CA/INTER/GR-II/COMPANY ACC/AMALGAMATION
AMALGAMATION PROBLEMS
PROBLEM NO.1
Balance Sheet of X Ltd. as on 31st March, 20X1:
Liabilities
Assets
Rs. (‘000)
Share Capital:
Rs. (‘000)
Land & Buildings
50,00
Equity Shares of Rs.10 each
14% Preference Shares of
75,00
Plant & Machinery
45,00
Rs.100 each
General Reserve
12% Debentures
Trade payables and other
Current liabilities
25,00
Furniture
Investments
10,50
5,00
12,50
40,00
Inventory
Trade receivables
Cash & Bank balance
23,00
24,00
15,00
_____
172,50
20,00
172,50
Other Information:

Y Ltd. takes over X Ltd. on 10th April, 20X1.

Debenture holders of X Ltd. are discharged by Y Ltd. at 10% premium by issuing
15% own debentures of Y Ltd.

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).

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.
Compute the purchase consideration.
PROBLEM NO.2
S. Ltd. is absorbed by P. Ltd. The draft balance sheet of S. Ltd. is as under:
Balance Sheet
Rs.
Share Capital:
2,000 7% Preference shares
of 100 each (fully paid-up)
5,000 Equity shares of Rs. 100
each (fully paid-up)
Reserves
6% Debentures
Trade payables
Rs.
Sundry Assets
13,00,000
2,00,000
5,00,000
3,00,000
2,00,000
1,00,000
-----------13,00,000
1
----------13,00,000
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P Ltd. has agreed:

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.
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%;
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
to assume the liability to trade payables.



