Amalgamation Dec 2020

Amalgamation, Absorption & Ext.
Reconstruction of Companies
1. On 1.1.2008, A Ltd. had the following capital structure:
Rs.
1,00,000 Equity shares of Rs. 10 each
10,00,000
10,000, 12% Preference Shares of Rs. 10 each
1,00,000
50,000, 10% Debentures of Rs. 10 each
5,00,000
16,00,000
On the above date, B Ltd. absorbed A Ltd. under the following terms and
conditions:
(1) B Ltd. will take over all the assets and Liabilities of A Ltd. at book
value.
(2) B Ltd. will pay for – Equity shareholders – 50,000 equity shares of
Rs. 10 each and
5,000, 12% Debentures of Rs. 100 each.
Preference shareholders – 13% preference shares of an equal amount.
Debenture holders - to be redeemed by B Ltd. at par.
Liquidation Expenses – Rs. 25,000.
You are required to calculate purchase consideration.
[Ans. Purchase consideration
11,00,000]
2. X Ltd. has the following capital Structure:

Equity shares of Rs. 10 each
75,00,000
14% Preference shares of Rs. 100 each
25,00,000
12% Debentures
40,00,000
Y Ltd. takes over X Ltd.
(1) Debenture holders of X Ltd. are discharged by Y Ltd. at 10% premium by
issuing
15% own debentures.
(2) 14% preference shareholders are discharged at a premium of 20% by
issuing
necessary number of 15% Preference shares of Y Ltd. (FV Rs. 100 each)
(3) Intrinsic Value per share of X Ltd. is Rs. 20 & that of Y Ltd. Rs. 30.
Y Ltd. will issue
equity shares to satisfy the Equity shareholders of X Ltd. on the
basis of Intrinsic
Value. However, the Entry should be made at par. The nominal value of
each Equity
Share of Y Ltd. is Rs. 10.
Compute purchase Consideration.
80,00,000]
3. The following is the balance sheet of A Ltd. as on 31.3.2007

Liabilities Amount Assets
Amount
14000 Equity Shares 1,400,000 Sundry Assets
1,800,000
of Rs. 100 each fully
paid
General Reserve 10,000 Discount on Issue of
10,000
debentures
10% Debenture 200,000 Preliminary
30,000
Expenses
Sundry Creditors 200,000 P & L A/c
60,000
Bank Overdraft 50,000
Bills Payable 40,000
1,900,000
1,900,000
Rajan Adhikari
CAP-II“Dec-2020”
FCA 1
Amalgamation of Companies
R Ltd. agreed to take over the business of A Ltd.. Calculate purchase
consideration under Net
Assets method on the basis of the following:
The market value of 75% of the Sundry Assets is estimated to be 12% more
than the book
value and that of the remaining 25% at 8% less than the book value.

14,36,000]
4. The abstract of Balance sheet of AXE ltd. as at 31.03.2011 are as follows:

Liabilities
Amount
Equity Share Capital (Rs. 100 each)
1,500,000
12% Preference Capital (Rs. 100 each)
800,000
13% Debentures
300,000
On 31.03.2011 BXE Ltd. agreed to take over AXE Ltd. on the following terms:
1) For each preference share in AXE Ltd. Rs. 10 in cash and 9% preference
share of Rs.
100 each in BXE Ltd.
2) For each equity share in AXE Ltd. Rs. 20 in cash and one equity share
in BXE ltd. of
Rs. 100 each. It was decided that the share in BXE ltd will be
issued at market price
of Rs. 140 share.
3) Liquidation expenses of AXE Ltd. are to reimbursed bu BXE Ltd. to the
extent os Rs.
10,000. Actual expenses amounting to Rs. 12,500.
You are required to calculate the amount of Purchase consideration.

32,80,000]
5. A Below is given the Balance Sheet of B Co. Ltd. as on 1.1.2008:

Liabilities Rs. Assets
Rs.
30,000 Shares of Rs. 10 each 3,00,000
Goodwill
25,000
General Reserve 30,000
Land & Building
95,000
Profit & Loss Account 15,000
Plant & Machinery
2,00,000
Provident Fund 5,000
Patents
7,500
10% Debentures 1,50,000
Stock
1,06,000
Creditors 20,000
Debtors
40,000
Investments
10,000
Bank
30,000
Cash
6,500
5,20,000
5,20,000
A Co. Ltd. absorbed the above company on the same date on the basic of the
Balance Sheet
given and on the following terms and conditions:
(1) It would issue 12% Debentures in A Co. Ltd. to discharge the
debenture debt at a
premium of 5%.
(2) It would pay Rs. 10,000 as cost of liquidation.
(3) It would pay cash @ Rs. 3 per share and exchange 3 shares of Rs.10
each (market
value Rs. 15) for every 5 shares in B Co. Ltd.
Rajan Adhikari
FCA 2
You are required to calculate the purchase consideration.
6. S Ltd is absorbed by P Ltd. The balance sheet of S Ltd. is as under:

Amount
2,000 Preference shares of Rs. 100 each 200,000 Sundry Assets
1,300,000
(Fully paid up)
5,000 equity shares of Rs. 100 each 500,000
(Fully paid up)
Reserves 300,000
6% Debentures 200,000
Trade Creditors 100,000
1,300,000
1,300,000
P Ltd. has agreed as under:
1. To issue 9% Preference shares of Rs. 100 each in the ration of 3 shares of
P ltd. for 4
Preference sharesin S ltd.
2. To issue to the debenture holders in S ltd 8% mortgage debentures at Rs.
96 of 6%
debentures in S ltd which are to be redeemed at premium of 20%.
3. To lpay Rs. 20 per share in cash and to issue 6 equity shares of Rs. 100
each (Market value
Rs. 125) in lieu of every 5 shares held in S ltd. and
4. To assume the liability to trade creditors
Calculate purchase consideration.
7. Balance Sheet of Ram & Sham Ltd. is given as on 31st March 2002:
Ram Sham
Ram Sham
Ltd. Ltd
Ltd. Ltd
Equity Share Capital of Rs. 10 1,00,000 50,000 Fixed Assets
80,000 70,000
each
Reserve & Surplus Book Debts
30,000 40,000
Share premium 10,000 15,000 Stock
20,000 10,000
Debentures 10,000 20,000 Cash in hand
10,000 5,000
Creditors 20,000 40,000
1,40,000 1,25,000
1,40,000 1,25,000
Ram Ltd. took over Sham Ltd. on following conditions:

(1) That necessary shares would be issued to old shareholder in accordance
with intrinsic
value of shares.
(2) That fixed assets has market value of Rs. 75,000 and 80,000 respectively,
Debtors are
good, Stock is shown at cost price whose gross realizable value is Rs. 25,000
and 12,000
respectively.
(3) Debentures of Sham Ld. were to be issued equivalent Debentures at premium
of 10%
Calculate Purchase Consideration.
[Ans. Intrinsic Value Ram Ltd. 11 per share & Shyam Ltd. 15
per share]
8. S Ltd. is absorbed by P Ltd. The Balance Sheet of S Ltd. is as under:

Balance Sheet
Rajan Adhikari
FCA 3
Rs.
2,000, 7% Preference Shares Sundry Assets
12,00,000
of 100 each 2,00,000
5,000 Equity Shares of 100
each 5,00,000
Reserves 3,00,000
12,00,000
12,00,000
P Ltd. has agreed
(1) To issue 9% Preference Shares of Rs. 100 each, in the ration of 3
shares of P Ltd. for
4 Preference Shares in S Ltd.
(2) To pay Rs. 20/share in Cash and issue 6 equity shares of Rs. 100 each
(Market Value
Rs. 125) in lieu of every 5 shares held in S Ltd.
(3) To redeem the Debentures at a premium of 20%.
Calculate PC.

10,00,000]
9. Sham Ltd Balance Sheet as on 31st March 2002

is as follows

Amount
Equity Shares of
Rs.10 each 150,000 Sundry Assets
100,000
9% Debenture 100,000 Current Assets
200,000
Current Liabilities 50,000
300,000
300,000
Ram Ltd. takes over Sham Ltd.

1) New company will issue necessary equity shares to old company's
shareholders
2) 10,000 11% dentures of Rs. 10 each were issued at Rs. 12 each to 9%
debenture
holders.
3) Current liabilities were also taken over.
Calculate Purchase Consideration assuming intrinsic value of old and new
company are
Rs. 20 and 15 respectively.
3,00,000]
10. Y ltd. decides to absorb X ltd. The balance sheet of X ltd. is as follows
Amount
3,000 equity shares of
Rs. 100 each (Fully
Rajan Adhikari
FCA 4
paid up) 300,000 Sundry Assets (Net)
290,000
Preference Shares 60,000 P & L A/c

70,000
360,000
360,000
Y ltd. agrees to take over the net assets of X ltd. An equity share in X
ltd,
for purposes of absorption, is valued @ Rs. 70. Y ltd. agrees to pay Rs.
60,000 in
cash for payment to preference shares holders and the balance in the form of
its
equity shares valued at Rs. 120. Calculate purchase consideration.
2,70,000]
11. Balance Sheet of X ltd. as on 31st March 1995

Liabilities RS ('000) Assets
RS ('000)
Equity shares of Rs. 10 each 7,500 Land & Building
5,000
14% Preference Shares of Rs. 100 2,500 Plant & Machinery
4,500
each
General Reserve 1,250 Furniture
1,050
12% Debentures 4,000 Investment
500
Sundry Creditors and Stock
2,300
Other Current Liabilites 2,000 Debtors
2,400
Cash and Bank
1,500
Total 17,250 Total
17,250
Other information:
1. Y ltd. takes over X ltd. on 1st April 1995.
2. Debenture holders of X ltd. are discharged by Y Ltd. at 10% premium
by issuing
5% own debentures of Y Ltd.
3. 14% Preference Shareholders of X Ltd. are discharged at a premium of
20% by issuing
necessary number of 15% Preference shares of Y Ltd. ( Face Value
Rs.
100)
4. Intrinsic Value per share of X Ltd. is Rs. 20 and that of Y Ltd. 30
will issue
equity shares to satisfy the equity shareholders of X ltd on the
basis of intrinsic
value. However, the entry should be made at par value only. The
nominal value of
each equity share of Y ltd is Rs. 10
Compute PC
8,000]
12. The balance sheet of X ltd. and Y ltd. as on 31.03.1996 are given below:
Liabilities X ltd. Y ltd Assets
X ltd. Y ltd
Equity Shares of Rs. 10 400,000 360,000 Premises
120,000 -
each
General Reserve 75,000 - Goodwill
- 120,000
Profit and Loss A/c 38,000 - Stock-in-trade
300,000 90,000
Sundry Creditors 72,000 120,000 Sundry Debtors
80,000 160,000
Bank
85,000 75,000
Profit and Loss A/c
- 35,000
Rajan Adhikari
FCA 5
585,000 480,000
585,000 480,000
A new company XY ltd was formed to take over the two businesses in entirety
on the
following understanding:
a) X ltd.’s premises to be revalued at Rs. 150,000, sundry debtors to
taken over at 90%
and stock at Rs. 315,000.
b) Y ltd.’s goodwill to taken over at Rs. 160,000, sundry debtors to be
taken over at Rs.
150,000 and stock at Rs. 75,000.
It was decided that the capital of XY Ltd. would consist of both preference
and equity shares
of face value Rs. 10 each. Preference shares would be order of Rs. 400,000
and balance
would be equity shares. Both companies would be issued shares of both the
types in equal
number, except that the surplus capital of X ltd. would be discharged full in
preference
shares. Indicate the number of shares to be issued to each of the absorbed
companies and how
the shares in XY ltd. would be distributed to the shareholders of X ltd. and
Y ltd.
Calculate Purchase consideration
13. Following is the Balance Sheet of A Ltd.

Rs.
20,000 share @ Rs. 10 2,00,000 G/W
25,000
General Reserve 20,000 Land and Building
1,00,000
10% Debentures 1,00,000 Plant and Machinery
1,45,000
Loan from bank 40,000 Stock
55,000
Creditors 80,000 Debtor
65,000
Cash
34,000
Preliminary Expenses
16,000
4,40,000
4,40,000
(1) PC is to be discharged in cash to the extent of Rs. 10,000 & the
Balance in fully paid
Equity Shares of 10 each valued at Rs. 12.5 per share.
(2) G/W is to be valued at 4 year's purchase of the excess of average of

5 years profit
over 8% of combined amount of share Capital & General Reserve.
Average profit of 5
years is 30,100. Calculate PC & Entries in books of Purchase Co.
[Ans. Goodwill 50,000 Purchase consideration 2,29,000]
14. Super Express Ltd and Fast Express Ltd. were in company business. They
decided to form a
new company named Super Fast Express Ltd. the balance sheet of both the
companies were
as under.
Super Express Ltd.
Balance Sheet as at 31st December, 2002
Liabilities Rs Assets
Rs.
Rajan Adhikari
FCA 6
20,000 Equity Shares of Rs. Building
10,00,000
100 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.

