,500 of Asha Ltd as
on 1.4.2016.
5) The Bank Balance of both Companies to be taken over by Abhilasha Ltd after deducting Liquidation Expenses
ˆ60,000 to be borne by Abhay Ltd and Asha Ltd in the ratio of 2:1.

1) Compute the basis on which Shares of Abhilasha Ltd. are to be issued to the Shareholders of the Existing
Company assuming that the Nominal Value per Share of Abhilasha Ltd is ˆ100.
2. Draw the Balance Sheet of Abhilasha Ltd as on 1.4.2016 after the amalgamation (IPCC May 2015 Gr.1)
18
38) Following are the Balance sheets of Companies K ltd and W Ltd as on 31-12-2015. ( ˆ ‘000)
Liabilities K Ltd W Ltd Assets K Ltd
W Ltd
Share Capital Eq. shares of ˆ100 each 2,000 1,500 Goodwill 20 --
10% pref.shares of ˆ 100 each 700 400 Other fixed assets 2,400 1,150
General Reserve 240 170 Debtors 625 615
P & L A/c - 15 Stock 412 680

12% Debentures of ˆ100 each 600 200 Cash at Bank 38 155
Sundry creditors 560 315 Own Debentures 192 --
(Nominal value ˆ2,00,000)
Discount on issue of Debentures 2
P & L A/c 411 --
------- -------- ------- -------
4,100 2,600 4,100 2,600
On 1-4-2016 K Ltd adopted the scheme of reconstruction.
i) Each Equity share shall be sub-divided into 10 equity shares of ˆ10 each fully paid up. 50% of the equity
share would be surrendered to the company.
ii) Preference dividends are in arrear for 3 years. Preference shareholders agreed to waive 80% of the dividend
claim and accept payment for the balance.
iii) Own Debentures of ˆ80,000 ( nominal value) were sold at ˆ98 cum interest and remaining own
debentures were cancelled.
Iv )Debenture holders of ˆ3,00,000 of agreed to accept one machinery of book value of ˆ 3,20,000 in full
settlement.
v) Creditors , Debtors and stock were valued at ˆ 5,00,000 ˆ6,00,000 and ˆ4,00,000 respectively.
Goodwill, discount on issue of debentures and profit and loss account (Dr) are to be written off.
vi) The company paid ˆ20,000 as penalty to avoid capital commitments ˆ4,00,000.
On 2-4-2016 a scheme of absorption was adopted K Ltd would take over W Ltd the purchase consideration was
fixed as below.
a) Equity shareholders of W Ltd will be given 50 Equity shares of ˆ10 each fully paid up in exchange for every
5 hares held in W Ltd.
b) Issue of 10% preference share of ˆ100 each in the ratio of 4 preference shares of K Ltd for every 5 shares
held in W Ltd.
c) Issue of 12 % debentures of ˆ100 each of K Ltd for every 12% debentures in W Ltd.
Pass necessary journal entries in the books of K ltd and draw the resultant balance sheet at at 2 nd April 2016.
(IPCC Nov 2012 16 M)
39) The balance sheet of M/s Unfortunate Limited as on 31-12-2015 was as under.
Share capital ˆ ˆ
2,500 equity shares of 100 each 2,50,000 Land and Building 1,30,000
Sundry creditors 1,25,000 Plant and machinery 75,000
Stock 50,000
Debtors 57,000
Cash 1,000
Preliminary expenses 5,500
Profit and Loss A/c 56,500
-------- --------
3,75,000 3,75,000
The share holders of the company resolved to take the company into voluntary liquidation and to form M/s
Fortunate Limited, a new company with an authorised share capital of ˆ 10 lakhs to take over the
business on the following terms:
1) Preferential creditors of ˆ15,000 are to be paid in full.
2) Unsecured creditors who agreed to take cash to be pain only 50 paise in the rupee in full of their claims
and who opted to take Debentures will issued fully value of 7% Debentures of M/s Fortunate Limited.
3) 2,500 equity shares of Rs. 100 each, Rs.60 paid to be distributed prorata to existing shareholders.
Five shareholders holding 2,000 shares dissented and their interest was purchased at ˆ50 per share by an
assenting shareholder to whom the shares were transferred.
Half the unsecured creditors opted to be paid in cash, and the funds for this purpose were found by calling
up the balance of ˆ40 per share, cost of liquidation amounting to ˆ 3,500 was discharged from the amount so
called up.
Compute the purchase consideration and prepare the Balance Sheet of the new company assuming that Plant
and Machinery, stock and Trade debtors were acquired at their book value. (C.A. Inter)
19
40) The following is the Balance sheet of A Ltd as at 31-3-2016
Liabilities ˆ Assets ˆ
8,000 equity shares of Building 3,40,000
10 each 8,00,000 Machinery 6,40,000
10% Debentures 4,00,000 Stock 2,20,000
Loan from A 1,60,000 Debtors 2,60,000
Creditors 3,20,000 Bank 1,36,000
General Reserve 80,000 Good will 1,30,000
Misc.expenditure 34,000
---------- ----------
17,60,000 17,60,000
B Ltd agreed to absorb A Ltd on the following terms and conditions
1) B Ltd would take over all assets except bank balance at their book values less 10%. Goodwill is to be valued
at 4 years purchase of super profits, assuming that the normal rate of return be 8% on the combined
amount of share capital and general reserve.
2) B Ltd is take over creditors at book value
3) The purchase consideration is to be paid in cash to the extent of ˆ 6,00,000 and the balance in fully paid
equity shares of ˆ100 each at ˆ125 per share.
