Tuesday, 21 January 2014
Friday, 10 January 2014
Thursday, 9 January 2014
Monday, 6 January 2014
Amalgamation ( Guys plz copy this to MS word and take a printout )
PROBLEMS ON AMALGAMATION OF COMPANIES
. 2 (both pooling of interest method
with statutory reserve)
The following are the balance sheets of P
Ltd. and S Ltd. as on 31st march 2001.
|
Liabilities
|
P Ltd.
|
S Ltd.
|
Assets
|
P Ltd.
|
S Ltd.
|
|
Equity share capital (Rs.10 each)
|
5,00,000
|
3,00,000
|
Land and buildings
|
2,50,000
|
1,55,000
|
|
14% preference shares capital (rs.100 each)
|
2,20,000
|
1,70,000
|
Plant and machinery
|
3,25,000
|
1,70,000
|
|
General reserve
|
50,000
|
25,000
|
57,500
|
35,000
|
|
|
Export profit reserve
|
30,000
|
20,000
|
Investments
|
1,25,000
|
95,000
|
|
Investment allowance reserve
|
|
10,000
|
Stock
|
90,000
|
1,03,000
|
|
Profit and loss a/c
|
75,000
|
50,000
|
Debtors
|
72,500
|
52,000
|
|
13% debentures (rs. 100 each)
|
50,000
|
35,000
|
Cash and bank
|
70,000
|
50,000
|
|
Current liabilities
|
65,000
|
50,000
|
|
|
|
|
|
9,90,000
|
6,60,000
|
|
9,90,000
|
6,60,000
|
P Ltd. takes over S Ltd. on 1st
April 2001. P Ltd. discharges the purchase consideration as below:
i)
Issued 35,000 equity shares of
rs. 10 each at par to the equity shareholders of S Ltd.
ii)
Issued 15% preference shares of
rs. 100 each to discharge the preference shareholders of S Ltd. at 10% premium.
The debentures of
S Ltd. will be converted into equivalent number of debentures of P Ltd.
The statutory reserves of S Ltd. (Export profit reserve and
investment allowance reserve) are to be maintained for 3 more years.
You are required to show the Journal
Entries and Balance sheet in the books of P Ltd. (transfree) assuming that :
(a)
The amalgamation is in the
nature of merger.
. 3 (
problem under pooling of interest ( absorption) in the nature of merger method
with intercompany owing with statutory reserve) The following are the balance
sheets of P Ltd. and P Ltd. Balance
sheets as on 31st march, 2003
|
Liabilities
|
P Ltd.
|
V Ltd.
|
Assets
|
P Ltd.
|
V Ltd.
|
|
Equity share
Capital (fully paid shares of Rs. 10 each)
|
15,000
|
6,000
|
Land & building
|
6,000
|
-
|
|
Securities premium
|
3,000
|
-
|
Plant & machinery
|
14,000
|
5,000
|
|
Foreign projects reserve
|
-
|
310
|
Furniture, fixtures and fittings
|
2,304
|
1,700
|
|
General reserve
|
9,500
|
3,200
|
Stock
|
7,862
|
4,041
|
|
Profit & loss A/C
|
2,870
|
825
|
Debtors
|
2,120
|
1,020
|
|
12% debentures
|
-
|
1,000
|
Cash at bank
|
1,114
|
609
|
|
Bills payable
|
120
|
-
|
Bills receivable
|
-
|
80
|
|
Sundry creditors
|
1,080
|
463
|
Cost of issue of debentures
|
-
|
50
|
|
Sundry provisions
|
1,830
|
702
|
|
|
|
|
|
33,400
|
12,500
|
|
33,400
|
12,500
|
All the bills receivable held by V Ltd.
were P Ltd. acceptances.
On 1st April 2003, 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 V Ltd. would be converted into 13%
debentures in P Ltd. of same amount and denomination.
Expenses of amalgamation amounting to Re. 1
lakh were borne by P Ltd.
You are required to close the books of V
Ltd. Pass journal entries in the books of P Ltd. and prepare balance sheet
immediately after the merger.
. 4 (Problem
on amalgamation in the nature of merger- pooling of interest method- with
statutory reserve)
The following are the balance sheet of X
Ltd and Y Ltd as on 31st march 2005.
|
Liabilities
|
X Ltd. Rs.
|
Y Ltd. Rs.
|
Assets
|
X Ltd. Rs.
|
Y Ltd. Rs.