You are required to calculate the purchase consideration.
PROBLEM NO.3
Y Ltd. decides to absorb X Ltd. The draft Balance Sheet of X Ltd. is as follows:
3,000 Equity shares of
Rs.100 each (fully paid)
Preference shares
3,00,000
60,000
---------3,60,000
Net assets
Profit and Loss Account
2,90,000
70,000
---------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?
PROBLEM NO.4
Following is the summarized Balance Sheet of X Co. Ltd. as at 31st March, 2012 :
Balance Sheet as at 31st March, 2012
Liabilities
Equity share capital (Rs.100
each)
11% Pref. share capital
General reserve
Sundry creditors
Rs. Assets
15,00,000 Land and Building
5,00,000 Plant and Machinery
3,00,000 Furniture and fittings
2,00,000 Stock in trade
Sundry debtors
Cash in hand and at
bank
25,00,000
Rs.
10,00,000
7,00,000
2,00,000
3,00,000
2,00,000
1,00,000
25,00,000
Y Co. Ltd. agreed to take over X Co. Ltd. on the following terms :
(i)
(ii)
(iii)
Each equity share in X Co. Ltd. for the purpose of absorption is to be value at
Rs.80
Equity shares will be issued by Y Co. Ltd by valuing its each equity share of
Rs.100 each at Rs.120 per share.
11% Preference shareholders of X Co. Ltd. will be given 11% redeemable
debentures of Y Co. Ltd. at equivalent value.
2
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(iv)
All the Assets and Liabilities of X Co. Ltd. will be recorded at the same value in
the books of Y Co. Ltd.
(a)
(b)
Calculate Purchase consideration.
Pass Journal entries in the books of Y Co. Ltd. for absorbing X co. Ltd.
PROBLEM NO.5
The financial position of two companies Hari Ltd. and Vayu Ltd. as on 31 st March, 2002
was as under:
Assets:
Goodwill
Building
Machinery
Stock
Debtors
Cash at Bank
Liabilities:
Share Capital:
Equity Shares of Rs.10 each
9% Preference Shares of Rs.100 each
10% Preference Shares of Rs.100each
General Reserve
Retirement Gratuity fund
Sundry Creditors
Hari Ltd.
(Rs.)
50,000
3,00,000
5,00,000
2,50,000
2,00,000
50,000
----------13,50,000
Vayu Ltd. (Rs.)
10,00,000
1,00,000
-70,000
50,000
1,30,000
----------13,50,000
3,00,000
-1,00,000
70,000
20,000
80,000
----------5,70,000
25,000
1,00,000
1,50,000
1,75,000
1,00,000
20,000
----------5,70,000
Hari Ltd. absorbs Vayu Ltd. on the following terms:
(a)
(b)
10% Preference Shareholders are to be paid at 10% premium by issue of
9% Preference Shares of Hari Ltd.
Goodwill of Vayu Ltd. is valued at Rs.50,000, Buildings are valued at Rs.1,50,000
and the Machinery at Rs.1,60,000.
(c)
Stock to be taken over at 10% less value and Reserve for Bad and Doubtful
Debts to be created @ 7.5%.
(d)
Equity Shareholders of Vayu Ltd. will be issued Equity Shares @ 5% premium.
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.
3
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PROBLEM NO.6
The following are the Balance sheets of M Ltd. and N Ltd. as at 31st March, 2009:
Liabilities
Fully paid equity shares of Rs.10 each
10% preference Shares of Rs.10 each, fully paid up
Capital Reserve
General Reserve
Profit and Loss Account
8% Redeemable debentures of Rs.1,000 each
Trade Creditors
Provisions
M Ltd. (Rs.)
3,600
1,200
600
2,100
780
-2,421
870
--------11,571
Assets
Plant and Machinery
Furniture and Fixtures
Motor Vehicles
Stock
Sundry Debtors
Cash at Bank
Preliminary Expenses
Discount on Issue of Debentures
4,215
2,400
-2,370
1,044
1,542
----------11,571
Rs.. in lakhs.
N Ltd.(Rs.)
900
----300
369
93
------1,662
468
183
51
444
237
240
33
6
------1,662
A new Company MN Ltd. was got incorporated with an authorized capital of
Rs.15,000 lakhs divided into shares of Rs.10 each. For the purpose of amalgamation in
the nature of merger, M Ltd. and N Ltd. were merged into MN Ltd. on the following
terms:
(i)
Purchase consideration for M Ltd.’s business is to be discharged by issue of
120 lakhs fully paid 11% preference shares and 720 lakhs fully paid equity shares
of MN Ltd. to the preference and equity shareholders of M Ltd. in full satisfaction
of their claims.
(ii)
To discharge purchase consideration for N Ltd.’s business, MN Ltd. to allot
90 lakhs fully paid up equity shares to shareholders of N Ltd. in full satisfaction of
their claims.
(iii) Expenses on the liquidation of M Ltd. and N Ltd. amounting to Rs.6 lakhs are to be
borne by MN Ltd.
(iv) 8% redeemable debentures of N Ltd. to be converted into 8.5% redeemable
debentures of MN Ltd.
(v)
Expenses on incorporation of MN Ltd. were Rs.15 lakhs.
You are requested to:
(a)
Pass necessary Journal Entries in the books of MN Ltd. to record above
transactions, and
(b)
Prepare Balance Sheet of MN Ltd. after merger.
4
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PROBLEM NO.7
Consider the following summarized balance sheets of X Ltd. and Y Ltd.
Balance Sheet as on 31st March, 20X1
Liabilities
Equity Share Capital
(Rs.10 each)
14% Preference
Share Capital
(Rs. 100 each)
General Reserve
Export Profit
Reserve
Investment
Allowance Reserve
Profit & Loss A/c
13% Debentures
(Rs. 100 each)
Trade payables
Other Current
Liabilities
X Ltd.
Y Ltd.
Assets
Rs.(‘000) Rs.(‘000)
50,00
30,00 Land & Building
Plant & Machinery
22,00
17,00 Furniture & Fittings
Investments
Inventory
5,00
2,50 Trade receivables
Cash & Bank
3,00
2,00
7,50
5,00
1,00
5,00
3,50
4,50
3,50
2,00
99,00
1,50
66,00
X Ltd.
Rs. (‘000)
25,00
32,50
5,75
7,00
12,50
9,00
7,25
Y Ltd.
Rs. (‘000)
15,50
17,00
3,50
5,00
9,50
10,30
5,20
99,00
66,00
X Ltd. takes over Y Ltd. on 1st April, 20X1. X Ltd. discharges the purchase consideration
as below:

Issued 3,50,000 equity shares of Rs. 10 each at par to the equity shareholders of
Y Ltd.

Issued 15% preference shares of Rs. 100 each to discharge the preference
shareholders of Y 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:

the amalgamation is in the nature of merger.