The average profit is ˆ1,24,400. The liquidation expenses amounted to ˆ16,000. B Ltd sold prior to 31st March,
2016 goods worth costing ˆ1,20,000 to A Ltd to ˆ1,60,000 , ˆ 1,00,000 worth of goods are still in stock of A Ltd.
On 31st March, 2016. Creditors of A Ltd include ˆ40,000 still due to B Ltd.
Show the necessary ledger accounts to close the books of A Ltd and prepare the Balance sheet of B Ltd as at
1st April, 2016 after the take over. ( PE II Nov 2006)
41) Balance Sheet of Anurag Trading Co. on 31st March 2014 is given below:
Liabilities Assets
Capital 50,000 Fixed Assets 69,000
Profit & Loss A/c 22,000 Stock in Trade 36,000
10% Loan 43,000 Trade Receivables 10,000
Trade Creditors 18,000 Deferred Expenditure 15,000
Bank 3,000
Total 1,33,000 Total 1,33,000
Additional Information:
i) Remaining life of Fixed Assets is 5 years with even use. The Net Realizable Value of Fixed Assets as on 31st
March 2015 was ˆ64,000.
ii) Firm’s Sales and Purchases for the year 2014–2015 amounted to ˆ 5 Lakhs and ˆ4.50 Lakhs respectively.
iii) The Cost and Net Realizable Value of the Stock were ˆ34,000 and ˆ 38,000 respectively.
iv) General Expenses for the year 2014–2015 were ˆ16,500.
v) Deferred Expenditure is amortized equally over 4 years starting from F.Y. 2013–2014, i.e. ˆ5,000 per year.
vi) Out of Debtors worth ˆ 10,000, collection of ˆ 4,000 depends on successful re–design of certain product
already supplied to the customer.
vii) Closing Trade Payable is ` 10,000, which is likely to be settled at 95%.
viii) There is pre–payment penalty of ˆ2,000 for Bank Loan Outstanding.
Prepare Profit & Loss Account for the year ended 31st March 2015 by assuming it is not a Going Concern
(IPCC Nov 2015 Gr.II 5 M)
42) On 31st December, 2015 the Balance Sheet of Bharat Ltd was as follows.
Share Capital
12,000 equity shares of 10 each 1,20,000 Patents 1,20,000
Sundry creditors 1,40,000 Plant and Machinery 40,000
Stock 30,000
Debtors 50,000
Cash 1,250
Preliminary expenses 7,250
Profit and Loss A/c 11,500
---------- --------
2,60,000 2,60,000
The company being unable to raise further capital and `patents' standing in the books at a figure largely in
excess of their value the following scheme of reconstruction was submitted to the share holders and creditors.
1) The company to go into voluntary liquidation and a new company called Nav Bharat Ltd' to be formed
with an authorised capital of ˆ 2,00,000 in ˆ10 equity shares to take over assets and liabilities.
2) Liabilities to be discharged by the company are as follows:
Preferential creditors ˆ20,000 to be paid in full and the other creditors to be paid 25 paise in the rupee in
cash and 50 paise in the rupee in 6% debentures of the new company.
3) 12,000 equity shares of ˆ 10 each, ˆ5 per share paid up to be issued to shareholders of the old company,
the balance of Rs.5 being payable in allotment.
4) The costs of liquidation amounting to ˆ 1,750 to be paid by the new company as part of the purchase
consideration.
Prepare Accounts and Journal entries in both companies.
20
21
PROFESSIONAL ACCESS Ph: 98494 19306
Vijayawada
31) The summarized Balance sheets of two companies on 31-3-2014 were as follows.
BALANCE SHEET
ALtd BLtd ALtd BLtd
Authorised Capital
Shares of 10 each 50,000 1,25,000 Goodwill --- 27,000
Issued Capital
of 10 each. 1,25,000 1,00,000 Fixed assets 1,00,000 45,000
Trade Creditors 15,000 30,000 Floating assets 50,000 35,000
P & L A/c 10,000 P & L A/c --- 23,000
-------- -------- -------- --------
,50,000 1,30,000 1,50,000 1,30,000
On 1st April, 2014 A Ltd decided to take over the business of B Ltd as from that date. The vendor
shareholders had agreed to accept shares in the purchasing company, the agreed basis being that such shares
were worth Rs.12 each and that shares of B Ltd were worth Rs. 6 each on 31st March, 2014.
The purchasing company take over all the assets of B Ltd and did not take over the liabilities.
Give journal entries recording the transactions in the books of the purchasing company and draw up
Balance sheet showing the effect of the merger. Assume that the authorised capital of A Ltd was increased to
the required extent. (C.A. Final)
33) The following are the Balance sheets of Good Ltd and Bad Ltd as on 31-3-2011.
( Rs. In Crores)
Balance Sheet
Good Ltd Bad Ltd
Share Capial
Authorised 25 5
Issued and Subscribed
Eq.shares of 10 each 12 5
Reserves & Surplus 88 10
Unsecured loan from Good Ltd - 10
--- ---
100 25
Fixed assets at cost 80 40

Less Depreciation 60 34
WDV 20 6
Investments at cost 30 lakhs equity shares of
Rs.10 of Bad Ltd 3 -
Long term Loan to Bad Ltd 10
-
Current assets 200 134
Less current Liabilities 133 115
Working capital 67 19
--- ---
100 25
On that day Good ltd absorbed Bad Ltd. The members of Bad Ltd are to get one equity share of Good Ltd issued
at a premium of Rs.2 per share for every five equity shares held by them in Bad Ltd. The necessary
approvals are obtained. You are asked to pass Journal entries in the books of two companies to give effect to the
above. ( CWA June 2007 16M)

