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

1.

Purchase Consideration
	A Ltd	B Ltd
No of O/s shares	100,000.00	60,000.00
Valued @ per share	18.00	20.00
So purchase consideration	1,800,000.00	1,200,000.00

2.

Journal Entry in books of A Ltd

Realisation a/c Dr	2440000
To Land and building		900000
To Plant and Machinery		500000
To Investment		80000
To Inventory		520000
To Trade Receivables		410000
To Cash		30000
(Assets trfd.)
10% Debentures Dr	500000
Trade payables Dr	260000
To Realisation a/c		760000
(Liabilities trfd)
Share holders' a/c Dr	60000
To Realisation a/c		60000
(Contingent libaility now recognised as actual)
Share capital a/c Dr	1000000
Securities premium a/c Dr	200000
General reserve a/c Dr	300000
Profit and Loss a/c Dr	180000
To Share holders' a/c		1680000
(Equities trfd to shareholders a/c)
AB Ltd a/c Dr	1800000
To Realisation a/c		1,800,000.00
(Purchase Consideration Receivable)
Realisation a/c Dr (Note 1)	180000
To Share Holder's a/c		180000
(Profit On realisation a/c trfd)
Shares in AB Ltd a/c Dr	1800000
To AB Ltd a/c		1,800,000
(Purchase consideration received)
Share holders' a/c Dr	1800000
To Shares in AB Ltd a/c		1800000
(Purchase consideration trfd to Shareholders)

3.

Journal entries in the books of AB Ltd.

Business Purchase a/c Dr	3,000,000
To Liquidators of A Ltd		1,800,000
To Liquidators of B Ltd		1,200,000
(Purchase consideration payable)
Land and building Dr	900000
Plant and Machinery Dr	500000
Investment dr	80000
Inventory dr	520000
Trade Receivables Dr	410000
Cash Dr	30000
Goodwill a/c Dr	180000
to Trade payable		260000
To 10% Debentures'		500000
To Other Liability		60000
To Business Purchase a/c		1,800,000
(Assets , Liabilities trfd along with Pucrhase consideration and balance trfd to goodwill
Land and building Dr	450000
Plant and Machinery Dr	380000
Inventory dr	350000
Trade Receivables Dr	260000
Cash Dr	40000
Goodwill a/c Dr	190,000
to Trade payable		170,000
To Secured Loans		300,000
To Business Purchase a/c		1,200,000
(Assets , Liabilities trfd along with Pucrhase consideration and balance trfd to goodwill
Liquidators of A Ltd Dr	1,800,000
To Share capital a/c (112500*10)		1125000
To securities Premium (112500*6)		675000
(1800000/16 = 112500 Shares)
(Purchase consideration discharged with shares of Face value Rs 10 with premium of 6 Rs per share)
Liquidators of A Ltd Dr	1,200,000
To Share capital a/c (75000*10)		750000
To securities Premium (75000*6)		450000
(1200000/16 = 7500 Shares)
(Purchase consideration discharged with shares of Face value Rs 10 with premium of 6 Rs per share)

4.

Balance Sheet of AB Ltd.

Assets
Land and building	900000+450000	1350000
Plant and Machinery	500000+380000	880000
Investment		80000
Inventory	520000+350000	870000
Trade Receivables	410000+260000	670000
Cash	30000+40000	70000
Goodwill a/c	180000+190000	370000
Total Assets		4290000
Liabilties and equity
Liability
Trade payable	260000+170000	430,000
10% Debentures'		500000
Other Liability		60000
Secured Loans		300,000
Total Liabilities		1,290,000
Equity
Share Capital	1125000+750000	1875000
Securities Premium	450000+675000	1125000
Total Equity		3000000
Total Liabilities & Equity		4,290,000

• Realisation Profit:

  To Assets	2,440,000.00	By Liabilities	760,000.00
  To Shareholders' a/c (Bal fig)	180,000.00	By AB Ltd	1,800,000.00
  		By Share holders' a/c	60,000.00
  TOTAL	2,620,000.00	TOTAL	2,620,000.00

• Please comment in case of any query regarding the solution.