Liabilities Rs Assets
Rs.
10,000 Equity Shares of Rs. Goodwill
1,00,000
100 each 10,00,000 Building
6,00,000
Machinery
5,00,000
Employees Profit sharing 60,000 Stock
40,000
account
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 their
book values. The companies were allotted equity shares of Rs. 100 each in
lieu of purchase
consideration.
Prepare opening balance sheet of Super Fast Express Ltd.
15. Following balance sheet of X Ltd. and Y Ltd.

Liabilities X Ltd. Y Ltd. Assets
X Ltd. Y Ltd.
Rs ‘000 Rs. ‘000
Rs ‘000 Rs. ‘000
Equity share capital (Rs. 50,00 30,00 Land & Building
2,500 1,550
10 each Plant & Machinery
3,250 1,700
14% Pref. Share Furniture & fittings
575 350
Capital (Rs. 100 each) 22,00 17,00 Investments
700 500
General Reserve 5,00 2,50 Stock
1,250 950
Export capital reserve 3,00 2,00 Debtors
900 1,030
Investment allowance Cash & Bank
725 520
Rajan Adhikari
FCA 7
Reserve -- 1,00
Profit & Loss A/c 7,50 5,00
13 % Debentures (Rs. 100 5,00 3,50
each)
Trade Creditors 4,50 3,50
Other Current Liabilities 2,00 1,50
99,00 66,00
99,00 66,00
st
X Ltd takes over Y Ltd. on 1 April, 1995. X Ltd. discharges the purchase
consideration as
below:
(i) Issued 3,50,000 equity shares of Rs. 10 each at par to the equity share
holders of Y Ltd.
(ii) Issued 15% preference shares of Rs. 100 each to discharge the preference
shareholder of
Ltd. at 10% premium.
The debentures of Y Ltd will be converted into equivalent number of
debentures of X Ltd.
The statutory reserves of Y Ltd. are to be maintained for 2 more years.
Show the balance sheet of X Ltd. after amalgamation on the assumption that:
(a) The amalgamation is in the nature of merger.

(b) The amalgamation is in the nature of purchase.
16. The following are the Balance Sheet of A Ltd. and B Ltd. as on 31.3.2008.
Liabilities A Ltd. B Ltd. Assets
A Ltd. B Ltd.
(Rs.) (Rs.)
(Rs.) (Rs.)
Share Capital: Fixed Assets
8,30,000 16,00,000
5,000 shares of Rs. 100 each 5,00,000 - Investments
1,70,000 -
80,000 Shares of Rs. 10 each - 8,00,000 Current Assets
6,90,000 16,80,000
Capital Reserve 1,00,000 - Goodwill
20,000 -
General Reserve 3,60,000 10,00,000
Secured Loan - 4,00,000
Unsecured Loan 2,20,000 -
Creditors 4,20,000 4,60,000
Provision for Tax 1,10,000 5,20,000
Proposed Dividend - 1,00,000
17,10,000 32,80,000
17,10,000 32,80,000
A Ltd. was absorbed by B Ltd. on the above date.
For the purpose of absorption, the goodwill of A Ltd. was considered
valueless. A Ltd. had
arrears of Depreciation amounting Rs. 40,000. The shareholders of A Ltd. are
allotted, in full
satisfaction of their claims, shares of B Ltd., in the same proportion as the
respective Intrinsic
Value of the shares of the two companies bear to each other. Pass Journal
Entries in the books
of B Ltd. Also prepare the Balance Sheet of B Ltd., assuming an Amalgamation
in the nature
of purchase.
[Ans. Purchase consideration 9,00,000 I Value-180,22.5]
17. The following were the Balance Sheet of P Ltd. and V Ltd. as on 31st March,
2002:
Rajan Adhikari
FCA 8
Liabilities P Ltd.(in
lakhs) V Ltd.
(in lakhs)
Equity share capital(fully paid up shares of
15,000 6,000
Rs. 10 each)
Securities Premium
3,000 -
Foreign Project 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
Total
33,400 12,500
Assets P Ltd.(in
lakhs) V Ltd.(in
Land and Buildings
6,000 lakhs)-
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 Receivables
- 80
Cost of issue of Debentures
- 50
Total
33,400 12,500
All the bills receivables held by V Ltd. and P Ltd.
acceptances.
On 1st April, 2002 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 Rs. 10 each at par for every
two shares
held in V Ltd. It was also agreed that 12 % debentures in P Ltd. of the same
amount
and denomination.
Expenses of amalgamation amounting to Rs. 1 Lakhs were borne by
P Ltd. You are required to :
1) Pass Journal entries in the books of P Ltd. and
2) Prepare P Ltd. Balance Sheet immediately after the merger.
18. Given below are the Balance Sheet of two companies as on 31st December,
2000:
Anand Ltd
Rs
Share Capital: Goodwill
1,50,000
Rs. 10 shares fully paid 15,00,000 Freehold Property
4,00,000
Share Premium Account 4,500 Plant & Machinery
3,50,000
General Reserve 1,00,000 Stock
6,82,000
Profit & Loss Account 1,65,650 Sundry Debtors
2,58,500
Rajan Adhikari
FCA 9
8 % Debentures 3,50,000 Bank
3,37,500
Sundry Creditors 57,850
21,78,000
21,78,000
Bhanu Ltd.
Rs
50,000
Rs. 10 shares fully paid 3,90,000 Freehold Property
1,80,000
10 % Debentures 70,000 Plant & Machinery
1,00,000
Bank Overdraft 6,000 Stock
1,62,000
Sundry Creditors 2,57,000 Sundry Debtors
95,000
Profit & Loss A/c
1,36,000
7,23,000
7,23,000
The two companies decided to amalgamate, as on 31st December, 2000 and a new
company
called Anand Bhanu Ltd. was formed with an authorized capital of Rs.
25,00,000 in shares of
Rs.10 each. The terms of amalgamation were as follows:
Anand Ltd: (i) 6 shares of Rs. 10 each fully paid in the new company in
exchange for
every 5 share in Anand Ltd. and Rs. 10,000 in cash;
(ii) The debenture – holders were to be allotted such
debentures in the
company bearing interest at 7% per annum as would bring the
same amount of
interest.
Bhanu Ltd: (i) I share of Rs. 10 each fully paid in the new company in
exchange for every
3 shares in Bhanu Ltd. and Rs. 5,000 in cash;
(ii) Debenture – holders were to be allotted such debentures
in the new
company bearing interest at 7% per annum as would bring the
same amount of
interest.
The new company took over all the assets and liabilities of the two existing
companies.
Show Journal entries in the books of Anand Bhanu Ld. giving effect to the
arrangement and
prepare its opening Balance Sheet,
[Ans. Purchase consideration Anand-18,10,000, Bhanu- 1,35,000]
19. The financial position of two companies Hari Ltd. and Vayu Ltd. as on 31st
March,2002,
was as under:
Hari Ltd (Rs.)
Vayu Ltd. (Rs.)
Assets:
Goodwill 50,000
25,000
Building 300,000
100,000
Machinery 500,000
150,000
Stock 250,000
175,000
Debtors 200,000
100,000
Cash at bank 50,000
20,000
Preliminary expenses 30,000
10,000
13,80,000
13,80,000
Liabilities:
Share capital:
Equity shares of Rs.10 each 10,00,000
300,000
Rajan Adhikari CAP-

II“Dec-2020”
FCA 10 Amalgamation
of Companies
9% preference shares of Rs.100 each
100,000 -
10% preference shares of Rs.100 each
- 100,000
General reserve
100,000 80,000
Retirement gratuity fund
50,000 20,000
Sundry Creditors
130,000 80,000
13,80,000 13,80,000
Hari Ltd. absorbs Vayu Ltd. on the following terms:
a. 10% preference shareholders are to be paid at 10% premium by issue of
9%
preference shares of Hari Ltd.
b. Goodwill of Vayu Ltd. is valued at Rs.50,000, buildings are valued at
Rs.150,000 and the machinery at Rs.160,000
c. Stock to be taken over at 10% less value and reserve on bad and
doubtful
debts to the created @ 7.5%
d. Equity shareholders of Vayu Ltd. will be issued equity shares @
Rs.10.50 each.
Prepare necessary ledger accounts to close the books of Vayu Ltd. and
show
the acquisition entries in the books of Hari Ltd. Also draft the
balance sheet
after absorption as at 31st March, 2002.
5,30,000]
20. Star and Moon had been carrying on business independently. They agreed to
amalgamate and
form a new company Neptune Ltd. with an authorized share capital of Rs.
2,00,000 divided
into 40,000 equity shares of Rs. 5 each.
On 31st December, 2002, the respective Balance Sheet of Star and Moon were
as follow:
Star
Moon
Rs.
Rs.
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
Representing Capital 1,82,500
1,76,250
Additional information:
(a) Revalued figures of Fixed and Current Assets were as follow:
Star
Moon
Rs.
Rs.
Fixed Assets 3,55,000
1,95,000
Current Assets 1,49,750
78,875
(b) The debtors and creditors – include Rs. 21,675 owed by Star and 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
Rajan Adhikari
FCA 11
Rs.
Rs.
2000 Profit 2,24,788
1,36,950
2001 (Loss)/Profit (1,250)
1,71,050
2002 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,2002 after
revaluation of assets
You are requested to:
(1) Compute the amount of debentures and share to be issued to Star and Moon.
(2) A Balance sheet of Neptune Ltd., showing the position immediately after
amalgamation.
[Ans. Purchase consideration Star-1,78,750, Moon- 1,79,250]
21. P and Q have been carrying on same business independently. Due to

competition in the
market, they decided to amalgamate and form a new company called PQ Ltd.
Following is the Balance Sheet of P and Q as at 31.3.2007:
Liabilities P Q Assets P
Q
Rs. Rs. Rs.
Rs.
Capital 7,75,000 8,55,000 Plant & 4,85,000
6,14,000
machinery
Current liabilities 6,23,500 5,57,600 Building 7,50,000
6,40,000
Current assets 1,63,500
1,58,600
13,98,500 14,12,600 13,98,500
14,12,600
Following are the additional information:

(i) The authorized capital of the new company will be Rs. 25,00,000
divided into
1,00,000 equity shares of Rs. 25 each.
(ii) Liabilities of P include Rs. 50,000 due to Q for the purchases made. Q
made a profit
of 20% on sale to P.
(iii) P has goods purchased from Q, cost to him Rs. 10,000. This is included
in the current
assets of P as at 31st March, 2007.
(iv) The assets of P and Q are to be revalued as under:
P Q
Rs. Rs.
Plant and machinery 5,25,000 6,75,000
Building 7,75,000 6,48,000
(v) The purchase consideration is to be discharged as under:

(a) Issue 24,000 equity shares of Rs. 25 each fully paid up in the
proportion of their
profitability in the preceding 2 years.
(b) Profits for the preceding 2 years are given bellow:
P Q
Rs. Rs.
Rajan Adhikari
FCA 12
1st year 2,62,800 2,75,125
nd
2 year 2,12,200 2,49,875
Total 4.75.000 5,25,000
(c) Issue 12% preference shares of Rs. 10 each fully paid up at par
to provide income
equivalent to 8% return on capital employed in the business as on 31.3.2007
after revaluation
of assets of P and Q respectively.
You are required to:
(i) Compute the amount of equity and preference shares issued to P and Q.
(ii) Prepare the Balance Sheet of P&Q Ltd. immediately after amalgamation.
[Ans. Purchase consideration P-8,45,000, Q-9,31,000]
22. Exe Limited is absorbed by Wye Limited. Given below are the Balance Sheet of
the two
Companies prepared after revaluation of their assets on a uniform basis.
Balance Sheet of Exe Limited
Rs.
Authorized Share Capital: Sundry Assets
16,85,000
9,000 Equity Shares of Rs.
Cash in hand
3,500
150 each 13,50,000
Paid – up share capital:

9, 000 Equity Share of Rs.
150 each Rs. 135 paid-up 12,15,000
General Reserve 4,03,500
Profit and Loss A/c 15,000
16,88,500
16,88,500
Balance Sheet of Wye Limited

Rs.
Authorized Share Capital: Sundry Assets
43,57,500
Cash in hand
27,500
75 each 45,00,000
Paid – up share capital:

75 paid-up 30,00,000
Profit and Loss A/c 35,000
43,85,000
43,85,000
Rajan Adhikari
FCA 13
The holder of every three shares in Exe Limited was to receive five shares in
the Wye
Limited plus as much cash a in necessary to adjust the rights of shareholders
of both the
companies in accordance with the intrinsic values of the shares as per the
respective Balance
Sheets.
Pass necessary journal entries in the books of Wye Limited and prepare the
Balance Sheet
giving effect to the above scheme of absorption Entries are to be made at par
value only.
[Ans. Purchase consideration 11,38,500, Cash per share 1.5]
23. The Balance Sheet as on 31st March, 2002 of X Ltd. are as under.
X Ltd.
Rs
Authorized and Subscribed Building
20,00,000
60,000 equity share of Rs. 100 Machineries
26,00,000
each fully paid of 60,00,000 Furniture
40,000
Reserve and Surplus: Current Assets:
General reserve 8,00,000 Stock
16,00,000
Profit and Loss Account 4,80,000 Debtors
9,20,000
Current Liabilities & Provision Cash in Hand
2,80,000
Creditors 9,60,000 Bank Balance
8,00,000
82,40,000
82,40,000
Y Ltd.
Rs
4,00,000
Authorized and Subscribed Machineries
16,80,000
20,000 equity share of Rs. 100 Furniture
20,000
each fully paid 20,00,000 Stock
7,20,000
Reserve and Surplus: Debtors
7,20,000
Capital reserve 2,00,000 Cash in Hand
20,000
General reserve 1,00,000 Bank Balance
1,60,000
Profit and Loss Account 1,40,000 Expenditure on New
project 3,00,000
Unsecured Loan:
Current Liabilities & Provision
Creditors 3,80,000
40,20,000
40,20,000
Y Ltd. was absorbed by X Ltd. on 1st April, 2002, on the following terms:
(a) Fixed Assets other than Goodwill to be valued at Rs. 20,00,000
including Rs. 24,000
for furniture.
(b) Stock to be reduced by Rs. 80,000 and debtors by 5%.
(c) X Ltd. to assume liabilities and to discharge the 12% Debenture by
issue of 11%
Debenture of the same value.
(d) The new project to be valued a Rs. 3,80,000.
Rajan Adhikari
FCA 14
(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 to declare and pay divided of 6% prior to
absorption.
(g) Expenses of liquidation of Y Ltd. are to be reimbursed by X Ltd. Rs.
24,000.
Draft Journal entries recording the scheme in the books of X Ltd. and
prepare the Balance
Sheet of X Ltd. after absorption assuming that X Ltd.’s authorized
capital has been
increased to Rs. 80,00,000
22,00,000]
24. S Ltd. is absorbed by P Ltd. The Balance Sheet of S. Ltd. is as under

Rs
Share Capital: Sundry Assets
13,00,000
2,000 7% Preference shares of
Rs. 100 each (fully paid-up) 2,00,000
5,000 Equity shares of Rs. 100
each (Fully paid-up) 5,00,000
Reserve 3,00,000
Trade Creditors 1,00,000
13,00,000
13,00,000
P. Ltd. has agreed:

a) To issue 9% preference shares of Rs. 100 each, in the ratio of 3
shares of P. td. For 4
preference shares in S. Ltd.
b) To issue to the debentures holders in S. Ltd. 8% Mortgage Debentures
at Rs. 96 in
lieu of 6% Debentures in S Ltd. which are to be redeemed at a premium
of 20%
c) To pay Rs. 20 per share in cash and to issue six equity shares of Rs.
100 each (market
value Rs. 125) in lieu of every five shares held in S Ltd., and
d) To assume the liability to trade creditors
Prepare books of new company and old company.
25. K Ltd. and L Ltd. amalgamate to form a new company LK Ltd. The financial
position of
these two companies on date of amalgamation was as under:
K Ltd L Ltd. K
Ltd L Ltd.
Rs. Rs Rs.
Rs
80,000
Equity shares of Rs. 100 Land & Building
4,50,000 3,00,000
each 8,00,000 3,00,000 Plant & machinery
7% Preference share of Furniture & Fittings
6,20,000 5,00,000
Rs. 100 each 4,00,000 3,00,000 Sundry Debtors
60,000 20,000
5% Debentures 2,00,000 --- Stores & Stock
2,75,000 1,75,000
General Reserve -- 1,00,000 Cash at Bank
2,25,000 1,40,000
P & L A/c 4,31,375 97,175 Cash in hand
1,20,000 55,000
Sundry Creditors 1,00,000 2,10,000 Preliminary
41,375 17,175
Rajan Adhikari
FCA 15
Secured Loan --- 2,00,000 Expenses
60,000
19,31,375 12,07,175
19,31,375 12,07,175
The terms of amalgamation are as under:
(a) (i) The assumption of liabilities of both the Companies
(ii) Issue of 5 Preference shares of Rs. 20 each in LK Ltd. @ Rs. 18
paid up at
premium of Rs. 4 per share for each preference share held in both
the Companies
(iii) Issue of 6 Equity shares of Rs. 20 each in LK Ltd. @ Rs. 18
paid up at a premium
of Rs. 4 per share for each equity share held in both the companies. In
addition, necessary
cash should be paid to the Equity shareholders of both the companies as is
required to adjust
the rights of shareholders of both the Companies in accordance with the
intrinsic value of the
shares of both the companies.
(iv) Issue of such amount of fully paid 6% debentures in LK Ltd. as
is sufficient to
discharge the 5% debentures in K Ltd.
(b) (i) The assets and liabilities are to be taken at book values except
stock and debtors
for which provision at 2% and 2 ½ % respectively to be raised.
(ii) The sundry debtors of K Ltd. include Rs. 20,000 due from L Ltd.
The LK Ltd. is to issue 15,000 new equity shares of Rs. 20 each, Rs. 18 paid
at premium of
Rs. 4 per share so as to have sufficient working capital. Prepare ledger
account in the books
of K Ltd. and L Ltd. to close their books.
[Ans. Purchase consideration K- 15,60,000, L-
7,90,000]
26. wye Ltd. acquires the business of Z Ltd. whose balance sheet on 31 st
December,
1996 is as under;
Particulars Note No
Amount
Equity & Liabilities
Shareholder’s fund
Equity capital (Shares of Rs.100 each fully paid up)
800,000
6%Pref. Capital (Shares of Rs.100 each fully paid up)
400,000
Reserves & surplus
Capital Reserve
100,000
Profit & Loss Ac count
50,000
Underwriting Commission
(40,000)
Non Current liabilities
6% debentures
200,000
Current Liabilities
Outstanding Interest (on debentures)
12,000
Works man compensation reserve (expected liability
8000
Rs.5000)
Trade Creditors
120,000
Total
16,50,000
Rajan Adhikari
FCA 16
Assets
Non Current Assets
Fixed assets
Goodwill
200,000
Land and building
400,000
Plant and machinery
600,000
Intangible Assets
Patent
50,000
Current Assets
Stock
150,000
Book debt
180,000
Cash at bank
70,000
Total
16,50,000
Wye Ltd. was to take over all assets (except cash) and liabilities(except
for interest
due on debentures) and to pay following amounts:
i) Rs.200,000 7% debentures (Rs.100 each) in Wye Ltd. for existing
debentures in Zed Ltd; for the purpose, each debenture of Wye Ltd.
is to
be treated as worth Rs.105.
ii) For each preference share in Zed Ltd. Rs.10 in cash and one 9%
preference
share of Rs.100 each in Wye Ltd.
iii) For each equity share in Zed Ltd. Rs.20 in cash and one equity
share in Wye
Ltd. of Rs.100each having the market value of Rs.140.
iv) Expense of liquidation of Zed Ltd. are to be reimbursed by Wye Ltd.
to the
extent of Rs.10,000. Actual expenses amounted to Rs.12,500.
Wye Ltd. valued Land and Building at Rs.5,50,000 Plant and Machinery at
Rs.6,50,000 and patents at Rs.20,000.
27. The Balance Sheet of B Ltd. and C Ltd., as on 31st March, 2000 were as
follows.
Rs 000
B Ltd C Ltd. B
Ltd C Ltd.
Rs. Rs
Rs. Rs
50,000 12% Preference Goodwill
--- 150
Share of Rs. 100 each 5,000 --- Land & Building
7,400 --
15,00,000 Equity 15,000 Plant & machinery
16,380 --
Share of Rs. 10 each -- 4,000 Furniture
270 M 500
4,00,000 Equity share Patents
600 --
of Rs. 10 each
Capital Reserve 4,800 --- Motors Vehicles
-- 705
General Reserve 3,500 1,000 Stock
4,050 2,600
P & L A/c 600 150 Debtors
800 1,290
Creditors 700 250 Cash at Bank
100 155
Rajan Adhikari CAP-

II“Dec-2020”
FCA 17 Amalgamation
of Companies
29,600 5,400
29,600 5,400
A new company , D Ltd. was formed with an authorized capital of Rs. 4 crore
divided into
50,000 preference shares of Rs. 100 each and 35,00,000 equity shares of Rs.
10 each, B Ltd.
and C Ltd. merged into D Ltd. on the following terms:
(i) D Ltd. allotted to B Ltd… 50,000 13% fully paid preference share and
20 lakh fully
paid equity shares to satisfy the claims of B Ltd’s preference shareholders
and equity
shareholders respectively.
(ii) D. Ltd. allotted to C Ltd. 4,40,000 fully paid equity shares to be
distributed among C
Ltd’s shareholders in full satisfaction of their claims.
(iii) Mr. D who mooted the scheme was allotted 5,000 fully paid equity
shares in
consideration of his services. The company debited the amount to
Preliminary
Expenses Account.
(iv) Expenses on the liquidation of B Ltd. and C Ltd. totaled Rs. 3,000
and were borne by
D. Ltd.
D. Ltd. made a public issue of 2 lakh equity shares of Rs. 10 each at a
premium of Rs. 2 per
share. The issue was underwritten at a commission of 2 ½ % on the issue price
of the shares.
The issue was fully subscribed for by the public. D Ltd. paid Rs. 85,000 in
cash as its
preliminary expenses.
Show important Ledger Accounts to close the books of B Ltd., pass journal
entries in the
books of D Ltd., and prepare D. Ltd’s Balance Sheet immediately after all the
above
mentioned transaction have been recorded.
(RTP – November
2003)
[Ans. Purchase consideration B-25,000, C-
4,400]
28. A ltd. agreed to acquire the business of b Ltd. as on 31st December, 1995.
On that date
Balance Sheet of B Ltd. was summarized as follows:
Rs.
Share capital (fully paid Goodwill
50,000
share of Rs. 10 each) 3,00,000
Land Building and plant
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 & Bank Balance
28,000
Creditors 10,000
5,00,000
5,00,000
The Debentures holders agreed to receive such 7% Debentures issued at 96 each

as would
discharged the debentures in B Ltd. at a premium of 20%. The shareholders in
B Ltd. were to
receive Rs. 2.50 in cash per share and 3 share in A Ltd. for every two shares
held - the shares
in A Ltd. being considered as worth Rs. 12.50 each.
Rajan Adhikari
FCA 18
There were fractions equaling 50 shares for which cash was paid. The
directors of A Ltd.
considered the various assets to be valued as follows:
Rs.
Land
1,00,000
Building
2,50,000
Plant
3,50,000
Stock
80,000
Debtors
18,000
The cost of liquidation of B Ltd. ultimately was Rs. 5,000. Due to a

technical hitch, the
transaction could be completed only on 1st July, 1996. Till date B Ltd.
carried on trading which
resulted in a profit Rs. 20,000 after providing Rs. 15,000 as deprecation. On
30th June, 1996
Stock was Rs. 90,000. Debtors were Rs. 25,000 and Creditors were Rs. 15,000.
There was no
addition to or deletion from the fixed assets. It was agreed that the profit
should belongs to A
Ltd.
You are required, as on July1, 1996, to:
(i) Prepare Realization Account and the Shareholders Account in the ledger of
B Ltd., and
(ii) Give journal entries in the books of A Ltd.
[Ans. Purchase consideration 6,37,500, Realization profit
1,97,500]
29. Let us consider the draft Balance Sheet of X Ltd. as on 31st March, 20X1:
Liabilities Rs. (‘000) Assets
Rs. (‘000)
Share Capital: Land & Buildings
50,00
Equity Shares of Rs. 10 each 75,00 Plant & Machinery
45,00
14% Preference Shares of Furniture
10,50
Rs. 100 each 25,00 Investments
5,00
General Reserve 12,50 Inventory
23,00
12% Debentures 40,00 Trade receivables
24,00
Trade payables and other Cash & Bank balance
15,00
Current liabilities 20,00
172,50
172,50
Other Information:
(i) Y Ltd. takes over X Ltd. on 10th April, 20X1.
(ii) Debenture holders of X Ltd. are discharged by Y Ltd. at 10%
premium by issuing
15% own debentures of Y Ltd.
(iii) 14% Preference Shareholders of X Ltd. are discharged at a premium
of 20% by
issuing necessary number of 15% Preference Shares of Y Ltd. (Face
value Rs. 100
each).
(iv) Intrinsic value per share of X Ltd. is Rs. 20 and that of Y Ltd.
Rs. 30. Y Ltd. will
issue equity shares to satisfy the equity shareholders of X Ltd.
on the basis of
intrinsic value. However, the entry should be made at par value
only. The nominal
value of each equity share of Y Ltd. is Rs. 10.
Rajan Adhikari
FCA 19
Compute the purchase consideration.
30. S. Ltd. is absorbed by P. Ltd. The draft balance sheet of S. Ltd. is as

under:
Balance Sheet
Rs.
Rs.
Share Capital:
2,000 7% Preference shares Sundry Assets
13,00,000
of Rs. 100 each (fully paid-up) 2,00,000
5,000 Equity shares of Rs. 100
each (fully paid-up) 5,00,000
Reserves 3,00,000
Trade payables 1,00,000
13,00,000
13,00,000
P. Ltd. has agreed :