Vijayawada
34) The summarized Balance sheet of Bad Luck Ltd as on 31 st March, 2013 was as follows.
Note Amount Amount
A.Equity and Liabilities
1) Shareholders Fund
a) Share capital 1 7,50,000
b) Reserves and Surplus 2 (10,00,000) (2,50,000)
22
2) Non-Current Liabilties
Long term borrowings 3 5,00,000
3) Current Liabilities
a) Short term borrowings 4 5,00,000
b) Trade payables 2,50,000 7,50,000
Total 10,00,000
B. Assets
1. Non-current Assets
a) Fixed Assets
i) tangible assets 5 5,50,000
ii) Intangible assets 6 1,50,000 7,00,000
3. Current Assets
a) Inventories 1,50,000
b) Trade receivables 1,25,000
c) Deferred Revenue Expenditure 25,000 3,00,000
Total 10,00,000
Notes to Accounts Amount Amount

6) Share capital
Authorised, Issued & fully paid 5,000 Eq.Shares of Rs. 100 each 5,00,000
2,500 8% preference shares of Rs. 100 each 2,50,000 7,50,000
7) Reserves and Surplus

Profit and Loss A/c (10,00,000)
8) Long term borrowings

9) Short term borrowings

-Loan from directors 3,00,000
- Bank overdraft 2,00,000 5,00,000
10) Tangible assets

Freehold property 4,00,000
Plant 1,50,000 1,50,000
6) Intangible assets
Goodwill 1,00,000
Trademark 50,000 1,50,000
The following scheme of reconstruction was framed , approved by the Court, all the concerned parties and
implemented.
i) The preference shares to be written down to Rs. 25 each and the equity shares to Rs.20 each. Each class of
shares then to be converted into shares of Rs. 100 each.
ii) The debenture holders to take over free hold property (book value Rs. 2,00,000) at a valuation of Rs. 2,50,000
in part payment of their holdings. Remaining free hold property to be revalued at Rs.6,00,00.
iii) Loan from directors to be waived in full.

iv) Stock of Rs. 50,000 to be written off Rs.12,500 to be provided for bad debts.
v) Profit and loss a/c written off, trade mark, goodwill and deferred revenue expenditure to be written off.
Pass journal entries for all the above mentioned transactions,. Also prepare Capital Reduction A/c and company’s
Balance sheet immediately after reconstruction.
(IPCC May 2013 16 M)
Vijayawada
23
29) Following are the Balance Sheets of Companies as at 31-12-2012.
Liabilities Assets
D Ltd V Ltd D Ltd V ltd
Equity share capital(100) 8,00,000 6,00,000 Goodwill 6,00,000 --
General Reserve 4,00,000 3,00,000 Fixed Assets 5,00,000 8,00,000
Investment Allowance Reserve 4,00,000 Investments 2,00,000 4,00,000
Creditors 5,00,000 2,00,000 Current Asset 4,00,000 3,00,000
---------- ----------- -------- ----------
17,00,000 15,00,000 17,00,000 15,00,000
D Ltd took over V Ltd on the basis of the respective shares value adjusting wherever necessary, the book
values of assets and liabilities on the basis of the following information.
a) Investment allowance reserve was in respect of addition made to fixed assets by V Ltd in the year 2005-2006
on which I.T relief has been obtained. In terms of the I.T Act, 1961 the company has to carry forward till 2015
reserve of Rs.2,00,000 for utilisation.
b) Investment of V Ltd included in 1000 shares in D Ltd acquired at cost of Rs.150 per share. The other
investments of V Ltd have a market value of Rs.1,92,500.
c) The market value of investments of D Ltd are to be taken at Rs. 1,00,000.
d) Goodwill of D Ltd and V Ltd are to be taken at Rs.5,00,000 and Rs. 1,00,000 respectively.
e) Fixed assets of D Ltd and V Ltd are valued at Rs.6,00,000 and Rs. 8,50,000 respectively.
f) Current assets of D Ltd included Rs. 80,000 of stock in trade received from V Ltd at cost plus 25%
The above scheme has been duly adopted. Pass necessary journal entries in the books of D Ltd and prepare
Balance sheet of D Ltd after taking over the business of V Ltd. Fractional Share to be settled in cash, rest in
shares of D Ltd. Calculation shall be made to be made to the nearest multiple of rupee. ( PE II May 2004)
11111111111
25) The paid-up capital of Toy Ltd. amounted to Rs. 2,50,000 consisting of 25,000 equity shares of Rs. 10 each.
Due to losses incurred by the company continuously, the directors of the company prepared a scheme for
reconstruction which was duly approved by the court. The terms of reconstruction were as under:
(i) In lieu of their present holdings, the shareholders are receive:
(a) Fully paid equity shares equal to 2/5th of their holding.
(b) 5% preference shares fully paid-up to the extent of 20% of the above new equity shares.
(c) Leasehold premises from Rs. 75,000 to Rs. 62,500.
Show the journal entries to give effect to the above scheme of reconstruction. (C.A. inter Nov 1995).
24
Vijayawada
4) The summarized balance sheets of three companies as on 31st March 2004 are as follows.
P Ltd Q Ltd R Ltd
Rs. In lakhs Rs. In lakhs Rs. In lakhs
Equity shares of Rs.10 each 90.00 15.00 25.00
Securities premium 18.00 -- --
P & LA/c 20.00 5.00 20.00
Long term loan 15.00 -- --
Proposed dividend 13.50 -- --
Sundry creditors 16.50 10.00 5.00
------- ------ -------
173.00 30.00 50.00
Land and buildings 60.00 -- 5.00