|
|
Equity share capital
(Rs. 10 each)
|
50,00,000
|
30,00,000
|
Land & building
|
25,00,000
|
15,50,000
|
|
14% preference share capital
(Rs.100 each)
|
22,00,000
|
17,00,000
|
Plant & machinery
|
32,50,000
|
17,00,000
|
|
General reserve
|
5,00,000
|
2,50,000
|
Furniture & fittings
|
5,75,000
|
3,50,000
|
|
Export profit reserve
(required under income tax act)
|
3,00,000
|
2,00,000
|
Investments
|
7,00,000
|
5,00,000
|
|
Investment allowance
|
-
|
1,00,000
|
Stock
|
12,50,000
|
9,50,000
|
|
Reserve(statutory)
|
|
|
Debtors
|
9,00,000
|
10,30,000
|
|
Profit & loss A/C
|
7,50,000
|
5,00,000
|
Cash at bank
|
7,25,000
|
5,20,000
|
|
13% debentures
(Rs.100 each)
|
5,00,000
|
3,50,000
|
|
|
|
|
Trade creditors
|
4,50,000
|
3,50,000
|
|
|
|
|
Other current liabilities
|
2,00,000
|
1,50,000
|
|
|
|
|
|
99,00,000
|
66,00,000
|
|
99,00,000
|
66,00,000
|
XY Ltd. is formed to take over X Ltd and Y
Ltd for the following consideration
X LTD
i)
Issue of 4,80,000 equity shares
of Rs.10 each of XY Ltd at par to the equity shareholders.
ii)
Issue of 15% preference shares
of Rs.100 each of XY Ltd to discharge the preference shareholders of X Ltd at
10% premium.
Y Ltd
i)
Issue of 3,50,000 equity shares
of Rs.10 each of XY Ltd at par to the equity shareholders.
ii)
Issue of 15% preference shares
of Rs.100 each of XY Ltd and discharge the preference shareholders of Y Ltd at
10% premium.
The debentures of X Ltd and Y Ltd will be
converted into equivalent number of debentures of XY Ltd. the statutory
reserves are to be maintained for two more years.
Close the books of X Ltd and Y Ltd and show
the opening entries and balances sheet of XY Ltd. on the assumption that the
amalgamation is in the nature of merger.
. 5 (
problem on amalgamation under net assets method with statutory reserve)
X company Ltd and Y company Ltd have agreed
to amalgamate and to form a new company called Z Co. Ltd which has taken over
both the companies as per their balance sheets given below:
Balance sheet of X Co. Ltd as on 31-12-2001
|
Liabilities
|
Rs.
|
Assets
|
Rs.
|
|
Share capital
Subscribed and paid up capital
50,000 share of Rs.10 each
|
5,00,000
|
Land and building
|
2,00,000
|
|
Reserves and surplus:
General reserve 1,50,000
Surplus 50,000
|
2,00,000
|
Plant and machinery
|
1,50,000
|
|
Development rebate reserve
|
30,000
|
Furniture
|
50,000
|
|
Creditors
|
50,000
|
Investment in govt. securities
|
2,00,000
|
|
Bills payable
|
20,000
|
Stock
|
90,000
|
|
|
|
Debtors
|
80,000
|
|
|
|
Bank
|
30,000
|
|
|
8,00,000
|
|
8,00,000
|
Balance
sheet of Y Co. Ltd as on 31-12-2001
|
Liabilities
|
Rs.
|
Assets
|
Rs.
|
|
Share capital
Subscribed and paid up capital share of Rs.10 each
|
8,00,000
|
Land and building
|
3,00,000
|
|
Reserves and surplus:
General reserve 3,00,000
Surplus
1,00,000
|
4,00,000
|
Plant and machinery
|
2,50,000
|
|
Secured loans
|
1,50,000
|
Patents
|
1,50,000
|
|
Unsecured loans
|
50,000
|
Furniture
|
50,000
|
|
Creditors
|
60,000
|
Investment in other securities
|
4,50,000
|
|
Bills payable
|
40,000
|
Stock
|
1,20,000
|
|
|
|
Debtors
|
90,000
|
|
|
|
Bank
|
90,000
|
|
|
15,00,000
|
|
15,00,000
|
Prepare ledger accounts in the books of Transferor
Company and opening entries in the books of Transferee Company under
amalgamation in the nature of merger.
Assume that development rebate reserve
(statutory reserve) is continued in the new company.
AMALGAMATION
IN THE NATURE OF PURCHASE
. 1
(Business purchase method with statutory reserve)
Following are the balance sheets of A Ltd and B Ltd as on 31.3.2001
|
|
A
|
B
|
|
A
|
B
|
|
Equity share capital (Rs.10)
|
50,00,000
|
20,00,000
|
Land and building
|
29,00,000
|
12,00,000
|
|
14% preference share capital
(Rs.100 each)
|
20,00,000
|
10,00,000
|
Plant and machinery
|
45,00,000
|
18,00,000
|
|
General reserve
|
8,00,000
|
2,00,000
|
Furniture
|
5,00,000
|
2,00,000
|
|
Investment allowance reserve
|
7,00,000
|
2,00,000
|
Stock
|
15,00,000
|
5,00,000
|
|
Profit and loss A/C
|
10,00,000
|
5,00,000
|
Debtors
|
10,00,000
|
7,00,000
|
|
12% debentures (Rs.100)
|
5,00,000
|
2,00,000
|
Cash at bank
|
5,00,000
|
3,00,000
|
|
Creditors
|
5,00,000
|
3,00,000
|
|
|
|
|
Other current liabilities
|
4,00,000
|
2,00,000
|
|
|
|
|
|
1,09,00,000
|
47,00,000
|
|
1,09,00,000
|
47,00,000
|
A Ltd takes over B Ltd as on 31.2.2001 on
the following conditions:
1.