I. to issue 9% Preference shares of Rs. 100 each, in the ratio of 3
shares of P. Ltd. for 4
preference shares in S. Ltd.
II. to issue to the debenture-holders in S. Ltd. 8% Mortgage Debentures
at Rs. 96 in lieu
of 6% Debentures in S. Ltd. which are to be redeemed at a premium of
20%;
III. to pay Rs. 20 per share in cash and to issue six equity shares of Rs.
100 each (market
value Rs. 125) in lieu of every five shares held in S. Ltd.; and
IV. to assume the liability to trade payables.
You are required to calculate the purchase consideration.
31. Y Ltd. decides to absorb X Ltd. The draft Balance Sheet of X Ltd. is as
follows:
Rs.
Rs.
3,000 Equity shares of Net assets
2,90,000
Rs. 100 each (fully paid) 3,00,000 Profit and Loss

Account 70,000
Preference shares 60,000
3,60,000
3,60,000
Y Ltd. agrees to take over the net assets of X Ltd. An equity share in X
Ltd., for purposes of
absorption, is valued @ Rs. 70. Y Ltd. agrees to pay Rs. 60,000 in cash for
payment to
preference shareholders equity shares will be issued at value of Rs. 120
each. Calculate
purchase consideration to be paid by Y Ltd. and how will it be discharged?
32. Neel Ltd. and Gagan Ltd. amalgamated to form a new company on 1.04.20X1.
Following is
the Draft Balance Sheet of Neel Ltd. and Gagan Ltd. as at 31.3.20X1:
Liabilities Neel Rs. Gagan Rs. Assets Neel Rs.
Gagan Rs.
Capital 7,75,000 8,55,000 Plant & 4,85,000
6,14,000
Machinery
Current 6,23,500 5,57,600 Building 7,50,000
6,40,000
liabilities
Current 1,63,500
1,58,600
assets
Rajan Adhikari
FCA 20
13,98,500 14,12,600 13,98,500
14,12,600
Following are the additional information:
(i) The authorised capital of the new company will be Rs. 25,00,000 divided
into 1,00,000
equity shares of Rs. 25 each.
(ii) Liabilities of Neel Ltd. includes Rs. 50,000 due to Gagan Ltd. for the
purchases made.
Gagan Ltd. made a profit of 20% on sale to Neel Ltd.
(iii) Neel Ltd. had purchased goods costing Rs. 10,000 from Gagan Ltd. All
these goods are
included in the current asset of Neel Ltd. as at 31st March, 20X1.
(iv) The assets of Neel Ltd. and Gagan Ltd. are to be revalued as under:
Neel Gagan
Plant and machinery 5,25,000 6,75,000
Building 7,75,000 6,48,000
(v) The purchase consideration is to be discharged as under:

(a) Issue 24,000 equity shares of Rs. 25 each fully paid up in the proportion
of their
profitability in the preceding 2 years.
(b) Profits for the preceding 2 years are given below:
Neel Gagan
1st year 2,62,800 2,75,125
IInd year 2,12,200 2,49,875
Total 4,75,000 5,25,000
(c) Issue 12% preference shares of Rs. 10 each fully paid up at par to
provide income
equivalent to 8% return on net assets in the business as on 31.3.20X1 after
revaluation of
assets of Neel Ltd. and Gagan Ltd. respectively.
You are required to compute the
(i) equity and preference shares issued to Neel Ltd. and Gagan Ltd.,
(ii) Purchase consideration.
33. Given below are the Balance Sheets of X Ltd. and Y Ltd. as at 31st March
20X1 at which date
Y Ltd. was absorbed by X Ltd.
(Rs. 00,000)
Liabilities X Ltd Y Ltd. Assets
X Ltd Y Ltd.
Rs. Rs
Rs. Rs
Equity Share of Rs. 10 Fixed Assets
20.00 8.00
each 5.00 10.00 Investments
3.45 5.20
P & L A/c 27.40 6.55 Stock
5.00 1.00
12% Debentures of Rs. Debtors
4.00 .75
100 each 2.00 1.00
Creditors for goods 1.15 .10 Cash at Bank
.76 1.40
Bill payable .45 .35 Bills receivable
.25 .35
Misc Expenditure
2.54 1.30
36.00 18.00
36.00 18.00
Additional Information: Investment of X Ltd. and Y Ltd. are consideration
worth Rs.
3,59,000 and Rs. 4,95,000 respectively.
Rajan Adhikari
FCA 21
Required: Give the journal entries in the books of X Ltd. and Y Ltd. and
prepare the Balance
Sheet of X Ltd. after absorption in each of the following alternative cases:
Case (a) If the purchases consideration it to be discharged by the
issue of equity shares
of Rs 10 each at a premium of Rs. 50 per share.
Case (b) If the purchase consideration is to be discharged by issue of
25,000 Equity
shares of Rs. 10 each at a premium of Rs 50 per share.
Case (c) If the purchase consideration is to be discharged by issue of
equity shares on
the basis of intrinsic value of shares of both the companies.
34. The Balance Sheet as at 31st March, 20X1 of CAMIC Ltd. and Y Ltd. are as
under
CAMIC Ltd.

Rs.
Share capital: Fixed Assets:
Authorized and Subscribed: Building
20,00,000
60,000 equity shares of Rs. 100 Machineries
26,00,000
each fully paid 60,00,000 Furniture
40,000
Reserve & Surplus: Current Assets:
16,00,000
Profit & Loss Account 4,88,000 Debtors
9,20,000
Current Liabilities & Provisions: Cash in hand
2,80,000
Creditors 9,60,000 Bank balance
8,08,000
82,48,000
82,48,000
Y Ltd.

Rs.
Share capital: Fixed Assets:
Authorized and Subscribed: Goodwill
4,00,000
20,000 equity shares of Rs. 100 Machineries
16,80,000
each fully paid 20,00,000 Furniture
20,000
Reserve & Surplus: Expenditure on New
Project 3,00,000
Capital reserve 2,00,000 Current Assets:
7,20,000
Profit & Loss Account 1,40,000 Debtors
7,20,000
Debentures 12,00,000 Cash in hand
20,000
Current Liabilities & Provisions: Bank balance
1,60,000
Creditors 3,80,000
40,20,000
40,20,000
Y Ltd. was absorbed by CAMIC Ltd. on 1st April, 20X1 on he following terms:
Rajan Adhikari
FCA 22
(a) Fixed assets other than Goodwill to be valued at Rs. 20,00,000
including Rs.
24,000 for furniture, (b) Stock to be reduced by Rs. 80,000 and Debtors by
Rs. 5% , (c)
CAMIC Ltd. to assume liabilities to discharged 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 to be values at Rs. 3,80,000, (e) The Shareholders of Y Ltd. to
receive cash payment
of Rs. 30 per shares plus four equity shares in CAMIC Ltd. for every five
shares held in Y
Ltd. (f) Both the companies declare and pay dividend of 6% prior to
absorption, (g) Expenses
of liquidation of Y Ltd. are to be reimbursed by CAMIC Ltd. to the extent of
Rs. 20,000. The
actual expenses amounted to Rs. 24,000.
Required: Draft journal entries recording the scheme in the books of Y Ltd.
and prepare the
Balance Sheet of CAMIC Ltd. after absorption assuming that CAMIC Ltd’s.
authorized
capital has been increased to Rs. 80,00,000. [Assume Corporate Dividend Tax @
10%]
35. Ajanta Limited agreed to acquire the balance of Elora Limited as on 31 March
20X1. The
Balance Sheet of Elora Limited as on that date was as under:

Rs.
Paid up Capitals: Fixed Assets:
10,000 12% Preference Land Building and plant

2,00,000
Shares of Rs. 10 each 1,00,000
Machineries
1,00,000
20,000 Equity shares of Rs. Current Assets
10 each 2,00,000
Stock
2,00,000
Reserve 20,000 Debtors
50,000
Profit and loss A/c 30,000 Cash & Bank Balance
48,200
12% Debentures 1,00,000 Miscellaneous
Expenditures:
Sundry Creditors 1,50,000 Preliminary Expenses
1,800
6,00,000
6,00,000
The consideration payable by Ajanta Limited was agreed as under:
(a) The Preference Shareholders of Elora Limited were to be allotted 8%

Preference
Shares of Rs. 1,10,000.
(b) Equity Shareholders to be allotted Six Equity Shares of Rs. 10 each
issued at a
premium of 10% and Rs. 3 cash against every five shares held.
(c) 12% Debentures holders of Elora Limited to be paid @ 8% premium by

issue of 14%
Debentures at 10% discount.
While arriving at the agreed consideration, the directors of Ajanta

Limited valued Land
and Building at Rs. 2,50,000, Stock Rs. 2,20,000, and Debtors at their book
value subject to
Rajan Adhikari
FCA 23
an allowance of 5% to cover doubtful debts. Debtors of Elora Limited included
Rs. 10,000
due from Ajanta Limited. The machineries were valued at book value. It was
agreed that
before acquisition, Elora Limited will pay dividend at 10% on Equity Shares.
Liquidation
expenses are Rs. 5,000. Assume Corporate Dividend Tax @10.
Required:
Draft journal entries necessary to close the books of Elora Limited and to
record acquisition
In the books of Ajanta Limited.

3,86,000]
36. The following is the Balance Sheet of V Ltd. as at 31st March, 20X1

Rs.
20,000 shares of Rs 10 each Goodwill
25,000
2,00,000
Land Building and plant
1,00,000
General Reserve 20,000 Plant and Machinery
1,45,000
10% Debentures 1,00,000 Stock
55,000
Loan form bank 40,000 Debtors
65,000
Sundry Creditors 80,000 Cash at bank
34,000
Preliminary expenses
16,000
4,40,000
4,40,000
The business of V Ltd. is taken over by P Ltd. as on that date on the

following terms:
(i) All assets (except Cash at Bank) are taken over at book value less 10%
subject to (ii)
below.
(ii) Goodwill is to be valued at 4 year’s purchase of the excess of
average of five years
profits over 8% of the combined amount of Share Capital and General
reserve.
iii) The trade creditors are to be taken over subject to a discount of 5%
and other liabilities
to be discharged by P Ltd. at book value.
iv) The purchase consideration is to be discharged in cash to the extent
of Rs. 10,000 and
the balance in fully paid Equity Shares of Rs. 10 each valued at Rs.
12.50 per share.
The average of the five year’s profit is Rs. 30,100. The expenses of
liquidation
amount to Rs. 2,000. Prior to 31st March 20X1 V Ltd. sold goods costing Rs.
30,000 to P Ltd.
for Rs. 40,000. Debtors include Rs. 20,000 still due from P Ltd. on the date
of absorption, Rs.
25,000 worth of goods were still in stock P Ltd.
Rajan Adhikari
FCA 24
Required: (a) Prepare Realisation Account, Bank Account, Sundry Shareholders
Account
and Share in P Ltd. Account In the books of V Ltd. (b) Give Journal entries
in the books of P
ltd.
1,62,500]
37. Following are the summarized Balance Sheets of A Ltd. and B Ltd. as at 31.
03.2008:
Particulars
A Ltd. B Ltd.
Share capital equity shares 10 each (fully paid up)
10,00,000 6,00,000
Share premium
2,00,000 -
General reserve
3,00,000 2,50,000
Profit and loss account
1,80,000 1,60,000
10% debenture
5,00,000 -
Secured loan
- 3,00,000
Sundry creditors
2,60,000 1,70,000
Total
24,40,000 14,80,000
Particulars
A Ltd. B Ltd.
Land and building
9,00,000 4,50,000
Plant and machinery
5,00,000 3,80,000
Investment (5,000 shares of B Ltd.)
80, 000 -
Stock
5,20,000 3,50,000
Debtors
4,10,000 2,60,000
Cash at bank
30,000 40,000
Total
24,40,000 14,80,000
The companies agree on a scheme of amalgamation of the following terms:

a) New company is to be formed by name AB ltd.
b) AB ltd. to take over all the assets and liabilities of the existing
companies .
c) For the purpose of amalgamation the shares of the existing companies
are to be valued as under:
A ltd.=Rs. 18 per shares
B ltd. = Rs. 20 per Shares
d) A contingent liabilities of A Ltd. Rs. 60,000 is to be treated as
actual
existing liabilities.
e) Shareholders of A Ltd. and B Ltd. are to be paid by issuing sufficient
number of shares of AB Ltd. at premium of Rs. 6 per share.
f) The face value of shares of AB Ltd. are to be of Rs. 10 each
you are required to:
i) Calculate the purchase consideration (i.e. number of shares to be
issued to A ltd.
and B ltd.)
Rajan Adhikari
FCA 25
ii) Pass journal entries in the books of A Ltd. for the transfer of
assets and liabilities.
iii) Pass journal entries in the books of AB Ltd. for acquisition of
A Ltd. and B
Ltd.
iv) Prepare the Balance Sheet Of AB Ltd.
38. Given below balance sheet of Vasudha Ltd. as on 31st March, 2012.
Liabilities Vasudha Vaishali Assets
Vasudha Vaishali
Ltd. Ltd.
Ltd. Ltd.
Issued Share Capital: 5,40,000 4,03,300 Factory Building
2,10,000 1,60,000
Equity Shares of Rs.
10 each
General Reserve 1,01,000 65,000 Debtors
2,86,900 1,72,900
Profit & Loss A/c 66,000 43,500 Stock
91,500 82,500
Sundry Creditors 44,400 58,200 Goodwill
50,000 35,000
Cash at Bank
98,000 1,09,590
Preliminary
15,000 10,010
7,51,400 Expenses
5,70,000 Total
7,51,400 5,70,000
Goodwill of the companies Vasudha Ltd. and Vaishali Ltd. is to be valued at