Plant & equipment 50.00 10.00 5.00
Stock 35.00 5.00 10.00
Debtors 20.00 5.00 15.00
Bank 8.00 10.00 15.00
------ ------- -------
173.00 30.00 50.00
P Ltd takes over R.Ltd by buying all the assets. The purchase i is 6,00,000 equity shares at a premium of 10%.
The creditors of R Ltd w ill be taken over by P.Ltd. The assets of R.Ltd. are valued at.
Land and Building 10,00,000 ; Plant and equipment 3,00,000 ; Stock 7,00,000 ; Debtors 12,50,000
P Ltd takes over Q Ltd by exchanging with the shareholders of Q ltd two in P ltd at a premium of 10% for every
share they hold. Required:
a) State the nature of the two types of acquisition involved there.
b) Give journal entries to record the acquisitions in the books of P ltd
c) Close books of R Ltd
d) prepare post acquisition of balance sheet of P Ltd ( CWA Dec 2004)
5) Sun Ltd and Moon Ltd were amalgamated on and from 1st Arpril, 2009. A new company Star ltd was formed to
take over the business of the existing business. The Balance sheet of Sun Ltd and and Moon Ltd as at 31 march,
2009 are given below.
BALANCE SHEET ( Rs in lakhs)
Sun Moon Sun Moon
Ltd Ltd Ltd Ltd
Equity shares of Rs. 100 each 400 375 Fixed Assets
12% Preference shares of Rs.100 150 100 Land & Building 275 200
25
Reserves & Surplus Plant & Machinery 175 125
Revaluation Reserve 75 50 Investments 75 25
General Reserve 85 75 Current Assets, Loans & Advances
Investment allowance Reserve 25 25 Stock 175 125
P & L A/c 25 15 Sundry debtors 125 150
Secured Loans Bills Receivable 25 25
10% Debentures of Rs.100 each 30 15 Cash and Bank balances 150 100
Current Liabilities & Provisions
Sundry creditors 135 60
Acceptances 75 35
-------- ------ -------- --------
1,000 750 1,000 750
Additional information :
(a) Star Ltd. will issue 5 equity shares for each equity share of Sun Ltd. And 4 equity shares for each equity share
of Moon Ltd. The shares are to be issued @ Rs. 30 each, having a face value of Rs. 10 per share.
(b) Preference shareholders of the two companies are issued equivalent
number of 15% preference shares of Star Ltd. at a price of Rs. 150 per share (face value Rs. 100).
(c) 10% Debentureholders of Sun Ltd. and Moon Ltd. are discharged by Star Ltd., issuing such number of its 15%
Debentures of Rs. 100 each so as to maintain the same amount of interest.
(d) Investment allowance reserve is to be maintained for 4 more years.
(e) Liquidation expenses are :
Sun Ltd. Rs. 2,00,000 Moon Ltd. Rs. 1,00,000
It was decided that these expenses would be borne by Star Ltd.
(f) All the assets and liabilities of Sun Ltd. and Moon Ltd. are taken over at book value.
(g) Authorised equity share capital of Star Ltd. is Rs. 5,00,00,000, divided into equity shares of Rs. 10 each. After
issuing required number of shares to the Liquidators of Sun Ltd. and Moon Ltd., Star Ltd. issued balance
shares to Public. The issue was fully subscribed. Required :
Prepare the Balance Sheet of Star Ltd. as at 1st April, 2009 after amalgamation has been carried out on the basis
of Amalgamation in the nature of Purchase. (IPCC Nov 2009 Gr.II 16 marks)
34) The following is the Balance sheet of A Ltd as at 31-3-2010