To issue 2,00,000 equity shares
of Rs.10 each at Rs.12.50 to the equity
shareholders of B Ltd
2.
To issue 15% preference shares
of Rs.100 each to discharge preference shares of B Ltd. at par
3.
To convert debentures of B Ltd
into equivalent number of debentures of A Ltd of Rs.100 each
4.
To maintain investment
allowance reserve of B Ltd for two years (statutory reserve)
5.
The fair value of plant and
machinery is Rs.15,00,000
Prepare necessary ledger accounts to close
the books of B Ltd under purchase method (amalgamation in the nature of
purchase)
. 3 (Problem
on absorption with net payment method of purchase consideration with statutory
reserve)
Following is the balance sheet of A Company as
on 30.6.2005
Balance
sheet
|
Liabilities
|
|
Assets
|
|
|
1,20,000 shares of RS.10 each
|
|
Buildings
|
|
|
Reserve fund
|
|
Machinery
|
|
|
Development rebate reserve
|
|
Stock
|
|
|
Creditors
|
|
Debtors
|
|
|
Profit & loss A/C
|
|
Bank
|
|
|
|
20,77,780
|
|
20,77,780
|
The concern is acquired by B Company. The
purchase consideration being the payment of Rs.10,00,000 in cash and allotment
of two fully paid shares of Rs.10 each at an agreed price of Rs.12.50 in
exchange for every 3 shares of A company. The liquidation expenses of the
vendor company is Rs.15,000.
Show the necessary journal entries to
record the above in the books of both the companies. Under purchase method.
Assume that development rebate reserve will continue for 3 more years in new
company.
. 4
(problem on absorption with statutory reserve)
The position of A Company was as follows:
Balance sheets as at 1.1.2005
|
Liabilities
|
A
Ltd.
|
B Ltd
|
Assets
|
A Ltd
|
B Ltd
|
|
Share capital
Equity shares of Rs.10 each
|
5,00,000
|
7,00,000
|
Fixed assets
|
3,00,000
|
5,00,000
|
|
5% debentures(Rs.100)
|
1,00,000
|
-
|
Stock debtors
|
3,50,000
|
1,00,000
|
|
Creditors
|
2,00,000
|
2,00,000
|
Goodwill
|
1,00,000
|
3,50,000
|
|
Profit & loss A/C
|
-
|
1,50,000
|
Cash at bank
|
-
|
1,00,000
|
|
Workman’s compensation fund
|
1,00,000
|
-
|
Profit
& loss A/C
|
1,50,000
|
-
|
|
|
9,00,000
|
10,50,000
|
|
9,00,000
|
10,50,000
|
B Company agreed
to acquire A Company on the following terms
(A) Shares of A Company are to be considered as worth Rs.6 each and
shares of B company are to be considered as worth Rs.12.50 each which are taken
as the basis for calculation of purchase consideration.
(B) When paying the purchase consideration , the B Company agreed to pay
1/4th in the form of cash and balance in shares of B company.
(C) It was decided to issue along with purchase consideration 5%
debentures of Rs.95 each for every 5% debentures of Rs.100 each in A Company.
Prepare the
journal entries in the books of A Company and B Company and also balance sheet
in the books of B Company. Under business purchase method. Assume that
workmen’s compensation fund (statutory reserve to be continued for 2 more
years).
. 5 (problem under business purchase method with statutory reserve- net
payment method of purchase consideration)
Fortunate Ltd.
Decided to absorb unfortunate Ltd. The balance sheet of the two companies as on
31st march 2002 are given below:
|
|
Fortunate Ltd.
|
Unfortunate Ltd
|
|
Fortunate Ltd.
|
Unfortunate Ltd
|
|
5% preference shares of Re.1 each
|
-
|
40,000
|
Goodwill
|
40,000
|
40,000
|
|
Equity shares of Re.1 each
|
2,52,000
|
80,000
|
Copy rights
|
20,000
|
-
|
|
Capital reserve
|
1,20,000
|
-
|
Land and buildings
|
1,00,000
|
60,000
|
|
General reserve
|
1,20,000
|
-
|
Plant
|
1,40,000
|
-
|
|
Development rebate reserve
|
-
|
20,000
|
Debtors
|
40,000
|
40,000
|
|
Creditors
|
8,000
|
40,000
|
Stock
|
40,000
|
20,000
|
|
Bank overdraft
|
-
|
20,000
|
Cash in hand
|
1,20,000
|
-
|
|
|
|
|
Profit & loss A/C
|
-
|
40,000
|
|
|
5,00,000
|
2,00,000
|
|
5,00,000
|
2,00,000
|
Additional
information
1. Fortunate Ltd. To take over both assets and liabilities of
Unfortunate Ltd.