the amalgamation is in the nature of purchase.
PROBLEM NO.8
Super Express Ltd. and Fast Express Ltd. were in competing business. They decided to
form a new company name Super Fast Express Ltd. The balance sheets of both the
companies were as under:
Super Express Ltd.
Balance sheet as at 31st December, 1999
Rs.
Rs.
20,000 Equity shares of
Buildings
10,00,000
Rs.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
5
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Fast Express Ltd.
Balance Sheet as at 31st December, 1999
Rs.
10,000 Equity shares of
Rs.100 each
Employees profit sharing
account
Sundry creditors
Reserve account
Surplus
Goodwill
10,00,000 Buildings
Machinery
60,000 Stock
40,000 Sundry debtors
1,00,000 Cash at bank
1,00,000 Cash in hand
13,00,000
Rs.
1,00,000
6,00,000
5,00,000
40,000
40,000
10,000
10,000
13,00,000
The assets and liabilities of both the companies were taken over by the new company
at 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.
PROBLEM NO.9
Wye Ltd. acquires the business of Zed Ltd. whose summarised balance sheet on
31st December, 20X1 is as under :
Liabilities
Rs.
Assets
Rs.
Share capital divided into
Goodwill
2,00,000
shares of Rs. 100 each
Land & Buildings
4,00,000
6,00,000
6% Preference share capital
4,00,000
Plant and Machinery
Equity share capital
8,00,000
Patents
Capital Reserve
1,00,000
Inventory
1,50,000
Trade receivables
1,80,000
Profit & Loss A/c
6% Debentures
Interest outstanding on
above
Workmen’s compensation
reserve (Expected liability
Rs. 5,000)
Trade payables
50,000
2,00,000
12,000
50,000
Cash at bank
Underwriting
commission
70,000
40,000
8,000
1,20,000
----------16,90,000
----------16,90,000
Wye Ltd. was to take over all assets (except cash) and liabilities (except for interest
due on debentures) and to pay following amounts:

Rs. 2,00,000 7% Debentures (Rs. 100 each) in Wye Ltd. for the existing
debentures in Zed Ltd.; for the purpose, each debenture of Wye Ltd. is to be
treated as worth Rs. 105.

For each preference share in Zed Ltd. Rs. 10 in cash and one 9% preference
share of Rs. 100 each in Wye Ltd.
6
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CA/INTER/GR-II/COMPANY ACC/AMALGAMATION

For each equity share in Zed Ltd. Rs. 20 in cash and one equity share in Wye Ltd.
of Rs. 100 each having the market value of Rs. 140.

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.
Write journal entries and prepare accounts in the books of Zed Ltd.
PROBLEM NO.10
The Balance sheets of X co. Ltd. and Y Co. Ltd. as on 31st October, 2002 are as
follows:Balance Sheet of X Co, Ltd.
Liabilities
Rs.
Share Capital:
Authorised Capital:
10,000 Shares of Rs.100 each 10,00,000
-----------Issued Capital
10,000 shares of Rs.100 each
fully paid
Reserves and surplus:
Capital reserve
2,00,000
General reserve
70,000
Unsecured loans :
Sundry Creditors
Assets
Fixed Assets
Good Will
80,000
Other
8,00,000
Current Assets:
Loans and advances
Rs.
8,80,000
9,00,000
10,00,000
2,70,000
2,00,000
3,10,000
----------17,80,000
-------------
----------17,80,000
-----------
Balance Sheet of Y Co. Ltd.
Liabilities
Share capital:
Authorised Capital
2,00,000 Shares of Rs.10 each
Issued Capital:
80,000 share of Rs.10 each
Reserve and Surplus:
General reserve
Secured Loans
Sundry creditors
Rs.
Assets
Rs.
Fixed assets:
16,00,000
Current assets,
20,00,000 Loan and Advances:
----------Bank
2,00,000
Other
6,60,000
8,00,000
8,60,000
8,00,000
5,00,000
3,60,000
-----------24,60,000
7
-----------24,60,000
VIJAYAWADA. Ph:9494528337
CA/INTER/GR-II/COMPANY ACC/AMALGAMATION
It was proposed that X Co. Ltd. should be taken over by Y Co. Ltd.
arrangement was accepted by both the companies:[a]
[b]
[c]
The following
Goodwill of X Co. Ltd is considered valueless.
Arrears of depreciation in X Co. Ltd amounted to Rs.40,000.
The holder of every 2 shares in X co. Ltd. was to receive:[i] as fully paid at par, 10 shares in Y Co, Ltd, and [ii] so much cash as is
necessary to adjust the right of shareholders of both the companies in
accordance with the intrinsic value of the shares as per their balance sheets
subject to necessary adjustment with regard to goodwill and depreciation in
X Co. Ltd.'s Balance Sheet.
You are required to:[a] Determine the composition of purchase consideration; and
[b] Show the Balance Sheet after absorption.
PROBLEM NO.11
Exe Ltd. is absorbed by Wye Ltd. Given below are the Balance Sheets of the two
Companies prepared after revaluation of their assets on uniform basis
Balance Sheet of Exe Limited
------------------------------------------------------------------------------------------------Liabilities
Rs.
Assets
Rs.
Authorised Share capital
Sundry Assets
16,85,000
9,000 Equity Shares of Rs. 150 each 13,50,000 Cash in hand
3,500
Paid up Share Capital:
9,000 Equity Shares of Rs.150 each
Rs.135 Paid up
12,15,000
General Reserve
4,03,500
Profit & Loss A/c
15,000
Sundry Creditors
55,000
---------------------16,88,500
16,88,500
Balance Sheet of Wye Limited
------------------------------------------------------------------------------------------------Liabilities
Rs.
Assets
Rs.
Authorised Share capital
Sundry Assets
43,57,500
60,000 Equity Share of
Rs.75 each
45,00,000
Cash In hand
27,500
Paid up Share capital:
40,000 Equity Shares of
Rs.75 paid up
30,00,000
General reserve
12,85,000
Profit & Loss A/c
35,000
Sundry Creditors
65,000
--------------------43,85,000
43,85,000
8
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The holder of every three Shares in Exe Ltd was to receive five Shares in the Wye
Ltd. plus as much cash as is necessary to adjust the rights of shareholders of
both the companies in accordance with the intrinsic values of the share as per the
respective Balance Sheets.
Pass necessary journal entries in the books of Wye Ltd. and prepare the Balance Sheet
giving effect to the above scheme of absorption. Entries are to be made at par value
only.
PROBLEM NO. 12
K Ltd. and L Ltd. amalgamate to form a new company LK Ltd. The financial position of
these two companies on the date of amalgamation was as under:
----------------------------------------------------------------------------------------------K Ltd
L Ltd
K Ltd
L Ltd
Share Capital
Goodwill
80,000
Equity Shares
Land & Building
4,50,000
3,00,000
of Rs.100 each 8,00,000 3,00,000
Plant & Machinery 6,20,000
5,00,000
7% Preference Share
Furniture and
of Rs. 100 each
4,00,000 3,00,000
Fittings
60,000
20,000
5% Debentures
2,00,000
—
Trade receivables 2,75,000
1,75,000
General Reserve
—
1,00,000
Stores & inventory 2,25,000
1,40,000
Profit and Loss
Cash at Bank
1,20,000
55,000
Account
3,71,375
97,175
Cash in hand
41,375
17,175
Trade payables
1,00,000 2,10,000
Secured Loan
-2,00,000
------------------------------------------------------------------------------------------------------18,71,375 12,07,175
18,71,375
12,07,175
The terms of amalgamation are as under:

(1) The assumption of liabilities of both the Companies.

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.

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.

Issue of such amount of fully paid 6% debentures in LK Ltd. as is sufficient to
discharge the 5% debentures in K Ltd. at a discount of 5% after takeover.

The assets and liabilities are to be taken at book values inventory and trade
receivables for which provisions at 2% and 2 ½ % respectively to be raised.


The trade receivables 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 up
at premium of Rs. 4 per share so as to have sufficient working capital. Prepare
ledger accounts in the books of K Ltd. and L Ltd. to close their books.
9
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PROBLEM NO. 13
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
---
Loans from Banks
250
450
Bank overdrafts
---
50
Trade payables
300
300
---
Total
4,050
1,800
2,700
850
Investments
700
---
Trade receivables
400
150
Cash at bank
250
---
---
800
4,050
1,800
Assets
Tangible assets/fixed assets
Accumulated loss
Total
B Ltd. has acquired the business of
was approved:




A Ltd.
The following scheme of merger
Banks agreed to waive off the loan of Rs. 60 thousands of B Ltd.
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).
Shareholders of A Ltd. will be given one share (new) of B Ltd. in exchange of
every share held in A Ltd.
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.
PROBLEM NO. 14
The following are the summarized Balance Sheets of P Ltd. and Q Ltd. as on
31st March, 20X1:
Liabilities
P Ltd.
Q Ltd.
Rs.
Rs.
Share Capital
Equity Shares of
Rs. 10 each
Assets
Fixed Assets
Investment
6,00,000
P Ltd.
Q Ltd.
Rs.
Rs.
7,00,000
2,50,000
80,000
80,000
3,00,000
10
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10% Pref. Shares of
Rs. 100 each
2,00,000
1,00,000
Reserves
Surplus
3,00,000
2,00,000
2,00,000
1,50,000
2,50,000
15,50,000
1,50,000
9,00,000
and
Current Assets:
Inventory
Trade receivables
Cash at Bank
2,40,000
4,20,000
1,10,000
3,20,000
2,10,000
40,000
15,50,000
9,00,000
Secured Loans:
12% Debentures
Current Liabilities:
Trade payables
Details of Trade receivables and trade payables are as under:
P Ltd. (Rs.)
Q Ltd. (Rs.)
3,60,000
1,90,000
60,000
20,000
4,20,000
2,10,000
2,20,000
1,25,000
30,000
25,000
2,50,000
1,50,000
Trade receivables
Debtors
Bills Receivable
Trade payables
Sundry Creditors
Bills Payable
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:




8 Equity Shares of Rs. 10 each will be issued by P Ltd. at par against 6 shares of
Q Ltd.
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.
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%.
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:

Journal entries in the books of P Ltd.