Liabilities Assets
8,000 equity shares of ˆ Building 3,40,000
10 each 8,00,000 Machinery 6,40,000
10% Debentures 4,00,000 Stock 2,20,000
Loan from A 1,60,000 Debtors 2,60,000
Creditors 3,20,000 Bank 1,36,000
General Reserve 80,000 Good will 1,30,000
Misc.expenditure 34,000
---------- ----------
17,60,000 17,60,000
B Ltd agreed to absorb A Ltd on the following terms and conditions
1) B Ltd would take over all assets except bank balance at their book values less 10%. Goodwill is to be valued
at 4 years purchase of super profits, assuming that the normal rate of return be 8% on the combined
amount of share capital and general reserve.
2) B Ltd is take over creditors at book value
3) The purchase consideration is to be paid in cash to the extent of ˆ 6,00,000 and the balance in fully paid
equity shares of ˆ100 each at ˆ125 per share.
The average profit is ˆ1,24,400. The liquidation expenses amounted to ˆ16,000. B Ltd sold prior to 31st March,
2010 goods worth costing ˆ1,20,000 to A Ltd to ˆ1,60,000 , ˆ 1,00,000 worth of goods are
still in stock of A Ltd. On 31st March, 2010. Creditors of A Ltd include ˆ40,000 still due to B Ltd.
Show the necessary ledger accounts to close the books of A Ltd and prepare the Balance sheet of B Ltd as at
1st April, 2010 after the take over. ( PE II Nov 2006)
26
25) Given below are the Balance Sheet of two Companies as on 31st December 2015.
A Limited
Share Capital: Issued and Fully paid up Patent 1,00,000
50,000 8% Cumulative Preference Shares of ` 10 each 5,00,000 Building 5,40,000
1,50,000 Equity Shares of ` 10 each 15,00,000 Plant and Machinery 15,10,000
General Reserve 7,65,000 Furniture 75,000
Profit and Loss Account 1,25,000 Investment 1,55,000
Cash and Bank 1,40,000
Total 29,50,000 Total 29,50,000
B Limited
Share Capital: Issued and Fully paid up Goodwill 62,000
50,000 Shares of ` 10 each 5,00,000 Motor Car 1,26,000
Profit and Loss Account 45,000 Furniture 58,000
Cash and Bank 20,000
Total 5,76,000 Total 5,76,000
It has been agreed that both these Companies should be wound up and a New Company AB Ltd should be
formed, to acquire the Assets of both the Companies on the following terms and conditions:
i) AB Ltd is to have an Authorized Capital of ` 36,00,000, divided into 60,000 8% Cumulative Preference Shares
of ` 10 each and 3,00,000 Equity Shares of 10 each.
ii) AB Ltd is to purchase the whole of the assets of A Ltd (except Cash and Bank balances) for ` 28,25,000, to be
settled as to 5,75,000 in cash, and as to the balance by issue of 1,80,000 Equity Shares, credited as fully paid,
to be treated as valued as ` 12.50 each.
iii) AB Ltd is to purchase the whole of the assets of B Ltd (except Cash and Bank balances) for ` 4,91,000, to be
settled as to 16,000 in cash, and as to the balance by issue of 38,000 Equity Shares, credited as fully paid, to
be treated as valued at ` 12.50 each.
iv) A Ltd and B Ltd both are to be wound up, the two Liquidators distributing the Shares in AB Ltd in kind
among the Equity Shareholders of the respective Companies.
v) The Liquidator of A Ltd is to pay the Preference Shareholders ` 12 in cash for every Share held, in full
satisfaction of their claims.
vi) AB Ltd is to make a Public Issue of 60,000, 5% Cumulative Preference Shares at a premium of 10%, and
30,000 Equity Shares at the Issue Price of ` 12.50 per Share, all amount payable in full on application.
It is estimated that the costs of liquidation (including the Liquidators’ Remuneration) will be ` 10,000 in case of A
Ltd and `5,000 in case of B Ltd and that the Preliminary Expenses of AB Ltd will amount to ` 24,000 exclusive of
the Underwriting Commission of 38,900 payable on the Public Issue.
You are required to prepare the initial Balance Sheet of AB Ltd, on the basis that all Assets other than Goodwill
are taken over at the Book Value.
27
2009 - Nov [2] (b) The following is the Balance Sheet of X Ltd. as on 31 st March, 2009 :
28
Liabilities Rs. Assets Rs.
12,000-10% preference Goodwill 90,000
share of Rs. 100 each 12,00,000 Land & Building 12,00,000
24,000-equity share of Rs. 100 each 24,00,000 Machinery 18,00,000
10% debentures 6,00,000 Stock 2,60,000
Bank overdraft 6,00,000 Debtors 2,80,000
Sundry Creditors 3,00,000 Cash 30,000
P & L A/c 14,00,000
_____ Preliminary expense s 40,000
51,00,000 51,00,000
On the above date, the company adopted the following scheme of reconstruction :
i) The equity shares are to be reduced to shares of Rs. 40 each fully paid and the preference shares to be reduced
to fully paid shares of Rs. 75 each.
(ii) The debentureholders took over stock and debtors in full satisfaction of their claims.
(iii) The Land and Building to be appreciated by 30% and Plant and Machinery to be depreciated by 30%.
(iv) The fictitious and intangible assets are to be eliminated.
(v) Expenses of Reconstruction amounted to Rs. 5,000.
Give journal entries incorporating the above scheme of reconstruction and prepare the reconstructed Balance
Sheet. (PEII Nov 2009 )
29
34) Following are the Balance Sheets of Companies as at 31-12-2006.
Liabilities Assets
D Ltd V Ltd D Ltd V Ltd
Equity
share capital(100) 8,00,000 6,00,000 Goodwill 6,00,000 --
General Reserve 4,00,000 3,00,000 Fixed Assets 5,00,000 8,00,000
Investment Allowance Investments 2,00,000 4,00,000
Reserve -- 4,00,000 Current Asset 4,00,000 3,00,000
Creditors 5,00,000 2,00,000
---------- ------------- -------- ----------
17,00,000 15,00,000 17,00,000 15,00,000
D Ltd took over V Ltd on the basis of the respective shares value adjusting wherever necessary, the book
values of assets and liabilities on the basis of the following information.
a) Investment allowance reserve was in respect of addition made to fixed assets by V Ltd in the year 1999-2000
on which I.T relief has been obtained. In terms of the I.T Act, 1961 the company has to carry forward till 2009
reserve of Rs.2,00,000 for utilisation.
b) Investment of V Ltd included in 1000 shares in D Ltd acquired at cost of Rs.150 per share. The other
investments of V Ltd have a market value of Rs.1,92,500.
c) The market value of investments of D Ltd are to be taken at Rs. 1,00,000.
d) Goodwill of D Ltd and V Ltd are to bew taken at Rs.5,00,000 and Rs. 1,00,000 respectively.
e) Fixed assets of D Ltd and V Ltd are valued at Rs.6,00,000 and Rs. 8,50,000 respectively.
f) Current assets of D Ltd included Rs. 80,000 of stock in trade received from V Ltd at cost plus 25%
The above scheme has been duly adopted. Pass necessary journal entries in the books of D Ltd and prepare
Balance sheet of D Ltd after taking over the business of V Ltd. Fractional Share to be settled in cash, rest in
shares of D Ltd. Calculation shall be made to be made to the nearest multiple of rupee. ( PE II May 2004)
9) Green Li;mited had decided to reconstruct the Balance Sheet since it had accumulated huge losses. The
following is the Balance Sheet of the Company on 31.3.2000 before reconstruction:
Balance Sheet of Green Limited as at 31.3.2000