2. Preference shareholders of Unfortunate Ltd. To get one 5% preference
share of Re. 1 Fortunate Ltd, for every
2 shares held.
3. Equity shareholders of Unfortunate Ltd. To receive one new share of
Re.1 of Fortunate Ltd. For every 10 shares held.
4. An amount of Rs.20,000 to be paid by Fortunate Ltd. For meeting
liquidation expenses , in addition Rs.10,000 paid by it directly.
5. Land and building of Fortunate Ltd. To be valued at Rs. 1,40,000 and
a provision of Rs.1,000 is to be made for doubtful debts in case of Unfortunate
Ltd.
Close the books of
Unfortunate Ltd and prepare balance sheet in the books of Fortunate Ltd. After
absorption under business purchase method (amalgamation in the nature
purchased.
Assume that
development rebate reserve (statutory reserve) is required to be continued in
the books of Fortunate Ltd.
. 6 (problem under business purchase method with net payment of
purchase consideration- without
statutory reserve)
The assets of the
Going Company Ltd. were purchased by the Surviving Company Ltd. The purchase
consideration was as follows:
1. A payment in cash at Rs.40 for every share in the Going Co. Ltd.
2. A further payment in cash of Rs.110 for every share in the Going Co.
Ltd.
3. An exchange of 4 shares in the Surviving Company Ltd. of Rs.50 each
at the market value Rs.80 for every share in the Going Co. Ltd
The balance sheet of Going Co.Ltd. as
follows:
|
Liabilities
|
Rs.
|
Assets
|
Rs.
|
|
Capital
1000 shares of Rs.200 each
|
2,00,000
|
Building
|
75,000
|
|
1000 debentures of Rs.100 each
|
1,00,000
|
Machinery
|
1,50,000
|
|
Creditors
|
30,000
|
Stock
|
90,000
|
|
Reserves
|
65,000
|
Debtors
|
80,000
|
|
Workmen’s savings bank
|
10,000
|
Bank
|
35,000
|
|
Profit & loss A/C
|
25,000
|
|
|
|
|
4,30,000
|
|
4,30,000
|
Prepare the necessary ledger accounts in the books of Going Company
Ltd. and opening entries in the books of Surviving Company Ltd. under purchase
method.
. 7 (problem under business
purchase method with net payment method of purchase consideration- without
statutory reserve)
The balance sheet of A Ltd. on 31st march 1995 was as
follows:
|
Liabilities
|
Rs.
|
Assets
|
Rs.
|
|
Share capital
8,000 equity shares of Rs.50 each
fully paid
|
4,00,000
|
Land & buildings
|
2,30,000
|
|
General reserve
|
50,000
|
Plant & machinery
|
1,80,000
|
|
Workmens accident Compensation fund
(outstanding liability Rs. 8,000)
|
30,000
|
Furniture
|
20,000
|
|
1,000, 14% debentures of
Rs. 50 each
|
50,000
|
Stock
|
90,000
|
|
Sundry creditors
|
40,000
|
Sundry debtors -1,00,000
Less: provision for doubtful debts- 5,000
|
95,000
|
|
Bank overdraft
|
10,000
|
Cash
|
2,000
|
|
Staff provident fund
|
40,000
|
Discount on issue of debentures
|
3,000
|
|
|
6,20,000
|
|
6,20,000
|
The business of
the company is taken over by B Ltd on that date.
1. A payment in cash at Rs.10 for every share in A Ltd.
2. An exchange of 5 shares in B Ltd. of RS. 10 each at the market value
of Rs.15 per share, for every 2 shares in A Ltd.
3. Show the realisation account, cash account and the sundry
shareholders account in the books of A Ltd. the expenses of liquidation amounted
to Rs.5000 were borne by A Ltd. under business purchase method.
. 8: (problem under business purchase method net payments method-
without statutory reserve)
The balance sheet
of Amina Company on 1-1-2002 was under:
Balance sheet
|
Liabilities
|
Rs.
|
Assets
|
Rs.
|
|
Capital :
50,000 preference shares of Rs.10
each
|
5,00,000
|
Buildings
|
7,00,000
|
|
90,000 ordinary shares of Rs.10
each
|
9,00,000
|
Patents
|
3,00,000
|
|
5% debentures
|
1,00,000
|
Stock
|
2,25,000
|
|
Interest outstanding on above
|
20,000
|
Debtors
|
1,60,000
|
|
Sundry creditors
|
1,10,000
|
Cash
|
25,000
|
|
|
|
P & L account
|
2,20,000
|
|
|
16,30,000
|
|
16,30,000
|
On 1-7-1984
“Pharma Company” agreed to absorb “Amina Company” on the following terms:
(a) Two shares of Rs. 5 each fully paid in Pharma Company to be issued
for every three shares in Amina Company.