Statement of consideration payable by P Ltd.
11
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CA/INTER/GR-II/COMPANY ACC/AMALGAMATION
PROBLEM NO. 15
The following draft Balance Sheets are given as on 31st March, 20X1:
(Rs. in lakhs)
(Rs. in lakhs)
Best
Ltd.
Better
Ltd.
Best
Ltd.
Rs.
Rs.
Better
Ltd.
Share Capital:
Fixed Assets
Rs.
25
Shares of Rs. 100, each
Investments
5
–
20
5
fully paid
20
10
Reserve and Surplus
10
8
Other Liabilities
20
2
50
20
Current Assets
Rs.
15
_______________
50
20
.
The following further information is given —

Better Limited issued bonus shares on 1st April, 20X1, in the ratio of one share
for every two held, out of Reserves and Surplus.

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.

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.

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.
PROBLEM NO.16
The following were the summarized Balance Sheets of P Ltd. and V Ltd. as at
31st March, 20X1:
Liabilities
P Ltd.
V Ltd.
(Rs. in lakhs) (Rs. in lakhs)
Equity Share Capital (Fully paid shares of Rs. 10 each)
15,000
6,000
3,000
–
–
310
General Reserve
9,500
3,200
Profit and Loss Account
2,870
825
Securities Premium
Foreign Project Reserve
12
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CA/INTER/GR-II/COMPANY ACC/AMALGAMATION
12% Debentures
–
1,000
Trade payables
1,200
463
Provisions
1,830
702
33,400
12,500
P Ltd.
V Ltd.
(Rs. in lakhs) (Rs. in lakhs)
Land and Buildings
Plant and Machinery
Furniture, Fixtures and Fittings
Inventory
Trade receivables
Cash at Bank
Cost of Issue of Debentures
6,000
14,000
2,304
7,862
2,120
1,114
—
33,400
–
5,000
1,700
4,041
1,100
609
50
12,500
All the bills receivable held by V Ltd. were P Ltd.’s acceptances.
On 1st April 20X1, 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 the same amount and denomination.
Details of trade receivables and trade payables as under:
Assets
P Ltd.
(Rs. in lakhs)
V Ltd.
(Rs. in
lakhs)
Trade payables
Bills Payable
Creditors
Trade receivables
Trade receivables
Bills Receivable
120
-
1,080
1,200
463
463
2,120
—
2,120
1,020
80
1,100
Expenses of amalgamation amounting to Rs. 1 lakh were borne by P Ltd. You are
required to :