Liabilities Rs. Assets Rs.
Share Capital: Fixed Assets:
Authorised: Goodwill 20,00,000
1,50,000 Equity Shares of Building 10,00,000
Rs. 50 each 75,00,000 Plant 10,00,000
Subscribed and paid up Computers 25,00,000
Capital 50,000 Equity Investments Nil
Shares of Rs.50 each 25,00,000 Current Assets Nil
1,00,000 Equity shares Profit and Loss A/c 20,00,000
of Rs. 50 each -- Loss
Rs. 40 per Share paid up 40,00,000
Secured Loans:
12% First Debentures 5,00,000
12% Second Debentures 10,00,000
Current Liabilities:
Sundry Creditors 5,00,000
---------- ----------
85,00,000 85,00,000
30
The following is the interest of Mr. X and Mr. Y in Green Lilmited:
Mr.X Mr.Y
Rs. Rs.
12% First Debentures 3,00,000 2,00,000
12% Second Debentures 7,00,000 3,00,000
Sundry Creditors 2,00,000 1,00,000
--------- ----------
12,00,000 6,00,000
Fully paid up Rs. 50 Shares 3,00,000 2,00,000
Partly paid up Shares (Rs. 40 paid up) 5,00,000 5,00,000
The following Scheme of Reconstruction is approved by all parties interested and also by the court:
(a) Uncalled capital is to be called up in full and such shares and the other fully paid up shares be converted into
equity shares of Rs.20 each.
(b) Mr.X is to cancel Rs. 7,00,000 of his total debt (other than share amount) and to pay Rs. 2 lakhs to the
company and to receive new 14% First Debentures for the balance amount.
(c) Mr.Y is to cancel Rs. 3,00,000 of his total debt (other than equity shares) and to accept new 14% First
Debentures for the balance.
(d) The amount thus rendered available by the scheme shall be utilised in writing off of Goodwill, Profit and
Loss A/c Loss and the balance to write off the value of computers.
You are required to draw the Journal Entries to record the same and also show theBalance Sheet of the
reconstructed company.
(CA Nov,2000)
11) The following are the summarised Balance Sheets of X Ltd. and Y Ltd.
X Ltd. Y Ltd.
Rs. Rs.
Liabilities:
Share Capital 1,00,000 50,000
Profit & Loss A/c 10,000 ---
Creditors 25,000 5,000
Loan X Ltd --- 15,000
-------- ---------
1,35,000 70,000
-------- --------
Assets:
Sundry Assets 1,20,000 60,000
Loan Y Ltd 15,000 ---
Profit & Loss A/c --- 10,000
-------- ------
1,35,000 70,000
(CA. Nov, 2001)
12) The following is the Balance Sheet of Rocky Ltd. as at March 31,2002:
Liabilities Rs. in lacs Assets:

Fully paid equity shares of Goodwill 15
Rs. 10 each 500 Land and Buildings 184
Capital Reserve 6 Plant and Machinery 286
12% Debentures 400 Furniture and Fixtures 41
Debenture Interest Outstanding 48 Stock 142
Trade Creditors 165 Debtors 80
Directors' Remuneration Outstanding 10 Cash at Bank 27
Other Outstanding Expenses 11 Discount on issue of
Provisions 33 Debentures 8
Profit and Loss Account 390
----- -----
1,173 1,173
The following scheme of internal reconstruction was framed, approved by the Court, all the concerned
parties and implemented:
(i) All the equity shares be converted into the same number of fully paid equity sares of Rs. 2.50 each.
(ii) Directors agree to forego their outstanding remuneration.
(iii) The debenture holders also agree to forego outstanding interest in return of their 12% debentures being
converted into 13% debentures.
(iv) The existing shareholders agree to subscribe for cash, fully paid equity shares of Rs. 2.50 each for Rs. 125
lacs.
v) Trade creditors are given the option of either to accept fully paid shares of Rs. 2.50 each for the amount
31
due to them or to accept equity shares whereas those for Rs. 100 lacs accept Rs. 80 lacs in cash in full
settlement.
(vi) The Assets are revalued as under:
Rs. in lacs
Land and Buildings 230
Plant and Machinery 220
Stock 120
Debtors 76
Pass Journal Entries for all the above mentioned transactions and draft the company's Balance Sheet
immediately after the reconstruction.
(CA. May, 2002)
17) The following is the balance sheet of X Ltd as on 31-3-98.

