MERGERS AND ACQUISITIONS

6] The financial position of two companies Harry Ltd. and S a l l y Ltd. as at 31st March 2021
was as under

Particulars Harry Ltd. Sally Ltd.

Equity and Liabilities
Shareholders’ funds
Share capital 11,00,000 4,00,000
General Reserve 70,000 70,000
Non-current liabilities
Long term provisions – Gratuity fund 50,000 20,000
Current liabilities
Trade Payables 1,30,000 80,000
Total 13,50,000 5,70,000
Assets
Non-current assets
Property, Plant and Equipment 8,00,000 2,50,000
Intangible assets - Goodwill 50,000 25,000

Current assets
Inventories 2,50,000 1,75,000
Trade receivables 2,00,000 1,00,000
Cash and Cash equivalents 50,000 20,000
Total 13,50,000 5,70,000

1) Equity share capital (Rs 10 each) Harry Ltd. Rs 10,00,000 while Sally Ltd 3,00,000
9% (Rs. 100) preference share capital of Harry Ltd Rs. 1 Lakh while 10% preference capital of
Sally Ltd. Rs. 1,00,000
2) PPE includes Land & Building Rs. 3 Lakh & 1 Lakh and plant and machinery of Rs. 5 Lakh &
1.5 lakh for Harry & sally.

Harry Ltd. absorbs Sally Ltd. on the following terms:

i. 10% Preference Shareholders are to be paid at 10% premium by issue of 9% Preference
Shares of Harry Ltd.
ii. Goodwill of Sally Ltd. is valued at Rs. 50,000, Buildings are valued at Rs. 1,50,000 and the
Machinery at Rs. 1,60,000.
iii. Inventory to be taken over at 10% less value and Provision for Doubtful Debts to be created
@ 7.5%.
iv. Equity Shareholders of S a l l y Ltd. will be issued necessary Equity Shares @ 5% premium
Draft the Balance Sheet after absorption as at 31st March, 2021.