Pass journal entries in the books of P Ltd. and

Prepare P Ltd.’s Balance Sheet immediately after the merger considering that the
cost of issue of debentures shown in the balance sheet of the V Ltd. company is
not transferred to the P Ltd. company.
13
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CA/INTER/GR-II/COMPANY ACC/AMALGAMATION
PROBLEM NO.17
Given below balance sheets of Vasudha Ltd. and Vaishali Ltd. as at 31st March, 2012.
Liabilities
Share Capital:
Equity Shares of
Rs.10 each
General Reserves
Profit & Loss A/c
Sundry Creditors
Vasudha
Ltd.
Vaishali
Ltd.
Assets
5,40,000
86,000
66,000
44,400
7,36,400
Factory Building
Debtors
4,03,300 Stock
54,990 Goodwill
43,500 Cash at Bank
58,200
5,59,990
Vasudha
Ltd.
2,10,000
2,86,900
91,500
50,000
98,000
Vaishali
Ltd.
1,60,000
1,72,900
82,500
35,000
1,09,590
7,36,400
5,59,990
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 of its
cost.
It is decided that Vasudha Ltd. will absorb Vaisahli Ltd. by taking over its entire
business by issue of shares at the Intrinsic Value.
You are required to draft balance sheet of Vasudha Ltd. after putting through the
scheme.
PROBLEM NO.18
The following was the Balance Sheet of V Ltd. as on 31st March, 2012 :
Particulars
Note No.
Equity and Liabilities
(1) Shareholder’s Funds
(a) Share capital
(b) Reserves and Surplus
(2) Non-current Liabilities
(a) Long-term Borrowings
(3) Current Liabilities
Trade Payable
1
2
1,150
(87)
3
630
170
1,863
Total
Assets
(1)
Non-current Assets
Tangible Assets
(2)
Current Assets
Inventories
Trade Receivables
Cash and Cash equivalents
4
5
Total
Notes :
(1)
Share Capital
Authorised :
Issued, Subscribed and Paid up :
80 lakh Equity shares of Rs.10 each, fully paid up
35 lakh 12% Cumulative Preference Shares of Rs.10 each,
fully paid up
Total
14
Amount
Rs. (In lakh)
1,152
380
256
75
1,863
?
800
350
1,150
VIJAYAWADA. Ph:9494528337
CA/INTER/GR-II/COMPANY ACC/AMALGAMATION
(2)
Reserves and Surplus
Debit Balance of Profit & Loss Account
(3)
Long-term Borrowings
10% Secured Cumulative Debentures of Rs.100 each,
full paid up
Outstanding Debenture Interest
(4)
(5)
Total
(87)
(87)
Total
600
30
630
Total
445
593
114
1,152
Total
69
6
75
Tangible Assets
Land and Buildings
Plant and Machinery
Furniture, Fixtures and Fittings
Cash and Cash Equivalents
Balance at Bank
Cash in hand
On 1st April, 2012 P Ltd. took over the entire business of V Ltd. on the following terms.
V Ltd.’s equity shareholders would receive 4 fully paid equity shares of P Ltd. of Rs.10
each issued at a premium of Rs.2.50 each for every five shares held by them in V Ltd.
Preference shareholders of V Ltd. would get 35 lakh 13% Cumulative Preference
Shares of Rs.10 each fully paid up in P Ltd., in lieu of their present holding.
All the debentures of V Ltd. would be converted into equal number of 10.5% Secured
Cumulative Debentures of Rs.100 each, fully paid up after the take over by P Ltd.,
which would also pay outstanding debenture interest in cash.
Expenses of amalgamation would be borne by P Ltd. Expenses came to be Rs. 2 lakh
P Ltd. discovered that its creditors included Rs.7 lakh due to V Ltd. for goods
purchased.
Also P Ltd.’s stock included goods of the invoice price of Rs.5 lakh earlier purchased
from V Ltd., which had charged profit @ 20% of the invoice price.
You are required :
(i)
Prepare Realisation A/c in the books of V Ltd.
(ii)
Pass journal entries in the books of P Ltd. assuming it to be an amalgamation in
the nature of merger.
PROBLEM NO.19
The following are the summarized Balance Sheets of X Ltd. and Y Ltd.
X Ltd.
Rs.
Liabilities:
Share Capital
Profit & Loss A/c
Creditors
Loan from X Ltd.
1,00,000
10,000
25,000
----------1,35,000
15
Y Ltd.
Rs.
50,000
-5,000
15,000
-------70,000
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CA/INTER/GR-II/COMPANY ACC/AMALGAMATION
Assets:
Sundry Assets
Loan to Y Ltd.
Profit & Loss A/c
1,20,000
15,000
----------1,35,000
60,000
-10,000
-------70,000
A new company XY Ltd. is formed to acquired the sundry assets and creditors of
X ltd. and Y Ltd. and for this purpose, the sundry assets of X Ltd. are revalued at
Rs.1,00,000. The debt due to X Ltd. is also to be discharged in shares of XY Ltd.
Write entries and Show the Ledger Accounts to close the books of X Ltd.
[Ans: Loss on realization Rs.20,000]
PROBLEM NO. 20
Sun Ltd. and Moon Ltd. were amalgamated on and from 1 st April, 2009. A new
company Star Ltd. was formed to take over the business of the existing companies.