Rs.
75,000 and Rs. 50,000 respectively. Factory Building of Vasudha Ltd. is
worth Rs.
1,95,000 and of Vaishali Ltd. Rs. 1,75,000. Stock of Vaishali Ltd. has been
shown at
10% above its cost.
It is decided that Vasudha Ltd. will absorb Vaishali Ltd., by taking over
its entire business by
issue of shares at the Intrinsic Value. You are required to draft the
balance sheet of Vasudha
Ltd. after putting through scheme.
39. The following are the Balance Sheet's of M Ltd. & N Ltd. on 31/03/2010.
M Ltd. N Ltd. M
Ltd. N Ltd.
Equity Shares @ 10 3,600 500 Plant and Machinery
4,215 468
10% Preference shares 1,200 - Furniture & Fixtures
2,400 183
Capital Reserve 600 - Motor Vehicles
- 51
Profit & Loss a/c 2,100 - Stock
2,370 444
8% Redeemable Debtor
1,044 237
debentures @1,000 780 300 Cash at Bank
1,542 240
Trade Creditors 2,421 369 Preliminary Expenses
- 33
Provision 870 93 Discount on Issue of
- 6
Debentures
11,571 1,662
11,571 1,662
A New Company MN Ltd. was incorporated & for Amalgamation in nature of

merger, M
Ltd. & N Ltd. were merged into MN Ltd. as follows:
Rajan Adhikari
FCA 26
(1) PC for M's business was discharged by issue of 120 lacs fully paid 11%
preference
Shares and 720 lacs fully paid Equity Shares of MN Ltd. to the
Preference & Equity
Shareholder of M Ltd. in full settlement of their Claim.
(2) To discharge PC for N's business, MN Ltd. to allot 90 lacs fully paid
up Equity Shares
to shareholders of N Ltd. in full satisfaction of their claims.
(3) Expenses on liquidation of M Ltd. & N Ltd. amounting to Rs. 6 lacs are
to be borne
by MN Ltd.
(4) 8 of MN % redeemable Debentures of N Ltd. are to be converted into
8.5%
redeemable Debentures Ltd.
(5) Expenses on Incorporation of MN Ltd. were Rs. 15 lacs.
You are requested to:
(a) Pass Necessary Journal Entries in books of MN Ltd. and
(b) Prepare Balance Sheet of MN Ltd. after Merger.
40. The Balance Sheet of P Ltd. as at 31st December, 2007 is as under:

Rs.
5,000 Equity Shares of Rs.100 5,00,000 Patents
70,000
each fully paid Freehold Premises
2,50,000
2,000, 10% Preference Shares of 2,00,000 Machinery
1,35,000
Rs. 100 each Stock
2,00,000
15% Debentures 2,00,000 Debtors
1,80,000
Unsecured Loan 1,00,000 Bank
50,000
Creditors 1,50,000 Profit & Loss Account
2,95,000
Accrued Interest on Debentures 30,000
11,80,000
11,80,000
The following scheme of reconstruction was passed and approved by the court:
(i) A new company PK Ltd. to be formed to take over the entire
business of P Ltd.
(ii) PK Ltd. to issue one equity share of Rs. 100, Rs. 60 paid-up in
exchange of every
two shares in P Ltd. to the shareholders who agree with the
scheme. Shareholders,
who do not agree with the scheme, to be paid @ Rs. 20 per share
in cash. Such
shareholders hold 400 equity shares.
(iii) Preference shareholders to get 15, 11% preference shares of Rs.
10 each in
exchange of 2 preference shares of P Ltd.
(iv) Liability in respect of 15% Debentures and interest accrued
thereon to be taken
over and discharged directly by PK Ltd. by issue of equity shares
of Rs. 100 each
fully paid-up.
(v) The creditors of P Ltd. will get from PK Ltd. 50% of their dues
in cash and 25%
in equity shares of Rs. 100 each and the Balance to be foregone
by them.
(vi) The freehold premises to be revalued at 20% more. The value of
machinery to be
reduced by 33⅓% and that of debtors by 10%. Stock to be reduced
to Rs. 1,60,000
and patents to have no value.
(vii) The preliminary Expenses amounted to Rs. 5,000.
Rajan Adhikari
FCA 27
You are required to prepare necessary Ledger Account in the books of P
Ltd. and pass
opening journal entries in the books of PK Ltd.
41. Given below are the Balance Sheets of two companies as on 31st
December,1992:
M Limited

Rs.
Capital: Patent Rights
2,00,000
Issued and Fully paid: Land & Buildings
6,00,000
50,000, 8% Cumulative Preference Shares 5,00,000 Plant &
Machinery 15,50,000
of Rs. 10 each Stock
3,50,000
1,50,000 Equity Shares of Rs. 10 each 15,00,000 Sundry Debtors
80,000
General Reserve Cash and Bank
1,60,000
Profit & Loss Account 8,00,000
50,000
29,40,000
29,40,000
K Limited
Rs.
Capital: Goodwill
70,000
Issued and Fully Paid: 4,00,000 Motor Vehicles
40,000
40,000 Shares of Rs. 10 each Furniture
25,000
Profit & Loss Account 32,000 Stock
2,39,000
62,000
Cash and Bank
17,000
4,53,000
4,53,000
It has been agreed that both these companies should be wound up and a new
company J K
Ltd. should be formed to acquire the assets of both the companies on the
following terms:
(i) J K Ltd. is to have an authorized capital of Rs. 30,00,000
divided into 50,000, 5%
cumulative preference shares of Rs. 10 each and 2,50,000 equity
shares of Rs. 10
each.
(ii) J K Ltd. is to purchase the whole of the assets of M Ltd. (expect
cash and bank
Balances) for Rs. 27,95,000 to be settled as to Rs. 5,45,000 in
cash and as to the
Balance by issue of 1,80,000 equity shares, credited as fully
paid, to be treated as
valued at Rs. 12.50 each.
(iii) J K Ltd. is to purchase the whole of the assets of K Ltd. (expect
cash and bank
Balances) for Rs. 3,81,000 to be settled as to Rs. 6,000 in cash
and as to the
Balance by issue of 30,000 Equity Shares, credited as fully paid,
to be treated as
valued at Rs. 12.50 each.
(iv) J K Ltd. is to make a public issue of 50,000, 5% cumulative
preference shares at
Particulars and 30,000 equity shares at the issue price of Rs.
12.50 per share, all
payable in full on application.
Rajan Adhikari
FCA 28
(v) M Ltd. and K Ltd both are to be wound up, the two liquidators
distributing the
shares in J K Ltd. in kind among the equity shareholders of the
respective
companies.
(vi) The liquidator of M Ltd. is to pay the preference shareholders Rs.
10 in cash for
every share held in full satisfaction of their claims.
It is estimated that the costs of liquidation (including the liquidators'
remuneration) will
be Rs. 5,000 in case of M Ltd and Rs. 2,000 in the case of K Ltd. and
that the preliminary
Expenses of J K Ltd. will amount to Rs. 18,000 exclusive of the
underwriting commission
of Rs. 23,750 payable on the public issue. The scheme has been sanctioned
and carried
through in its entirety.
(a) set out the closing entries in the books of M Ltd. in the form of
journal entries
together with the closing cash book entries; and
(b) draw up the initial Balance Sheet of J K Ltd. on the basis that all
assets other than
goodwill are taken over at the book value.
42. The summarized Balance Sheets of A Ltd. and B Ltd. as at 1st January, 2008
are as under:
Liabilities A Ltd. Rs. B Ltd. Assets A
Ltd. Rs. B Ltd. Rs.
Rs.
Equity Shares of Rs. 1,20,000 - Land & Buildings
1,40,000 1,20,000
15 each Stock
30,000 15,000
Equity Shares of Rs. Debtor
10,000 25,000
10 each - 1,00,000 Cash and Bank
40,000 20,000
Reserve 60,000 50,000
P&L A/c 10,000 20,000
Creditors 30,000 10,000
2,20,000 1,80,000
2,20,000 1,80,000
The above two companies agree to amalgamate and form a new company AB Ltd. on
the
following conditions:
1. AB Ltd. will take over all the assets and Liabilities of A Ltd. and B
Ltd.
2. The entire purchase consideration will be satisfied by the issue of
28,600 equity
shares of Rs. 10 each of AB Ltd.
3. For the purpose of Amalgamation, the value of each Equity Share is
agreed at Rs. 25
and Rs. 12.50 for A Ltd. and B Ltd. respectively.
4. The creditors are to be paid off by AB Ltd.
(i) Pass journal entries to close the books of A Ltd. and B Ltd.
(ii) Pass journal entries in the books of AB Ltd. and
Rajan Adhikari
FCA 29
(iii) Prepare the Balance Sheet of AB Ltd.
43. Two companies Weak Ltd. and Feeble Ltd. amalgamate and form a new company
Recovery
Ltd. the Balance Sheet of two companies are as under:
Liabilities Weak Ltd. Feeble Assets Weak
Ltd. Feeble Ltd.
Rs. Ltd.
Rs. Rs.
Rs.
Equity shares of 8,00,000 5,00,000 Goodwill

1,40,000 -
Rs.10 each Stock
3,10,000 3,00,000
P&L a/c 1,00,000 2,00,000 Debtors
7,50,000 5,00,000
10% Debentures 1,20,000 -
Creditors 1,80,000 1,00,000
12,00,000 8,00,000
12,00,000 8,00,000
The past average profits of Weak Ltd. and Feeble Ltd. were Rs. 60,000 and Rs.
40,000
respectively.
Recovery Ltd. agreed to take over the two companies for the sum of Rs.
15,00,000 and to
discharge all Liabilities. Rs. 3,00,000 of the purchase consideration be paid
in cash and
Balance in equity shares. It is agreed that before being amalgamated, the
debtors of the two
companies will be written-down to the extent of 10%. The profit on conversion
is to be
divided between the two companies in the same proportion as to the profit
previously earned
by them.
Show Business Purchase Account in the books of Recovery Ltd. Also show how
the Equity
Shareholders Account of Weak Ltd. and Feeble Ltd. be closed.
44. Exe Ltd. was wound up on 31.3.2004 and its Balance Sheet as on that date is
given below:
Balance Sheet of Exe Limited as on 31.3.2004
Rs.
9,64,000
1,20,000 Equity Shares of Rs. Current Assets:
10 each 12,00,000 Stock
7,75,000
Reserve and Surplus: Sundry Debtors 1,60,000
Profit prior to Incorporation 42,000 Less: Provision for Bad &
1,52,000
Contingency Reserve Doubtful Debts 8,000
Profit & Loss Account 2,70,000 Bills Receivable
30,000
Current Liabilities: 2,52,000 Cash at Bank
3,29,000
Bills Payable
Provision: 2,26,000
Provision for Income Tax 2,20,000
22,50,000
22,50,000
Wye Ltd. took over the following assets at values shown as under:
Fixed Assets Rs. 12,80,000; Stock Rs. 7,70,000; and Bills Receivable Rs.
30,000.
Purchase consideration was settled by Wye Ltd. as under:
Rajan Adhikari CAP-