BALANCE SHEET
Share Capital
2,000 shares of Rs. 100 2,00,000 Goodwill 35,000
General reserve 20,000 Land and Buildings 85,000
10% Debentures 1,00,000 Plant and Machinery 1,60,000
Loan from A (a director) 40,000 Stock 55,000
Sundry Creditors 80,000 Debtors 65,000
Cash at Bank 34,000
Discount on issue of
Debentures 6,000
-------- --------
4,40,000 4,40,000_
The business of the company is taken over by Y Ltd on that date, on the following terms:
Y Ltd to take over all assets except cash, to value the assets at their book values less 10% except goodwill which
was to be valued at 4 years purchase of the excess of average (five years) profits over 8% of the combined
amount of Share Capital and Reserves.
b) Y Ltd to take over the trade creditors which were subject to a discount of five percent.
c) The purchase consideration was to be discharged in cash to the extent of Rs. 1,50,000 and the balance in fully
paid equity shares of Rs. 10 each valued at Rs. 12.50 per share.
The average of the five years profits was Rs. 30,100. The expenses of liquidation amounted to Rs. 4,000. X ltd
had sold prior to 31-3-98 goods amounting to Rs. 30,000 to Y Ltd for Rs. 40,000. Debtors include Rs. 20,000
still due from Y Ltd. On the date of absorption, Rs. 25,000 worth of goods were still in stock of Y Ltd. Show the
important ledger accounts in the books of X Ltd and entries in the books of Y Ltd.
17) The following are the Balance Sheets of Yes Ltd. and No Ltd. as on 31st October, 1999
Yes Ltd. No Ltd.
(in crores)
Rs. Rs.
Sources of funds:
Share capital:
Authorised 25 5
issued and Subscribed:
Equity share of Rs. 10 each fully paid 12 5
Reserves and Surplus 88 10
Share holders funds 100 15
Un secured loan from Yes Ltd. -- 10
--- ---
100 25
Funds employed in:

Fixed assets: Cost 70 30
Less: Depreciation 50 24
Written down value 20 6
Investments at cost:
30 lakhs equity shares of Rs. 10
each of No Ltd. 3 ---
Long term loan to No Ltd. 10 ---
Current Assets 100 34
Less: Current liabilities 33 15 67 19
--- ---
32
100 25
On that day Yes Ltd. absorbed No Ltd. The members of No Ltd are to get one equity share of Yes Ltd. Issued
at a premium of Rs. 2 per share for every five equity shares held by them in No Ltd. The necessary approvals
are obtained.
You are asked to pass journal entries in the books of the two companies to give effect to the above.
(C A inter 99 Nov)
20) The following are the balance sheets of Lav Limited and Kush limited as on 31st March, 1989.
BALANCE SHEET
Lav Kush Lav Kush
Ltd Ltd Ltd Ltd
Share capital
shares of 100 each 8,30,000 5,00,000 Fixed assets 4,00,000 5,00,000
Reserves 36,000 2,04,000 Investments
Trade creditors 1,94,000 5,76,000 800 shares of Lav ltd --- 1,40,000
500 shares of Kush Ltd 50,000 ---
Stock 3,00,000 2,50,000
Debtors 2,40,000 3,20,000
Cash at bank 40,000 70,000
--------- --------- --------- ---------
10,30,000 12,80,000 10,30,000 12,80,000
A new company Ram Limited was formed to take over the assets (including cash but excluding
investments) and liabilities of both companies effective from 1-4-89. It was agreed that Ram Limited will
take over fixed assets of both the companies @ 25% above the written down value and the debtors of both
companies subject to a provision for bad debts at 5%. In the case of Lav Limited it was further agreed that
the stock shall be taken over at 90% of the stated value and the creditors at book value subject to an
additional provision for sales tax liability of Rs. 24,000.
In the case of Kush Limited the stock was agreed to be taken over at 110% of the stated value and creditors
at book values except a liability of Rs. 12,000 which was considered no longer required.
Ram Limited issued 8,000 equity shares of Rs. 100 each fully paid up to the liquidator of Lav limited and
7,000 equity shares of Rs. 100 each fully paid up to the liquidator of Kush Limited. Balance consideration
was paid by cash. Registration expenses of Ram Limited came to Rs. 20,000.
Journalise the above transactions( including for cash ) in the books of Ram Limited as prepare its
summarised Balance Sheet after the amalgamation is put through.
All workings notes should form part of your answer.

(C.A. Inter May 90)
2010 - Nov [3] Extra Ltd. furnishes you with the following Balance Sheet as on 31st March,
2010 :
Liabilities Amount Assets Amount
Share Capital Fixed assets less depreciation 50
Equity Shares of ` 10 each fully paid 100 Investments at cost 120
9% Redeemable Preference Shares Current assets 142
of ` 100 each fully paid 20
Capital Reserves 8
Revenue Reserves 50
Share Premium 60
10% Debentures 4
Current Liabilities 70
312 312
(i) The company redeemed the preference shares at a premium of 10% on 1st April 2010.
(ii) It also bought back 3 lakhs equity shares of ` 10 each at ` 30 per share.
The payment for the above were made out of huge bank balances, which appeared
as a part of the current assets.
(iii) Included in it’s investment were “investments in own debentures” costing ` 2 lakhs (face
value ` 2.20 lakhs). These debentures were cancelled on 1st April 2010.
(iv) The company had 1,00,000 equity stock options outstanding on the above mentioned
date, to the employees at ` 20 when the market price was ` 30. (This was included under
Current liabilities). On 1.04.2010 employees exercised their options for 50,000 shares.
(v) Pass the Journal Entries to record the above.
33
(vi) Prepare Balance Sheet as at 01.04.2010. (16 marks)
2010 - Nov [5] Following is the Balance Sheet of Y Ltd., as at 31st March 2010 :
Appendix IPCC Gr. II Paper - 5 II-9
Liabilities ` Assets `
Share Capital Fixed Assets
Issued & paid up : Goodwill 8,00,000
2,50,000 equity share of ` 10 Building 7,00,000
each ` 8 per share paid up 20,00,000 Plant and machinery 13,00,000
1,00,000 (10%) pref. shares Current Assets
of ` 10 each fully paid up 10,00,000 Stock 7,00,000
Reserves & Surplus Sundry debtors 9,00,000
General reserve 6,00,000 Bank Balance 6,60,000
Current Liabilities Misc. Exp.
Creditros 4,00,000 Preliminary Expense 40,000
Workmen’s profit sharing fund 3,00,000
51,00,000 51,00,000
X Ltd. decided to absorb the business of Y Ltd., at the respective book value of assets and trade
liabilities except Building which was valued at ` 12,00,000 and Plant & Machinery at
` 10,00,000.
The purchase consideration was payable as follows :
(i) Payment of liquidation expenses ` 5,000 and workmen’s profit sharing fund at 10%
premium;
(ii) Issue of equity share of ` 10 each fully paid at ` 11 per share for every pref. share and
every equity share of Y Ltd., and a payment of ` 4 per equity share in cash.
Calculate the purchase consideration, show the necessary ledger accounts in the books of Y Ltd.,
and opening Journal Entries in the books of X Ltd. (16 marks)
and Subscribed Capital : 10,00,000 Fixed Assets:

10,000 Equity Shares of ` 100 each Machineries 3,50,000
fully paid Current Assets :
Unsecured Loans : Stock 2,53,000
15% Debentures 3,00,000 Debtors 2,30,000
Accrued interest 45,000 Bank 20,000
Current Liabilities : Profit & Loss A/c. 5,80,000
Creditors 52,000
Provision for Income Tax 36,000
14,33,000 14,33,000
It was decided to reconstruct the company for which necessary resolution was passed and
sanctions were obtained from the appropriate authorities. Accordingly, it was decided that :
(i) Each share be sub-divided into 10 fully paid up equity share of ` 10 each,
Appendix IPCC Gr. II Paper - 5 II-13
(ii) After sub-division, each shareholder shall surrender to the company 50% of his holding
for the purpose of reissue to debentureholders and creditors as necessary.
(iii) Out of shares surrendered, 1000 shares of ` 10 each shall be converted into 10%
Preference Shares of ` 10 each fully paid up.
(iv) The claims of the debenture holders shall be reduced by 50%. In consideration of the
reduction, the debenture holder shall receive Preference Shares of ` 1,00,000 which are
converted out of shares surrendered.
(v) Creditors claim shall be reduced by 25%, it is to be settled by the issue of equity shares
of ` 10 each out of shares surrendered.
(vi) Balance of Profit and Loss Account to be written off.
(vii) The shares surrendered and not re-issued shall be cancelled.
Pass Journal Entries giving effect to the above and the resultant Balance Sheet. (16 marks)
34

Abyas Amalgamation IPCC G 1 & 2

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ABHYAAS CA ACADEMY, Ph:84999 46555

Vijayawada 77998 59135

The consideration payable by Amar ltd was agreed as under:

5) The Balance sheets of X Ltd and Y Ltd as on 31-3-2016 are as under.

PROBLEMS ON INTER COMPANY OWINGS:

7) The following are Balance sheets of P Ltd and S Ltd as at 31-12-2015

You are required to prepare as on 1-10-2015

INTER COMPANY HOLDINGS

BALANCE SHEET OF Y Ltd

B Ltd is absorbed by A Ltd on the following terms.

Show ledger accounts in the books of B Ltd and Balance sheet of A.

Draw up the Balance sheet of P Ltd after the absorption is completed.

Your are required to:

17) On 31st March, 2016the Balance sheet of X Ltd was as follows.

Share capital share of rs. 10 each fully paid up 30,00,000 18,00,000

Land & Building 27,00,000 13,50,000

Authorised,Issued and subsc- Goodwill 50,000

b) Equity shareholders to surrender to the company 90% of their value

g) Assets to be reduced as under

k) Authorised share capital was suitably increased.

21) The following is the Balance Sheet of Weak Ltd as on 31-3-2016.

b) to provide ˆ15,000 for bad debts.

26) BALANCE SHEET OF A LTD. as on 31-3-2016

Notes to Accounts Amount Amount

2) Reserves and Surplus

3) Long term borrowings

4) Short term borrowings

iii) Loan from directors to be waived in full.

ABHYAAS CA ACADEMY, Ph:84999 46555

All the bills receivable held by V Ltd. were P Ltd.'s acceptances.

You are required to:

ABHYAAS CA ACADEMY, Ph:84999 46555

(3) Long-Term Borrowings

You are required to:

2 lakh 8% Preference shares of Rs. 100 each fully paid up 200

Equity and liabilities Assets

Particulars Abhay Ltd Asha Ltd

You are required to:

P & L A/c - 15 Stock 412 680

Fixed assets at cost 80 40

PROFESSIONAL ACCESS Ph: 98494 19306

Notes to Accounts Amount Amount

7) Reserves and Surplus

8) Long term borrowings

9) Short term borrowings

10) Tangible assets

iii) Loan from directors to be waived in full.

Land and buildings 60.00 -- 5.00

34) The following is the Balance sheet of A Ltd as at 31-3-2010

Balance Sheet of Green Limited as at 31.3.2000

Liabilities Rs. in lacs Assets:

17) The following is the balance sheet of X Ltd as on 31-3-98.

Funds employed in:

All workings notes should form part of your answer.

and Subscribed Capital : 10,00,000 Fixed Assets:

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