The Balance sheets of Sun Ltd. and Moon Ltd. as at 31st March, 2009 are given below:
(Rs. in Lakhs)
Liabilities
Share Capital:
Equity Shares of Rs.100 each
12% Preference shares of Rs.100
Reserves and Surplus
Revaluation reserve
General reserve
Investment allowance reserve
P & L Account
Secured Loan
10% Debentures (Rs.100 each)
Current Liabilities and
Provisions:
Sundry Creditors
Acceptance
Sun
Ltd.
Moon
Ltd.
400
150
375
100
75
85
25
25
50
75
25
15
30
15
135
75
1,000
60
35
750
Assets
Fixed Assets
Land & Building
Plant & Machinery
Investments
Current Assets,
Loans and
Advances
Stock
Sundry Debtors
Bills Receivables
Cash and Bank
Sun
Ltd.
Moon
Ltd.
275
175
200
125
75
25
175
125
25
150
125
150
25
100
1,000
750
Additional information:
(a)
Star Ltd. will issue 5 equity shares for each equity share of Sun Ltd. and 4 equity
shares for each equity share of Moon Ltd. The shares are to be issued @ Rs.30
each, having a face value of Rs.10 per share.
(b)
Preference shareholders of the two companies are issued equivalent number of
15% preference shares of Star Ltd. at a price of Rs.150 per share (face value
Rs.100)
(c)
10% Debentureholders of Sun Ltd. and Moon Ltd. are discharged by Star Ltd.,
issuing such number of its 15% Debentures of Rs.100 each so as to maintain the
same amount of interest.
16
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CA/INTER/GR-II/COMPANY ACC/AMALGAMATION
(d)
Investment allowance reserve is to be maintained for 4 more years.
(e)
Liquidation expenses are:
Sun Ltd.
Rs.2,00,000
Moon Ltd.
Rs.1,00,000
It was decided that these expenses would be borne by Star Ltd.
(f)
All the assets and liabilities of Sun Ltd. and Moon Ltd. are taken over at book
value.
(g)
Authorized equity share capital of Star Ltd. is Rs.500 Lakhs, divided into equity
shares of Rs.10 each. After issuing required number of shares to the Liquidators
of Sun Ltd. and Moon Ltd., Star Ltd. issued balance shares to Public. The issue
was fully subscribed.
Required:
Prepare the Balance Sheet of Star Ltd. as at 1st April, 2009 after amalgamation has
been carried out on the basis of Amalgamation in the nature of Purchase.
PROBLEM NO.21
Summarized Balance Sheets as on 31st March, 2012
Liabilities
Equity share
capital
(Rs.10 per share)
14% Pref. capital
(Rs.100 each)
General reserve
Export project res.
Investment Res.
Profit and loss A/c
15% Debentures
Trade creditors
Bills payables
Other liabilities
Gee Ltd.
Rs.
25,00,000
Pee Ltd.
Rs.
15,00,000
11,00,000
8,50,000
2,50,000
1,50,000
3,75,000
2,50,000
1,50,000
75,000
1,00,000
49,50,000
2,50,000
1,00,000
50,000
1,25,000
1,75,000
75,000
1,00,000
75,000
33,00,000
Assets
Buildings
Plant and
machinery
Furniture and
fixtures
Investments
Stock
Debtors
Bills receivables
Cash at bank
Gee Ltd.
Rs.
12,50,000
Pee Ltd.
Rs.
7,75,000
16,25,000
8,50,000
2,87,500
3,50,000
6,25,000
4,00,000
50,000
3,62,500
1,75,000
2,50,000
4,75,000
4,60,000
55,000
2,60,000
49,50,000
33,00,000
All the bills receivables of Pee Ltd. were having Gee Ltd.’s acceptances.
Gee Ltd. takes over Pee Ltd. on 1st April, 2012.
discharged as follows :
(i)
(ii)
(iii)
(iv)
(v)
The purchase consideration is
Issued 1,65,000 equity shares of Rs.10 each at par to the equity shareholders of
Pee Ltd.
Issued 15% preference shares of Rs.100 each to discharge the preference
shareholders.
Debentures of Pee Ltd. will be converted into equivalent no. of debentures of
Gee Ltd.
The statutory reserves of Pee Ltd. are to be maintained for two more years.
Expenses of amalgamation amounting to Rs.10,000 will be borne by Gee Ltd.
17
VIJAYAWADA. Ph:9494528337
CA/INTER/GR-II/COMPANY ACC/AMALGAMATION
Show the opening Journal entries and the opening balance sheet of Gee Ltd. as at
1st April, 2012 after amalgamation, on the assumption that the amalgamation is in the
nature of the merger.
PROBLEM NO.22
Star and Moon had been carrying on business independently. They agreed to
amalgamate and form a new company Neptune Ltd. with an authorised share capital of
Rs.2,00,000 divided into 40,000 equity shares of Rs.5 each.
On 31st December, 1995, the respective Balance Sheets of Star and Moon were as
follows:
Star
Rs.
3,17,500
1,63,500
4,81,000
2,98,500
1,82,500
Fixed Assets
Current Assets
Less: Current Liabilities
Representing Capital
Moon
Rs.
1,82,500
83,875
2,66,375
90,125
1,76,250
Additional Information:
(a) Revalued figures of Fixed and Current Assets were as follows:
Star
Rs.
3,55,000