II“Dec-2020”
FCA 30 Amalgamation
of Companies
Rs. 5,10,000 of the consideration was satisfied by the allotment of fully
paid 10% Preference
Shares of Rs. 100 each. The Balance was settled by issuing equity shares of
Rs. 10 each of Rs.
8 per share paid up.
Sundry Debtors realized Rs. 1,50,000. Bills payable was settled for Rs.
38,000.
Income Tax authorized fixed the taxation liability at Rs. 2,22,000.
Creditors were finally settled with the cash remaining after meeting
liquidation Expenses
amounting to Rs. 8,000.
(i) Calculate the number of equity shares and preference shares to be
allotted by Wye
Ltd. in discharge of purchase consideration.
(ii) Prepare the Realization Account, Cash/Bank Account, Equity
Shareholders Account
and Wye Ltd. Account in the books of Exe Ltd.
(iii) Pass Journal Entries in the books of Wye Ltd.
45. The following draft Balance Sheets are given as on 31st March, 20X1:
(Rs. in lakhs)
(Rs. in lakhs)
Best Better
Best Better
Ltd. Ltd.
Ltd. Ltd.
Rs. Rs.
Rs. Rs.
25 15
Shares of Rs. 100, each Investments
5 –
fully paid 20 10 Current Assets
20 5
Reserve and Surplus 10 8
Other Liabilities 20 2
50 20
50 20
The following further information is given —
(a) Better Limited issued bonus shares on 1st April, 20X1, in the ratio of
one share for every
two held, out of Reserves and Surplus.
(b) It was agreed that Best Ltd. will take over the business of Better Ltd.,
on the basis of the
latter’s Balance Sheet, the consideration taking the form of allotment of
shares in Best Ltd.
(c) The value of shares in Best Ltd. was considered to be Rs. 150 and the
shares in Better Ltd.
were valued at Rs. 100 after the issue of the bonus shares. The allotment of
shares is to be
made on the basis of these values.
(d) Liabilities of Better Ltd., included Rs. 1 lakh due to Best Ltd., for
purchases from it, on
which Best Ltd., made profit of 25% of the cost. The goods of Rs. 50,000 out
of the said
purchases, remained in stock on the date of the above Balance Sheet.
Make the closing ledger in the Books of Better Ltd. and the opening journal
entries in the
Books of Best Ltd., and prepare the Balance Sheet as at 1st April, 20X1 after
the takeover.
46. The following are the summarized Balance Sheets of A Ltd. and B Ltd. as on
31.3.20X1: (Rs.
in thousands)
Liabilities A Ltd. B
Ltd.
Share capital:
Equity shares of 100 each fully paid up 2,000
1,000
Reserves 1,000 ---
10% Debentures 500 ---
Rajan Adhikari
FCA 31
Loans from Banks 250 450
Bank overdrafts --- 50
Trade payables 300 300
---
Total 4,050
1,800
Assets
Tangible assets/fixed assets 2,700 850
Investments 700 ---
Trade receivables 400 150
Cash at bank 250 ---
Accumulated loss --- 800
Total 4,050
1,800
B Ltd. has acquired the business of A Ltd. The following scheme of merger was
approved:
(i) Banks agreed to waive off the loan of Rs. 60 thousands of B Ltd.
(ii) B Ltd. will reduce its shares to Rs. 10 per share and then consolidate
10 such shares into
one share of Rs. 100 each (new share).
(iii) Shareholders of A Ltd. will be given one share (new) of B Ltd. in
exchange of every
share held in A Ltd.
(iv) Trade payables of B Ltd. includes Rs. 100 thousands payable to A Ltd.
Pass necessary entries in the books of B Ltd. and prepare Balance Sheet after
merger.
47. Following is the Balance Sheet as at March 31, 2005:
(Rs. ‘000)
Liabilities Max Ltd. Mini Ltd. Assets Max Ltd.
Mini Ltd.
Share capital: Goodwill 20
-
Equity shares of Rs. 100
Each 1,500 1,000 Other fixed assets 1,500
760
9% Preference shares
of Rs. 100 each 500 400 Debtors 651
440
Stock 393
680
General reserve 180 170 Cash at bank 26
130
Profit and loss account- 15
12% Debentures of
Rs. 100 each 600 200 Own debenture 192
-
(Nominal value
Rs. 2,00,000)
Sundry creditors 415 225 Discount on issue
of debentures 2
-
Profit and loss
account 411
-
3,195 2,010 3,195
2,010
On 1.4.2005, Max Ltd. adopted the following scheme of reconstruction:
(i) Each equity share shall be sub-divided into 10 equity shares of Rs. 10
each fully paid
up. 50% of the equity share capital would be surrendered to the Company.
Rajan Adhikari
FCA 32
(ii) Preference dividends are in arrear for 3 years. Preference shareholders
agreed to waive
90% of the dividend claim and accept payment for the balance.
(iii) Own debentures of Rs. 80,000 were sold at Rs. 98 cum-interest and
remaining own
debentures were cancelled.
(iv) Debentureholders of Rs. 2,80,000 agreed to accept one machinery of book
value of Rs.
3,00,000 in full settlement.
(v) Creditors, debtors and stocks were valued at Rs. 3,50,000, Rs. 5,90,000
and Rs.
3,60,000 respectively. The goodwill, discount on issue of debentures
and Profit and
Loss (Dr.) are to be written off.
(vi) The Company paid Rs. 15,000 as penalty to avoid capital commitments of
Rs. 3,00,000.
On 2.4.2005 a scheme of absorption was adopted. Max Ltd. would take
over Mini Ltd.
The purchase consideration was fixed as below:
(a) Equity shareholders of Mini Ltd. will be given 50 equity shares of Rs. 10
each fully paid
up, in exchange for every 5 shares held in Mini Ltd.
(b) Issue of 9% preference shares of Rs. 100 each in the ratio of 4
preference shares of Max
Ltd. for every 5 preference shares held in Mini Ltd.
(c) Issue of one 12% debenture of Rs. 100 each of Max Ltd. for every 12%
debentures in
Mini Ltd.
You are required to give Journal entries in the books of Max Ltd. and draw
the resultant
Balance
Sheet as at 2nd April, 2005.
48. The following is the summarized balance sheet of two companies P Ltd. And N
Ltd. As on
31st December 2015.
P Ltd. N Ltd P
Ltd. N Ltd.
Share 5,00,000 1,80,000 Shares in P
- 1,00,000
Capital Ltd. (10,000)
Reserve & 1,45,000 - Shares in P
30,000 -
Surplus Ltd.( 4,500)
Debentures - 2,00,000 Debentures 1,00,000
in N Ltd.
Trade 3,00,000 2,00,000 Sundry 8,15,000
4,60,000
Creditors Assets
P&L
- 20,000
Account
9,45,000 5,80,000 9,45,000
5,80,000
The two companies agreed that P ltd should take over N Ltd. The debenture
holders in N Ltd.
Agreed to convert the debentures in 9% redeemable preference shares of Rs.
100 each. Prior
to the absorption P Ltd. Declared a dividend of 20%, the dividend has not
been yet paid.
Shareholders in N Ltd. were to receive shares in P Ltd on the basis of the
intrinsic value of
the shares. The assets of N Ltd has to be written up by Rs. 40,000 and those
of P Ltd were to
be reduced by Rs. 15,000, Prepare the ledger accounts of N Ltd. and journal
entries in the
books of P Ltd.
(Ans –PC-1,20,000 DPC-62,105)

49. The following are the summarized Balance Sheets of M Ltd and N Ltd.
Rajan Adhikari
FCA 33
M Ltd. N Ltd. M
Ltd. N Ltd.
Equity Share 32,000 28,000 Sundry Assets
42,000 33,000
Capital
Profit & Loss 5,000 Shares of N Ltd
20,000
Account
Creditors 15,000 6,000 Profit & Loss
1,000
Account
Loan H Ltd. 10,000
62,000 34,000
62,000 34,000
The whole of the shares of M Ltd. are held by H Ltd and the entire share
capital of N Ltd is
held by M Ltd.
A new company MN Ltd is formed to acquire the sundry assets and the creditors
of M ltd and
N Ltd. For this purpose, the sundry assets of M Ltd are revalued at Rs.30,000
and those of N
Ltd at Rs. 20,000. The amount of loan due to H ltd is also to be discharged
by way of shares
in the new company.
Show the Journal Entries necessary to close the books of M Ltd and N Ltd.
[Ans: Purchase Consideration to M Ltd. Rs. 5,000 and N Ltd. Rs. 14,000]
50. The following are the balance sheets of two companies, Wye Ltd. and Zee Ltd.
as at
December 31, 2015.
Wye Ltd. Zee Ltd. Wye Ltd.

Zee Ltd.
Equity Share 5,00,000 3,00,000 Sundry
7,50,000 3,50,000
Capital Assets
Reserve 1,00,000 55,000 1,000 Shares
1,00,000
of Wye Ltd
Creditors 1,50,000 95,000
7,50,000 4,50,000
7,50,000 4,50,000
Wye Ltd. absorbed Zee Ltd on the basis of intrinsic values, entries to be
made at par.
[Ans: Intrinsic Value of Shares of Wye Ltd. Rs. 120, and Zee Ltd. Rs. 125]
51. A Ltd has acquired, as a current asset 60,000 shares in B Ltd for Rs. 60,000
an 1st November
2014. On 1st January 2016 it agreed to absorb B Ltd. the consideration being
a. The assumption of all the liabilities.

b. The discharge of the Rs.40,000 debentures held outside the company at a
premium of 10%
by the issue of 6.5% Debentures in A Ltd carrying full six months interest
payable 1st July
1966.
c. A payment of cash of Re 0.50 per share in B ltd; and d) The issue shares
of Re. 1 each in A
Ltd credited as fully paid to the members of B Ltd on the basis of:
Two equity shares (valued at Rs.1.60 each) and one 7 ½ cumulative preference
share (valued
at Rs.1.10) for every five shares in B Ltd.
The summarized balance sheet of B Ltd as on 31st December 2015 was as
follows:

Amount
Rajan Adhikari
FCA 34
Share Capital 1,60,000 shares 1,20,000 Fixed Assets
73,000
of Re. 1 each Re. 0.75 paid
General Reserve 75,000 Stock
85,800
Profit & Loss Account 21,550 Debtors
45,000
Insurance Fund 10,000 Investment on account of
10,000
insurance fund
5% Debenture 45,000 5% Debenture in B Ltd.
48,00
Creditors 17,800 Bank Balance
50,750
Goodwill
20,000
2,89,350
2,89,350
*The company had been carrying its own insurance risk crediting amounts
equivalent to the
premium to the fund and charging losses thereof.
It was agreed that for the absorption purposes, 5% should be written off on
stocks and
provision of 2 ½ % to be made for the doubtful debts. The remaining assets
other than
goodwill are considered to be properly valued for the purpose of absorption.
Before passing entries in respect of the absorption, A Ltd decided to revalue
shares in B Ltd
on the same basis as that of the absorption.
The absorption was completed on 1.3.2016 by the issue of necessary shares and
debentures in
A Ltd and the payment of cash. B Ltd thereupon be wound up. The expenses
amounted to
Rs.750 were paid by A Ltd. Prepare the Ledger of B and Journal of A.
[Ans: Purchase Consideration Rs. 2,17,600, Payable PC Rs. 1,36,000 and
Realization
Profit Rs. 1,050]
52. The Balance Sheet of A Limited and B Limited as at 31st March, 2008 are as
follows:
A Ltd. B Ltd. A
Ltd. B Ltd.
Equity Share 20,00,000 12,00,000 Sundry Assets
30,00,000 14,00,000
Capital of 10
each
General Reserve 4,00,000 2,20,000 40,000 Shares of A
4,00,000
Ltd
Creditors 6,00,000 3,80,000
30,00,000 18,00,000
30,00,000 18,00,000
A Ltd. absorbed B Ltd. on the basis of intrinsic value of the shares. The
purchase
consideration is to be discharged in fully paid-up equity shares. A sum of
Rs.1,00,000 is
owed by A Ltd. to B Ltd., also included in the stock of A Ltd. is Rs.1,20,000
goods supplied
by B Ltd. at cost plus 20%.
Give Journal entries in the books of both the companies, if entries are made
at intrinsic value.
Also prepare Balance Sheet of A Ltd. after absorption.
[Ans: Net Assets Rs. 15,00,000, Purchase Consideration Rs. 10,20,000]
53. The following are the balance sheets of two companies, X Ltd. and Y Ltd. as
at December 31,
1987.
X Ltd. Y Ltd. X
Ltd. Y Ltd.
Rajan Adhikari
FCA 35
Equity Share 4,00,000 2,00,000 Sundry Assets
6,00,000 3,40,000
Capital of 10
each
General Reserve 1,00,000 40,000 5,000 Shares of X
50,000
Ltd
9% Debenture 1,00,000
Creditors 1,00,000 50,000
6,00,000 3,90,000
6,00,000 3,90,000
X ltd is to take over Y Ltd on the following terms
a. For each share of Y Ltd, X Ltd will issue its one share of Rs.10 at Rs.11
and pay cash 50
Paise
b. X Ltd to issue such an amount of fully paid debentures at Rs. 90 as it is
sufficient to
discharge 9 percent debentures of Y Ltd at a premium of 8%.
Give the journal entries and the shareholders account in the books of Y Ltd.
[Ans: Purchase Consideration Rs. 1,75,000]
54. The following is the summarised balance sheet of A Ltd and B Ltd as on 31st
December 1017
A Ltd. B Ltd. A
Ltd. B Ltd.
Equity Share 5,00,000 2,00,000 Fixed Assets
6,00,000 3,50,000
Capital of 10
each
Preference shares 1,00,000 1,00,000 4,000 Shares of B
60,000 4,00,000
of Rs 100 each Ltd
Reserve & 2,00,000 1,50,000 3000 shares of A
80,000
Surplus Ltd
12% Debenture 1,00,000 1,00,000 Stock
3,00,000 1,70,000
Creditors 3,40,000 1,60,000 Debtors
1,60,000 90,000
Bills Payable 20,000 20,000 Bills Receivable
50,000 10,000
Bank
90,000 30,000
12,60,000 7,30,000
12,60,000 7,30,000
Fixed Assets of both the companies are to be revalued at 20% above book
value. Both the
companies are to pay 10% Equity dividend, Preference dividend having been
already paid.
After the above transactions are given effect to, A Ltd. will absorb B Ltd.
on the following
terms:
a. 6 Equity Shares of Rs. 10 each will be issued by A Ltd. at par against 5
shares of B Ltd.
b. 10% Preference Shareholders of B Ltd. will be paid at 10% discount by
issue of 11%
Preference Shares of Rs. 100 each at par in A Ltd.
c.Rs.20,000 to be paid by A ltd to B ltd for the liquidation expenses.
Bills receivable discounted by A Ltd were all accepted by B Ltd. Creditors of
B Ltd includes
Rs 30,000 due to A Ltd.
Give journal Entries of A Ltd, Equity shareholders account , A Ltd Account
and realization
account in books of B Ltd.
Ans PC-3,00,000 DPC-2,52,000
Rajan Adhikari
FCA 36
55. The following are the summarized Balance Sheets of P Ltd. and Q Ltd. as on
31st March,
20X1:
Liabilities P Ltd. Q Ltd. Assets P