(b) Six shares of Rs. 5 each fully paid in Pharma Company to be issued
for every five preference shares in Amina Company.
(c) Debentures holders to be paid in full in ordinary shares of Rs. 5
each and for the interest outstanding in cash.
(d) The creditors to receive 75% of sums due to them in fully paid
shares of Rs.5 each and 25% of the balance in cash in full settlement.
Prepare
realisation account and share holders account in the books of Amino Company and
pass entries in the books of Pharma Co. under business purchase method.
. 9 (problem on absorption with net payment method of purchase
consideration- without statutory reserve)
The balance sheet
of Small Ltd. was as follows:
|
Liabilities
|
Rs.
|
Assets
|
Rs.
|
|
12,000, 6% preference shares of Rs.
10 each
|
1,20,000
|
Goodwill
|
1,00,000
|
|
Equity shares of Rs.10 each
|
80,000
|
Building
|
1,10,000
|
|
Debentures
|
1,00,000
|
Plant
|
90,000
|
|
Creditors
|
82,000
|
Stock
|
83,000
|
|
General reserve
|
84,000
|
Debtors 70,000
Less: reserves 3,500
|
66,500
|
|
Profit & loss A/C
|
20,000
|
Bills receivable
|
4,000
|
|
|
|
Cash
|
32,500
|
|
|
4,86,000
|
|
4,86,000
|
A new company
called Big Ltd. was floated to purchase the business of the above concern. All
the assets except cash and creditors were to be transferred to the new venture.
The purchase price
was:
1. The allotment of eleven 5% preference shares of Rs.10 each fully
paid for each ten preference shares.
2. Twenty equity shares of Rs.10 each credited at Rs.9 fully paid for
each 16 equity shares held.
3. Sufficient debentures to enable the existing debenture holders to be
satisfied at a premium of 5% on their holding by the issue of debentures in the
new company.
The expenses of
winding up of Small Ltd. were Rs.7,500. Show the ledger accounts in the books
of Small Ltd. and the journal entries in the books of the purchasing company.
Under business purchase method.
. 10 (problem under business purchase method without statutory reserve)
The following is
the balance sheet of Fair Deal Ltd. AAA
on 31st March 2001:
|
Liabilities
|
Rs.
|
Assets
|
Rs.
|
|
90,000 equity shares of Rs.10 each
|
9,00,000
|
Buildings
|
4,25,000
|
|
General reserve
|
1,20,000
|
Plant and machinery
|
2,25,000
|
|
P & L
Account
|
52,000
|
Furniture
|
75,000
|
|
12% debentures
|
4,00,000
|
Trade Mark
|
35,000
|
|
Creditors
|
3,18,600
|
Investments
|
1,15,000
|
|
|
|
Debtors
|
3,00,000
|
|
|
|
Stock
|
5,60,000
|
|
|
|
Bank
|
55,600
|
|
|
17,90,600
|
|
17,90,600
|
Fair Deal Ltd.
was absorbed by Nathan Ltd. on the following terms and conditions:
(i)
Assume all liabilities and to
acquire all assets except investments which were sold by Fair Deal Ltd. at 90%
book value.
(ii)
Discharge the debentures of
Fair Deal Ltd. at a discount of 10% by the issue of 14% debentures of Rs.100
each in Nathan Ltd.
(iii)
Trade marks were found useless.
(iv)
Issue of one equity share of
Rs. 10 in Nathan Ltd. issued at Rs.12 and a cash payment of Rs.3 for every
share in Fair Deal Ltd.
(v)
Pay the cost of absorption for
5,800
(vi)
Fair Deal Ltd. sold in the open
market half of the shares received from Nathan Ltd. at Rs. 15 per share. Show
the necessary ledger accounts in the books of Fair Deal Ltd. and opening
journal entries in the books of Nathan Ltd. under business purchase method.
. 11 (problem on absorption under business purchase method with
calculation of purchase consideration under net payments method-without
statutory reserve)
Following is the
balance sheet of Bharat Co. Ltd. as on 31st march 2002.
