Question

BLtd. 6,00,000 2,50,000 1,60,000 Following are the summarised Balance Sheets of A Ltd. and B Ltd, as at 312 Particulars A Ltd. Share capital: Equity shares 10 each (fully paid up) 10,00,000 Securities premium 2,00,000 General reserve 3,00,000 Profit and loss account 1,80,000 10% Debentures 5,00,000 Secured loan Trade payables 2,60,000 24,40,000 Land and building 9,00,000 Plant and machinery 5,00,000 Investment 80,000 Inventory 5,20,000 Trade receivables 4,10,000 Cash at bank 30,000 24,40,000 The companies agree on a scheme of amalgamation on the following terms: (0) A new company is to be formed by name AB Ltd. (ii) AB Ltd. to take over all the assets and liabilities of the existing companies. (iii) For the purpose of amalgamation, the shares of the existing companies are to be va A Ltd. = 18 per share B Ltd. = 720 per share 3,00,000 1,70,000 14,80,000 4,50,000 3,80,000 3,50,000 2,60,000 40,000 14,80,000 S are to be valued as under.

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Answer 1

i) Purchase Consideration Calculation: Existing number of shares Value per share Total value of existing shares Value per new shares issued Number of shares to be issued A Ltd B Ltd 100,000 60,000 --> (a) *18 *20 --> (b) 1,800,000 * 1,200,000 --> (c) = (a) (b) *16 *16 --> (d) 10 + 6] 112,500 75,000 --> (c)/(d) It will be distributed as below: Share Capital Add: Securities Premium Total Purchase Consideration * 1,125,000 * 750,000 --> 112,500 x 10; 75,000 x *10] #675,000 450,000 --> 112,500 x 6; 75,000 x 6] 1,800,000 * 1,200,000

ii) Journal Entries in A Ltd's Books: Credit [Ref: Part-(i)] *1,800,000 General Journal Debit Credit By Realisation A/C * 2,440,000 To Land & Building A/C * 900,000 To Plant & Machinery A/C *500,000 To Inventory A/C *520,000 To Trade Receivables A/C *410,000 To Investment A/C *80,000 To Bank A/C *30,000 (To transfer assets to Realisation A/C) By Profit and Loss A/C *60,000 To Trade Payables A/c 30,000 (To treat the contingent liability as a real liability) By 10% Debentures A/C *500,000 By Trade Payables A/C 320,000 To Realisation A/C *820,000 (To transfer liabilities to Realisation A/C) General Journal Debit By AB Ltd A/C *1,800,000 To Realisation A/C (To record purchase consideration agreed for) By Share Capital A/C *1,000,000 By Securities Premium A/C *200,000 By General Reserve A/C *300,000 By Profit and Loss A/C *120,000 By Realisation A/C *180,000 To Shareholders A/C (To transfer balances to shareholders A/C) By Shareholders A/C * 1,800,000 To Shares in AB Ltd A/C (To close balance in Shareholders A/c) [*180000 - 360000] 1800000 +*820000 - 2440000] *1,800,000 *1,800,000 1260000 +*60000]

iii) Journal Entries in AB Ltd's Books: Credit Credit General Journal Debit By Land & Building A/C *900,000 By Plant & Machinery A/C *500,000 By Inventory A/C *520,000 By Trade Receivables A/C * 410,000 By Investment A/C *80,000 By Bank A/C * 30,000 By Goodwill A/C *180,000 To 10% Debentures A/C To Trade Payables A/c To Liquidator of A Ltd A/c (To account purchase consideration of A Ltd) By Liquidator of A Ltd A/c *1,800,000 To Share Capital A/C To Securities Premium A/C (To issue shares to Liquidator of A Ltd) General Journal Debit By Land & Building A/C * 450,000 By Plant & Machinery A/C * 380,000 By Inventory A/C *350,000 By Trade Receivables A/c *260,000 By Bank A/C * 40,000 By Goodwill A/C *190,000 To Secured Loan A/c To Trade Payables A/c To Liquidator of A Ltd A/C (To account purchase consideration of B Ltd) By Liquidator of B Ltd A/C *1,200,000 To Share Capital A/C To Securities Premium A/C (To issue shares to Liquidator of B Ltd) [Balancing figure] *300,000 *170,000 *1,200,000 [Balancing figure] *500,000 *320,000 *1,800,000 (Ref: Part-1)] 750,000 (Ref: Part-(i)] * 450,000 *1,125,000 (Ref: Part-1)] * 675,000

iv) Amalgamated Balance Sheet of AB Ltd (A Ltd and B Ltd amalgamated) Particulars Note No. Amount I. Equities and Liabilities (1) Shareholders' Fund (a) Share Capital 1,875,000 (b) Reserves and Surplus * 1,125,000 (2) Non-current Liabilities (a) Long-Term Borrowings 3 *800,000 (3) Current Liabilities (a) Trade Payables * 490,000 320000+ *170000] Total *4,290,000 II. Assets (1) Non Current Assets (a) Fixed Assets Tangible Assets * 2,230,000 Intangible Assets * 370,000 (b) Non-current Investment *80,000 (2) Current Assets (a) Inventories * 870,000 (7520000 + 350000] (b) Trade Receivables * 670,000 (R410000 +*260000] (c) Cash and Cash Equivalents *70,000 Total *4,290,000 Notes to Accounts 1. Share Capital 1,87,500 Equity Shares of 10 each fully paid up {1,875,000 (*1125000 + 3750000] (These shares have been issued for consideration other than cash) 2. Reserves and Surplus Securities Premium * 1,125,000 (+675000 + 450000] 3. Long-Term Borrowings Secured 10% Debentures *500,000 Secured Loan *300,000 $800,000 4. Fixed Assets (i) Tangible Assets Land & Building *1,350,000 (1900000 + 3450000] Plant and Machinery *880,000 * 2,230,000 500000 + 380000] (ii) Intangible Assets Goodwill *370,000 180000 +*190000] 5. Cash and Cash Equivalents Cash at Bank *70,000 30000 + 40000]