Ltd. Q Ltd.
Rs. Rs. Rs.
Rs.
Share Capital Fixed Assets
7,00,000 2,50,000
Equity Shares of Rs. 6,00,000 3,00,000 Investment
80,000 80,000
10 each Current Assets:
10% Pref. Shares of 2,00,000 1,00,000 Inventory
2,40,000 3,20,000
Rs. 100 each Trade
4,20,000 2,10,000
receivables
Reserves and 3,00,000 2,00,000 Cash at Bank
1,10,000 40,000
Surplus
Secured Loans:
12% Debentures 2,00,000 1,50,000
Current Liabilities:
Trade payables 2,50,000 1,50,000
15,50,000 9,00,000
15,50,000 9,00,000
Details of Trade receivables and trade payables are as under:
P Ltd. (Rs.) Q Ltd. (Rs.)

Trade receivables
Debtors 3,60,000 1,90,000
Bills Receivable 60,000 20,000
4,20,000 2,10,000
Trade payables
Sundry Creditors 2,20,000 1,25,000
Bills Payable 30,000 25,000
2,50,000 1,50,000
Fixed Assets of both the companies are to be revalued at 15% above book
value. Inventory in
Trade and Debtors are taken over at 5% lesser than their book value. Both the
companies are
to pay 10% Equity dividend, Preference dividend having been already paid.
After the above transactions are given effect to, P Ltd. will absorb Q Ltd.
on the following
terms:
(i) 8 Equity Shares of Rs. 10 each will be issued by P Ltd. at par against 6
shares of Q Ltd.
(ii) 10% Preference Shareholders of Q Ltd. will be paid at 10% discount by
issue of 10%
Preference Shares of Rs. 100 each at par in P Ltd.
(iii) 12% Debenture holders of Q Ltd. are to be paid at 8% premium by 12%
Debentures in P
Ltd. issued at a discount of 10%.
(iv) Rs. 30,000 is to be paid by P Ltd. to Q Ltd. for Liquidation expenses.
Sundry Creditors of
Q Ltd. include Rs. 10,000 due to P Ltd.
Prepare:
(a) Journal entries in the books of P Ltd.
(b) Statement of consideration payable by P Ltd.
Rajan Adhikari
FCA 37
56. The following is the Balance Sheet of Blue Star Ltd. as at 31st Ashadh,
2071:
Rs.
8,000 equity shares of Rs.100
each 800,000 Building
340,000
10% debentures 400,000 Machinery
640,000
Loan from A 160,000 Stock
220,000
Creditors 320,000 Debtors
260,000
General Reserve 80,000 Bank
136,000
Goodwill
130,000
Deferred Revenue
Exp.
34,000
1,760,000
1,760,000
Big Star Ltd. agreed to absorb Blue Star Ltd. on the following terms and
conditions:
(1) Big Star Ltd. would take over all Assets, except bank balance at their
book values less
10%. Goodwill is to be valued at 4 year‘s purchase of super profits,
assuming that the
normal rate of return be 8% on the combined amount of share capital and
general
reserve.
(2) Big Star Ltd. is to take over creditors at book value.
(3) The purchase consideration is to be paid in cash to the extent of Rs.
600,000 and the
balance in fully paid equity shares of Rs.100 each at Rs.125 per share.
The average profit is Rs. 124,400. The liquidation expenses amounted to

Rs. 16,000 to
be borne by Big Star Ltd. Blue Star Ltd. had purchased prior to 31st
Ashadh, 2071
goods costing Rs. 120,000 from Big Star Ltd. for Rs. 160,000. Rs. 100,000
worth of
goods is still in stock of Blue Star Ltd. on 31st Ashadh, 2071. Creditors
of Blue Star
Ltd. include Rs.40,000 still due to Big Star Ltd.
Show the necessary Ledger Accounts to close the books of Blue Star Ltd.
and prepare the
Balance Sheet (extract) of Big Star Ltd. as at 1st Shrawan, 2071 after the
takeover.
[RTP Dec 14]
57. The following are the Balance Sheets of companies as at 32nd Ashadh,
2075:
Liabilities DD Ltd. SS Ltd. Assets DD Ltd.
SS Ltd.
Rs. Rs. Rs.
Rs.
Equity share 800,000 600,000 Goodwill 800,000
600,000
capital (Rs.
100)
General 400,000 300,000 Fixed Assets 500,000
800,000
Reserve
Investment ― 400,000 Investments 200,000
400,000
Allowance
Reserve
Sundry 500,000 200,000 Current 400,000
300,000
Creditors Assets
Rajan Adhikari
FCA 38
17,00,000 15,00,000
17,00,000 15,00,000
DD Ltd. took over SS 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:
(i) Investment Allowance Reserve amounting to Rs. 200,000 has to carry
forward till FY
2076/077 for utilization.
(ii) Investments of SS Ltd. included 1,000 shares in DD Ltd. acquired at
cost of Rs. 150
per share. The other investments of SS Ltd. have a market value of Rs.
192,500.
(iii) The market value of investments of DD Ltd. are to be taken at Rs.
100,000.
(iv) Goodwill of DD Ltd. and SS Ltd. are to be taken at Rs. 500,000 and Rs.
100,000
respectively.
(v) Fixed assets of DD Ltd. and SS Ltd. are valued at Rs. 600,000 and Rs.
850,000
respectively.
(vi) Current assets of DD Ltd. included Rs. 80,000 of stock in trade
received from SS Ltd.
at cost plus 25%.
The above scheme has been duly adopted. Pass necessary Journal Entries in the
books of DD
Ltd. and prepare Balance Sheet of DD Ltd. after taking over the business of
SS Ltd.
Fractional share to be settled in cash, rest in shares of DD Ltd. Calculation
shall be made to
the nearest multiple of a rupee.
[RTP June 19]
58. Following is the Balance Sheet of X Co. Ltd. as at 31st March, 2019:
Balance Sheet as at 31st March, 2019
Rs.
Equity share capital (Rs. 100 each) 15,00,000 Land and building
10,00,000
11% Pref. share capital 5,00,000 Plant and machinery
7,00,000
General reserve 3,00,000 Furniture and
fittings 2,00,000
Sundry creditors 2,00,000 Stock in trade
3,00,000
Sundry debtors
2,00,000
Cash in hand and at
bank 1,00,000
25,00,000
25,00,000
Y Co. Ltd. agreed to take over X Co. Ltd. on the following terms:
(i) Each equity share in X Co. Ltd. for the purpose of absorption is
to be valued
at Rs. 80.
(ii) Equity shares will be issued by Y Co. Ltd. by valuing its each
equity
share of Rs. 100 each at Rs. 120 per share.
(iii) 11% Preference shareholders of X Co. Ltd. will be given 11%
redeemable debentures of Y Co. Ltd. at equivalent value.
(iv) All the Assets and Liabilities of X Co. Ltd. will be recorded
at the same
value in the books of Y Co. Ltd.
Rajan Adhikari
FCA 39
(a) Calculate Purchase consideration.
(b) Pass Journal entries in the books of Y Co. Ltd. for
absorbing X Co. Ltd.
[RTP June 19]

59.
Balance Sheet of Himal Ltd.
Rs.
Rs.
Share Capital 20,00,000 Fixed
Assets 15,00,000
Investment 2,50,000
Current Liabilities 15,00,000 Current
Assets 32,50,000
50,00,000
50,00,000
Balance Sheet of Hill Ltd.
Rs.
Rs.
Share Capital 10,00,000 Fixed
Assets 3,00,000
Goodwill 1,00,000
Current Liabilities 2,00,000 Current
Assets 14,00,000
Proposed dividend 1,00,000
18,00,000
18,00,000
Himal Ltd. absorbed Hill Ltd. on following terms & conditions:

a) Hill 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 Hill Ltd. is valued at Rs. 14,50,000.
c) The purchase consideration is satisfied by the allotment of fully
paid shares of Rs. 100
each in Himal Ltd.
Following additional informations are also to be taken in to
consideration:
 Himal Ltd. holds 2,500 shares of Hill Ltd. at a cost of Rs 2,00,000.
 The stock of Hill Ltd. includes items valued at Rs. 50,000 from
Himal Ltd. (cost Rs.
37,500)
 The creditors of Hill Ltd include Rs. 15,000 due to Himal Ltd.
Show ledger account in the books of Hill Ltd. to give effect to the above
and Balance Sheet
of Himal Ltd. after completion of absorption.
[Dec 9]
60. White Ltd. agreed to acquire the business of Green Ltd. as on 32nd Ashad,
2068 The
summarized Balance Sheet of Green Ltd. at that date was as follows:
Balance Sheet as on 32nd Ashad, 2068
Rs.
Share Capital in fully paid 6,00,000 Goodwill
1,00,000
equity shares of Rs. 10
each
General Reserve 1,70,000 Land and Buildings
2,30,000
Rajan Adhikari
FCA 40
Profit and Loss Account 1,10,000 Plant and Machinery
4,10,000
12% Debentures 1,00,000 Stock in Trade
1,68,000
Creditors 20,000 Debtors
36,000
Cash at Bank
56,000
10,00,000
10,00,000
The consideration payable by White Ltd. was agreed as follows:

i) A cash payment equivalent to Rs. 2.50 for every Rs. 10 share in
Green Ltd.
ii) The issue of 90,000 shares of Rs.10 each fully paid up in
White Ltd. having an
agreed value of Rs. 15 per share.
White Ltd. also agreed to discharge the 12% Debentures of Green
Ltd. at a
premium of 20% by allotment of its 14% Debentures at 96 percent.
When computing the agreed consideration, the directors of White

Ltd. valued the
following assets at values noted against them:
Rs.
Land and Buildings 7,50,000