Balance sheet of Bharat Co. Ltd.
|
Liabilities
|
Rs.
|
Assets
|
Rs.
|
|
Equity share capital (5000 shares
of Rs.100 each)
|
5,00,000
|
Goodwill
|
30,000
|
|
Reserve fund
|
1,00,000
|
Building
|
3,00,000
|
|
P & L A/c
|
50,000
|
Machinery
|
2,70,000
|
|
10 % debentures
|
2,00,000
|
Investments
|
1,50,000
|
|
Creditors
|
1,00,000
|
Stock
|
2,00,000
|
|
Dividend equalisation reserve
|
50,000
|
Debtors
|
60,000
|
|
Tax provision
|
50,000
|
Cash
|
40,000
|
|
|
10,50,000
|
|
10,50,000
|
India Co. Ltd purchased
the business of Bharat Co. Ltd. on the following terms:
(a) All the assets except cash and goodwill are taken over
(b) 800 shares of Rs.100 each of India Co. are issued at an agreed value
of Rs. 125 per share in full settlement of accounts of creditors.
(c) 5 equity shares of Rs.100 each in India Co. are issued to equity
shareholders at an agreed value of Rs. 125 per share for every 4 shares held in
Bharat Co.
(d) Cash Rs. 40 per share held in Bharat Ltd. is paid to equity
shareholders
(e) 10% debentures are discharged at 20% premium by issue of necessary
amount of 12% debentures in India Ltd. at 4% discount.
Close the books of
Bharat Co. Ltd and pass opening journal entries in the books of India Co. Ltd.
Under business purchase method.
. 12 (problem on absorption or acquisition in the nature of purchase
with net payment method of purchase consideration without statutory reserve)
A Company Ltd. is
absorbed by B Company Ltd. the consideration being:
(a) Assumption of liabilities
(b) Discharge of debentures at a premium of 5% by the issue of 5%
debentures in B Company Ltd.
(c) A payment of cash of Rs.30 per share and
(d) To exchange 3 shares of Rs.10 each in B Company Ltd. at an agreed
value of Rs.15 per share for every share in A Company Ltd.
Balance sheet of A Company Ltd. as on 31.12.2004
|
Liabilities
|
Rs.
|
Assets
|
Rs.
|
|
Share capital
60,000 shares of Rs.50
Each fully paid
|
30,00,000
|
Goodwill
|
2,50,000
|
|
General reserve
|
3,20,000
|
Land & buildings
|
7,65,000
|
|
Profit & loss A/c
|
1,80,000
|
Plant & machinery
|
22,00,000
|
|
5% debentures
|
15,00,000
|
Patents
|
50,000
|
|
Creditors
|
2,00,000
|
Patterns
|
25,000
|
|
|
|
Investments
|
50,000
|
|
|
|
Stock
|
10,60,000
|
|
|
|
Debtors
|
4,50,000
|
|
|
|
Bank
|
3,50,000
|
|
|
52,00,000
|
|
52,00,000
|
Pass journal entries to close the books of A Company Ltd. together
with necessary ledger accounts. Under purchase method (amalgamation in the
nature of purchase).
13. (Problem on absorption with calculation of purchase
consideration under net payment method without Statutory Reserve)
The following Balance sheet of Ashwini
Company Ltd.on 31.3.2002
|
Liabilities
|
Rs
|
Assets
|
Rs
|
|
Share capital
(Shares of Rs.10 each)
Debentures
Creditors
Reserve Fund
Workmen Compensation Fund
Dividend Rebate Reserve
Profit&Loss A/c
Depreciation Fund
(Land and Buildings)
|
2,00,000
1,00,000
30,000
25,000
10,000
10,000
5,100
20,000
|
Land and Buildings
Plant and Machinery
Work in Progress
Stock
Furniture
Debtors
Cash at Bank
Cash in Hand
|
1,20,000
1,50,000
30,000
60,000
2,500
25,000
12,500
100
|
|
4,00,100
|
4,00,100
|
The company is absorbed by Jaswant
companyLtd. On the above date. The consideration for the absorption is the
discharge of debentures at a premium of 5%, taking over the trade liability and
a payment of Rs.7 in cash and one share of
the face value of Rs.5 in Jaswant company Ltd. ( Market value Rs.8 per
share)in exchange for one share iin Ashwini Company Ltd. The cost of
liquidation Rs.500 is to be met by the purchasing company. Calculate purchase
consideration and the journal entries in
the books of both the companies. Under purchase method (i.e. Amalgamation in
the nature of purchase)
14 ( Problem on absorption with net
payment method of purchase consideration without Statutory Reserve)
The following is the B/S of Chandra Ltd . as on 31.12.2003
|
Liabilities
|
Rs.
|
Assets
|
Rs.
|
|
Share capital:
Shares of Rs.30 each fully paid
General Reserve
Workmens Profit Sharing fund
Debentures
Creditors
|
3,00,000
30,000
15,000
1,00,000
25,000
|
Buildings
Machinery
Furniture
Patents
Stock
Debtors
Cash at Bank
|
1,60,000
1,80,000
10,000
50,000
40,000
20,000
10,000
|
|
4,70,000
|
4,70,000
|
The
above company is absorbed by
Ravindra Ltd. The purchase consideration
being the discharge of debentures at a premium of 5% by the issue of debentures
in Ravindra Ltd,taking over the liabilities and a payment of Rs.5 in cash and 2 shares of Rs..10 each
fully paid at the market value of Rs.16
per share in exchange for every one share in Chandra Ltd. The expenses
of liquidation amounting to Rs.1,000 are to be borne by Ravindra Ltd.
Pass the journal entries in the books of both the companies. Under
Business Purchase Method (is Amalgamation in the nature of purchase)
15 ( problem under Business Purchase Method
when portion of shares received from Purchasing company, are sold by Vendor
Company-without statutory reserve)
The following is the B/S of D Ltd.,on
31-12-2001
|
Liabilities
|
Rs
|
Assets
|
Rs.
|
|
4,000 shares of Rs.100 each
General Reserve
Profit&Loss A/c
Creditors
5% Debentures
Dividend Equalisation Fund
|
4,00,000
50,000
5,600
1,28,700
2,50,000
24,000
|
Buildings
Plant and Machinery
Investments
Debtors
Stock
Cash at Bank
|
1,70,000
4,00,000
50,600
1,40,500
80,700
16,500
|
|
8,58,300
|
8,58,300
|
D.Ltd., was absorbed by N Ltd.,on the
above mentioned date on the following terms and conditions:
(1) N.Ltd to assume all liabilities and
to acquire all assets except investment which were sold by D.Ltd for Rs.45,500.
(2)Discharge the Debenture debt at a
discount of 5% by the issue of 7% Debentures in N.Ltd.
(3)issue two shares of Rs.60 each in N
Ltd.at Rs.65 per share and also to pay Rs.2 in cash to the shareholders of D
Ltd. in exchange for one share in D Ltd.
(4)Pay the cost of Absorption Rs.1500
(5)D.Ltd sold in the open market one
fourth of the shares received from N Ltd. at the average rate of Rs.63 per share.
Show the realization accounts , Bank account and Shareholders account in
the books of D Ltd. under Business
Purchase Method.
. 16 ( problem under Business Purchase
Method Without Statutory Reserve in the
problem)
Following is the B/S of X Ltd. on
31.3.2001
|
Particulars
|
Rs
|
Particulars
|
Rs.
|
|
Preference Share Capital
Equity Share Capital
Profit and Loss A/c
General Reserve
Debentures
Creditors
|
5,00,000
10,00,000
2,00,000
3,00,000
2,00,000
3,00,000
|
Plant and Machinery
Land and Buildings
Investments
Stock
Debtors
Cash
Bank
|
5,00,000
10,00,000
2,00,000
3,00,000
4,00,000
10,000
90,000
|
|
25,00,000
|
25,00,000
|
X Ltd. is absorbed by Y Ltd.on the above
date on the following terms:
1.Equity shares are to be redeemed
at 6% premium by issuing equity shares
in Y Ltd. at par.
2.Nine Preference shares in Y Ltd. are
to be issued for five preference shares
held in X Ltd. The face value of preference shares of both the companies
is same..
3.Stock is not taken over by Y Ltd.and it realized Rs.1,00,000
4.The fair value of assets taken over is
as under:
Rs.
Plant and Machinery 4,00,000
Land and Building 17,00,000
Investments
1,00,000
Debtors
Book value less 10%
Prepare Realisation Account and Equity
Shareholders account. Also pass journal entries in the books of Y Ltd. under Business Purchase Method.
. 17 (Problems on absorption under
Business Purchase Method with Net assets method of purchase consideration)
ABC Ltd.sells its business to XYZ Ltd.on
31.12.1998. on that date , its B/S was:
|
Liabilities
|
Rs.
|
Assets
|
Rs.
|
|
|
2000
shares of Rs.100 each
Debentures
Trade
Creditors
Reserve
Fund
Profit
& Loss A/c
|
2,00,000
1,00,000
30,000
50,000
20,000
|
Goodwill
Premises
Plant
Stock
Debtors
Cash
|
50,000
1,50,000
83,000
39,500
27,500
50,000
|
|
|
4,00,000
|
4,00,000
|
XYZ Ltd.agreed to take over the assets (exclusive of cash and Goodwill)
at 10% less than the book values, to pay Rs.75,000 for Goodwill and to take
over Debentures..
The purchase consideration was to be
discharged by the allotment of 1,500 shares of Rs.100 each at a premium of
Rs.10 per share and the balance in cash.
Cost of liquidation amounted to Rs.3000
met by ABC Ltd. show the necessary accounts in the books of ABC Ltd. pass
journal entries in the books of XYZ Ltd.