Plant and Machinery 4,50,000
Stock in Trade 1,42,000
Debtors Subject to an allowance of 5% to cover
doubtful
debts.
The cost of liquidation of Green Ltd. came to Rs. 5,000 which
was borne by
White Ltd.
Give ledger accounts to close the books of the Green Ltd.
[Dec 11]
61. X Ltd. takes over Y Ltd. on Shrawan 01, 2069 and discharges consideration
for
the business as follows:
a. Issued 42,000 fully paid equity shares of Rs. 10 each at par to the
equity
share holders of Y Ltd.
b. Issued fully paid up 15% preference shares of Rs. 100 each to
discharge the
preference shareholders (Rs. 170,000) of Y Ltd. at a premium of
10%.
c. It is agreed that the debentures of Y Ltd. (Rs. 50,000) will be
converted into
equal number and amount of 13% debentures of X Ltd.
Calculate the purchase consideration of X Ltd.
[Dec 12]
62. X Ltd. and Y Ltd. amalgamate to form a new company XY Ltd. The
Financial Position of these two companies on the date of amalgamation
was as under:
Rajan Adhikari
FCA 41
Capital and X Y X
Y Ltd.
Liabilities Ltd.(Rs.) Ltd.(Rs.) Assets
Ltd.(Rs.) (Rs.)
Share Capital Goodwill
80,000
Equity Share of Rs.
100 Land and
each 800,000 300,000 Building
450,000 300,000
7% Preference Share
of Plant
Rs. 100 each 400,000 300,000 &Machinery 620,000
500,000
Furniture and
5 % Debenture 200,000 - Fittings 60,000
20,000
Sundry
General Reserve - 100,000 Debtors 275,000
175,000
Profit and Loss Stores and
account 431,375 97,175 Stock 225,000
140,000
Sundry Creditors 100,000 210,000 Cash at Bank 120,000
55,000
Secured Loan - 200,000 Cash in Hand 41,375
17,175
Preliminary
Expense 60,000
Total 1,931,375 1,207,175 Total 1,931,375
1,207,175
The terms of amalgamation are as under:
a) The assumption of liabilities of both companies.
Issue of 5 preference share of Rs.20 each in XY Ltd. @ Rs. 18 paid
up at premium
of Rs. 4 per share for each preference share held.Issue of 6
Equity shares of Rs. 20
each in XY Ltd. @ Rs. 18 paid up at a premium of Rs. 4 per share
for each equity
share held in both companies .In addition, necessary cash should
be paid to equity
shareholders of both companies as is required to adjust the rights
of shareholder of
both the Companies in accordance with intrinsic value of the share
of both the
companies.
Issue of such amount of fully paid 6 % debenture in XY Ltd. as is
sufficient to
discharge the 5 % debenture in X Ltd. at a discount of 5% after
takeover.
b) The assets and liabilities are to be taken at book values stock
and debtors for
which provision at 2 % and 2.5% respectively to be made.
The XY Ltd. to issue 15,000 new equity shares of Rs. 20 each Rs.
18 paid up at a
premium of Rs. 4 per share so as to have sufficient working
capital.
Required:
Prepare Ledger accounts in the books of X Ltd. and Y Ltd. to close their
books.
[Dec 14]
63. Following are the summarized Balance Sheet of Company Rishi Ltd. and Muni
Ltd., as at
Ashad 31, 2073.
Liabilities Rishi Muni Assets
Rishi Muni
Ltd.(Rs.) Ltd.(Rs.) Ltd.
(Rs.) Ltd.(Rs.)
Share Capital Goodwill
20,000 -
Rajan Adhikari
FCA 42
Equity Shares of 2,000,000 1,500,000 Other Fixed Assets
2,400,000 1,150,000
NRs. 100 Each
10% Preference
Shares of NRs 700,000 400,000 Trade Receivables
625,000 615,000
100 Each
General Reserve 240,000 170,000 Inventory
412,000 680,000
Profit & Loss - 15,000 Cash at Bank

38,000 155,000
Account
12% Debenture of Own Debenture
NRs. 100 Each 600,000 200,000
(Nominal Value of
192,000 -
NRs. 200,000/-)
Trade Payables 560,000 315,000 Discount on Issue
2,000
of Debentures
Profit & Loss
411,000 -
Account
Total 4,100,000 2,600,000 Total
4,100,000 2,600,000
On Shrawan 01, 2073, Rishi Ltd. adopted the following scheme of

reconstruction:
a) Each equity share shall be sub-divided into 10 equity share of Rs. 10

each fully paid up.
50% of the equity share capital would be surrendered to the company.
b) Preference dividend are in arrear for 3 years. Preference shareholders
agreed to waive 80%
of the dividend claim and accept payment for the balance.
c) Own debenture of Rs. 80,000/- (Nominal Value) were sold at NRs. 98 cum
interest and
remaining own debentures were cancelled.
d) Debentures holders of Rs. 300,000/- agreed to accept one machinery of
book value of Rs.
320,000/- in full settlement.
e) Trade payables, Trade receivables and Inventory were valued at Rs.
500000/- Rs. 600000/-
and Rs. 400000/- respectively.
f) The company paid Rs. 20,000/- as penalty to avoid capital commitments
of Rs. 400,000/-
On Shrawan 02, 2073, a scheme of absorption was adopted. Rishi Ltd. would
take over Muni
Ltd. The purchase consideration was fixed as below:
a) Equity shareholders of Muni Ltd. will be given 50 equity shares of Rs.
10 each fully paid
up, in exchange for every 5 shared held in Muni Ltd.
b) Issue of preference shares of NRs. 10 each in the ratio of 4 preference
shares of Rishi Ltd.
for every 5 preference shares held in Muni Ltd.
c) Issue of 12% debentures of Rs. 100 each of Rishi Ltd. for every 12%
debentures in Muni
Ltd.
Pass necessary Journal Entries in the books of Rishi Ltd., and draw a
resultant Balance Sheet
as at Shrawan 02, 2073. (Make suitable assumptions required, if any.)
[Dec 16]
Rajan Adhikari
FCA 43
64. Batliboi & Co. Ltd. carried on manufacturing business. Its products were
sold to wholesalers
and the company had its own retail shop. Adhikary & Co. (P) Ltd. carried on
similar
manufacturing business, but all goods produced were sold through the
company's own retail
shops.
The summarized balance sheets of the two companies as at 31st March, 2014
were as follows:
Batliboi & Adhikary & Fixed
Batliboi & Adhikary &
Co. Ltd. Co. (P) Ltd. Assets: Co.
Ltd. Co. (P) Ltd
Share Capital (Rs.) (Rs.)
(Rs.) (Rs.)
Authorized equity Freehold

10,00,000
shares of Rs. 10 40,00,000 6,00,000 Pro-
2,50,000
perties at cost
Plant &
13,00,000 1,00,000
Issued & fully Machinery at
cost less
depreciation
paid up 25,00,000 6,00,000
23,00,000 3,50,000
Current Assets:
P & L A/c 3,40,000 90,000
Creditors 4,20,000 70,000 Stock
4,80,000 1,20,000
Debtors
2,30,000 80,000
Bank
2,50,000 2,10,000
32,60,000 7,60,000
32,60,000 7,60,000
The Original cost of Plant and Machinery was:
Batliboi & Co. Ltd. Rs. 26,00,000
Adhikary & Co. (P) Ltd. Rs. 2,00,000
The following arrangements were made and carried out on April 1, 2014.
a) Batliboi & Co. Ltd. purchased from the shareholders of Adhikary &
Co. (P) Ltd. all
the issued shares @ Rs. 14 per share.
b) The shareholders of Adhikary & Co. (P) Ltd. took over one of the
freehold properties
of Adhikary & Co. (P) Ltd. for Rs. 60,000, at the book value of
the same. It was
agreed that the amount should be set off against the amount due to
them under (a)
above and the balance due to them to be satisfied by the issue of
an appropriate
number of equity shares in Batliboi & Co. Ltd. at Rs. 19.50 per
share.
The necessary transfer in regard to the setting off the price of the
property taken over
by the shareholders against the amount due to them from Batliboi &
Co. Ltd. were
made in the books of the two companies.
c) All manufacturing was to be carried on by Batliboi and Co. Ltd.
and all retail
business is to be carried on by Adhikary & Co. (P) Ltd. in this
connection.
i) Batliboi & Co. Ltd. purchased the whole of Adhikary & Co. (P) Ltd.'s
plant and
machinery for Rs. 1,50,000 and certain of their free-hold property
(cost Rs. 1,00,000) at
Rs. 1,20,000.
Rajan Adhikari
FCA 44
ii) Adhikary & Co. (P) Ltd. purchased Batliboi & Co. Ltd.‘s freehold retail
shop Buildings
(Cost to Batliboi & Co. Ltd., Rs. 75,000) at Rs. 60,000 and took over
the retail stock at
Rs. 80,000 at the book value.
d) Batliboi & Co. Ltd. drew a cheque in favour of Adhikary & Co. (P) Ltd.
for the net
amount due, taking into account all the matters mentioned above.
e) Immediately after the transfer of shares in (a) above. Adhikary & Co. (P)
Ltd. declared
and paid dividend of Rs. 60,000 (ignore income-tax).
You are required to prepare the Balance Sheets of Batliboi & Co. Ltd. and
Adhikary & Co.
(P) Ltd. immediately after the completion of the above transaction.
[June 18]
65. The summarized Balance Sheet of Krishna Ltd. As on 31st Ashad, 2073 was as
follows:
Amount Amount
Liabilities Assets (Rs.)
(Rs.)
Equity Shares of Rs. 10 fully 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
50,50,000
50,50,000
Radha Ltd. agreed to absorb the business of Krishna Ltd. with effect from
1
Shrawan, 2073.
i) The purchase consideration settled by Radha Ltd. as agreed:
(i) 4,50,000 equity shares of Rs. 10 each issued by Radha Ltd. by
valuing its share
@ Rs. 15 per share.
(ii) Cash payment equivalent to Rs. 2.50 for every share in Krishna
Ltd.
ii) The issue of such an amount of fully paid 8% debentures in Radha
Ltd. at 96% as is
sufficient to discharge 9% debentures in Krishna Ltd. at a premium
of 20%.
iii) Radha Ltd. will take over the tangible fixed assets at 100% more
than the book value,
stock at Rs. 7,10,000 and debtors at their face value subject to a
provision of 5% for
doubtful debts.
iv) The actual cost of liquidation of Krishna Ltd. was Rs. 75,000.
Liquidation cost of
Krishna Ltd. is to be reimbursed by Radha Ltd. to the extent of Rs.
50,000.
v) Statutory reserves are to be maintained for 1 more year.
Rajan Adhikari
FCA 45
(i) Close the books of Krishna Ltd. by preparing realisation account, Radha
Ltd. Account,
shareholders account and debenture account.
(ii) Pass journal entries in the books of Radha Ltd. regarding acquisition
of business
[June 17]
Rajan Adhikari
FCA 46

Amalgamation Dec 2020

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Amalgamation, Absorption & Ext.

2. X Ltd. has the following capital Structure:

3. The following is the balance sheet of A Ltd. as on 31.3.2007

[Ans. Purchase consideration

4. The abstract of Balance sheet of AXE ltd. as at 31.03.2011 are as follows:

You are required to calculate the amount of Purchase consideration.

5. A Below is given the Balance Sheet of B Co. Ltd. as on 1.1.2008:

6. S Ltd is absorbed by P Ltd. The balance sheet of S Ltd. is as under:

Calculate purchase consideration.

Ram Ltd. took over Sham Ltd. on following conditions:

8. S Ltd. is absorbed by P Ltd. The Balance Sheet of S Ltd. is as under:

[Ans. Purchase consideration

9. Sham Ltd Balance Sheet as on 31st March 2002

Liabilities Amount Assets

Ram Ltd. takes over Sham Ltd.

Preference Shares 60,000 P & L A/c

11. Balance Sheet of X ltd. as on 31st March 1995

Calculate Purchase consideration

13. Following is the Balance Sheet of A Ltd.

(2) G/W is to be valued at 4 year's purchase of the excess of average of

Fast Express Ltd.

15. Following balance sheet of X Ltd. and Y Ltd.

(a) The amalgamation is in the nature of merger.

Rajan Adhikari CAP-

(ii) 15% debentures in Neptune, Ltd. at par to provide an income equivalent

21. P and Q have been carrying on same business independently. Due to

Following are the additional information:

(v) The purchase consideration is to be discharged as under:

Paid – up share capital:

Balance Sheet of Wye Limited

Paid – up share capital:

24. S Ltd. is absorbed by P Ltd. The Balance Sheet of S. Ltd. is as under

P. Ltd. has agreed:

Rajan Adhikari CAP-

The Debentures holders agreed to receive such 7% Debentures issued at 96 each

The cost of liquidation of B Ltd. ultimately was Rs. 5,000. Due to a

30. S. Ltd. is absorbed by P. Ltd. The draft balance sheet of S. Ltd. is as

P. Ltd. has agreed :

Rs. 100 each (fully paid) 3,00,000 Profit and Loss

(v) The purchase consideration is to be discharged as under:

Liabilities Rs. Assets

Liabilities Rs. Assets

Liabilities Rs. Assets

10,000 12% Preference Land Building and plant

(a) The Preference Shareholders of Elora Limited were to be allotted 8%

(c) 12% Debentures holders of Elora Limited to be paid @ 8% premium by

While arriving at the agreed consideration, the directors of Ajanta

[Ans. Purchase consideration

Liabilities Rs. Assets

The business of V Ltd. is taken over by P Ltd. as on that date on the

The companies agree on a scheme of amalgamation of the following terms:

Goodwill of the companies Vasudha Ltd. and Vaishali Ltd. is to be valued at

A New Company MN Ltd. was incorporated & for Amalgamation in nature of

40. The Balance Sheet of P Ltd. as at 31st December, 2007 is as under:

Liabilities Rs. Assets

Equity shares of 8,00,000 5,00,000 Goodwill

Rajan Adhikari CAP-

47. Following is the Balance Sheet as at March 31, 2005:

(Ans –PC-1,20,000 DPC-62,105)

Wye Ltd. Zee Ltd. Wye Ltd.

a. The assumption of all the liabilities.

Liabilities Amount Assets

Liabilities P Ltd. Q Ltd. Assets P