. 18(problem under Business Purchase
Method under net asset method of purchase consideration-without statutory
reserve)
The following B/S of Small Ltd. as on
31.3.2004.
|
Liabilities
|
Rs
|
Assets
|
Rs.
|
|
Share Capital
Equity shares of Rs.10 each
Profit & Loss A/c
Debentures
Creditors
|
20,000
7,000
10,000
3,000
|
Goodwill
Fixed Assets
Current Assets
|
4,000
16,500
19,500
|
|
40,000
|
40,000
|
Big Ltd agreed to take over the assets
(exclusive of Goodwill , Fixed Assets of Rs.4000 and cash Rs.1,000 included in current
Assets) at 10% less than book value and to discharge the trade creditors and to
pay Rs.6,000 for Goodwill.
The purchase consideration was to be settled by the allotment of 2000
shares of Rs.10 each , Rs.8 called up at a market value of Rs.15 per share and
the balance in cash. Liquidation expenses amounted to Rs.400.
(a) Show
the calculation of Purchase
Consideartion.
(b) Give
journal Entries in the books of Small Ltd.
(c) Opening
entries in the books of Big Ltd.. Under
business purchase method.
. 19
(problem under Business purchase method with calculation of Purchase
Consideration under Net Assets Method)
The B/S of Novelty Company as on 31-12-2001 was as follows:
|
Liabilities
|
Rs.
|
Assets
|
Rs.
|
|
2000 shares at Rs.100 each
Reserve Fund
5% Debentures
Loan from X( A director)
Creditors
|
2,00,000
20,000
1,00,000
40,000
80,000
|
Goodwill
Buildings
Machineries
Stock on hand
Debtors
Cash at Bank
Discount on Debentures
|
35,000
85,000
1,60,000
55,000
65,000
34,000
6000
|
|
4,40,000
|
4,40,000
|
This company was agreed to be purchased by Marvel Company on the
following terms:
1.Marvel Company to acquire all assets
at book value less 10% except cash, which is retained in the Novelty Company.
The goodwill is to be valued on the following lines:
The goodwill is to be valued at 4 years
purchase of the excess average profit of
5 years over 8% of the combined
share capital and Reserve Fund.
2.Marvel Company to take over creditors
at 5% Discount.
3.The purchase consideration to be paid as to Rs.1,50,000 in
cash and the balance in shares of Rs.10
each, valued at Rs.12.50 each.
The average profits for the last 5 years is Rs.30,100, the expenses of
realization are Rs.4,000.
Prepare the necessary Ledger accounts in
the books of Novelty Company and Journal entries in the books of Marvel
Company.
. 20 (problem on absorption with
calculation of purchase consideration under net asset method)
Chota company was agreed to be absorbed
by Mota company on 30.6.2002. on this
date, the B/S of the Chota company was as follows:
|
Liabilities
|
Rs
|
Assets
|
Rs
|
|
Share Capital:
Shares of 45,000 at Rs.10 each
General Reserve
Profit& Loss A/c
5% Debentures
Dividend Equalisation Fund
Creditors
|
4,50,000
3,00,000
1,40,000
1,10,000
40,000
20,000
|
Land& Buildings
Furniture
Machineries
Stock
Debtors
Cash balance
|
3,50,000
30,000
5,60,000
80,000
36,000
4,000
|
|
10,60,000
|
10,60,000
|
Mota company having decided to acquire
all the assets and liabilities of Chota
company valued the assets as follows:
It
was decided to acquire current assets at book values and fixed assets at
the following values:
Land & Buildings Rs.4,00,000
Furniture
Rs.20,000
Machineries Rs.6,00,000
Value of Goodwill
Rs.60,000
The purchase consideration is payable ½
in shares and the balance in cash.
The absorption expenses of Rs.5,000 was
paid by the Mota Company in addition to purchase consideration.
Prepare the necessary accounts in the books of Chota company and journal
entries in the books of Mota Company.
. 21 (Problem on Absorption- Net Asset
Method)
Bharath Ltd was absorbed by India
Limited on 31-12-01 on which date the B/S of Bharath Limited was as follows:
|
Liabilitities
|
Rs
|
Assets
|
Rs
|
|
Equity Share Capital
5% Preference Share Capital
Sundry Creditors
|
6,00,000
4,00,000
1,50,000
|
Buildings
Plant
Current Assets
P&L A/c
|
4,00,000
2,00,000
2,00,000
3,50,000
|
|
11,50,000
|
11,50,000
|
India Ltd took over buildings at
Rs.3,00,000, Plant at Rs.1,40,000 and stock at Rs.60,000. The purchase
consideration is to be satisfied by the issue of 8% Preference Shares of Rs.100
each and Equity Shares of Rs.10 each in 3:2 ratio.
The Preference Shareholders are to be
settled in full by the allotment of New Preference Shares. Sundry debtors
realized Rs.1,50,000 and Rs.1,10,000 was paid to Sundry Creditors in full
settlement(There were no other current assets). Cost of liquidation Rs.10,000.
Prepare necessary ledger accounts in the
books of Bharath Limited. Opening
Journal Entries of India Limited and its Balance Sheet.
Subscribe to:
Comments (Atom)