1,49,750
Fixed Assets
Current Assets
(b)
Moon
Rs.
1,95,000
78,875
The debtors and creditors - include Rs.21,675 owed by Star to 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
2,24,788
(1,250)
1,88,962
1993 Profit
1994 (Loss)/Profit
1995 Profit
(ii)
Moon
1,36,950
1,71,050
1,79,500
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, 1995 after revaluation of assets.
You are requested to:
(1)
Compute the amount of debentures and shares to be issued to Star and Moon.
(2)
A Balance Sheet of Neptune Ltd., showing the position immediately after
amalgamation.
18
VIJAYAWADA. Ph:9494528337
CA/INTER/GR-II/COMPANY ACC/AMALGAMATION
PROBLEM NO.23
Neel Ltd. and Gagan Ltd. amalgamated to form a new company on 1.04.2012.
Following is the Draft Balance Sheet of Neet Ltd. and Gagan Ltd. as at 31.3.2012 :
Liabilities
Capital
Current
Liabilities
Neel
Rs.
7,75,000
6,23,500
13,98,500
Gagan
Assets
Rs.
8,55,000 Plant &
5,57,600 Machinery
Building
Current assets
14,12,600
Neel
Rs.
Gagan
Rs.
4,85,000
6,14,000
7,50,000
6,40,000
1,63,500
1,58,600
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 Neel Ltd. includes Rs.50,000 due to Gagan Ltd. for
made. Gagan Ltd. made a profit of 20% on sale to Neel Ltd.
the purchases
(iii) Neel Ltd. had purchased goods costing Rs.10,000 from the Gagan Ltd. All these
goods are included in the current asset of Neel Ltd. as at 31st March, 2012.
(iv)
(v)
The assets of Neel Ltd. and Gagan Ltd. are to be revalued as under :
Neel
Rs.
Plant and machinery
5,25,000
Building
7,75,000
Gagan
Rs.
6,75,000
6,48,000
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
Rs.
2,62,800
2,12,200
4,75,000
1st year
2nd year
Total
(c)
Gagan
Rs.
2,75,125
2,49,845
5,25,000
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
31.3.2012 after revaluation of asset 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.
19
VIJAYAWADA. Ph:9494528337
CA/INTER/GR-II/COMPANY ACC/AMALGAMATION
PROBLEM NO.24
The following is the summarized Balance Sheet of A Ltd. as at 31st March, 2012:
Liabilities
8,000 equity shares
Rs.100 each
10% debentures
Loan from A
Creditors
General Reserve
of
Rs. Assets
8,00,000 Building
Machinery
4,00,000 Stock
1,60,000 Debtors
3,20,000 Bank
80,000 Goodwill
Share issue Expenses
17,60,000
Rs.
3,40,000
6,40,000
2,20,000
2,60,000
1,36,000
1,30,000
34,000
17,60,000
B Ltd. agreed to absorb A Ltd. on the following terms and conditions:
(1)
B 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)
B Ltd. is to take over creditors at book value.
(3)
The purchase consideration is to be paid in cash to the extent of Rs.6,00,000 and
the balance in fully paid equity shares of Rs.100 each at Rs.125 per share.
The average profit is Rs.1,24, 400. The liquidation expenses amounted to Rs.16, 000.
B Ltd. sold prior to 31st March, 2012 goods costing Rs.1,20,000 to A Ltd. for
Rs.1,60,000. Rs.1,00,000 worth of goods are still in stock of A Ltd. on 31st March,
2012. Creditors of A Ltd. include Rs.40,000 still due to B Ltd.
Show the necessary Ledger Accounts to close the books of A Ltd. and prepare
the Balance Sheet of B Ltd. as at 1st April, 2012 after the takeover.
PROBLEM NO.25
Ram Limited and Shyam Limited carry on business of a similar nature and it is agreed
that they should amalgamate. A new company, Ram and Shyam Limited, is to be
formed to which the assets and liabilities of the existing companies, with certain
exception, are to be transferred. On 31st March 2011, the Balance Sheets of the two
companies were as under:
Ram Limited
Balance Sheet as at 31st March, 2011
Liabilities
Share Capital:
30,000 Equity Shares
Rs.10 each, fully paid
General Reserve
Profit and Loss Account
Sundry Creditors
Rs.
of
3,00,000
1,60,000
40,000
1,50,000
6,50,000
20
Assets
Freehold Property, at cost
Plant and Machinery, at cost
less Depreciation
Motor Vehicles, at cost
less Depreciation
Stock
Debtors
Cash at Bank
Rs.
2,10,000
50,000
20,000
1,20,000
1, 64,000
86,000
6,50,000
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CA/INTER/GR-II/COMPANY ACC/AMALGAMATION
Shyam Limited
Balance Sheet as at 31st March, 2011
Rs. Assets
Liabilities
Share Capital:
Freehold Property, at cost
16,000 Equity Shares of
Plant and Machinery, at cost
Rs.10 each, fully paid
1,60,000 less Depreciation
Profit and Loss Account
40,000 Stock
6% Debentures
1,20,000 Debtors
Sundry Creditors
6,4000 Cash at Bank
3,84,000
Rs.
1,20,000
30,000
1,56,000
42,000
36,000
3,84,000
Assets and Liabilities are to be taken at book-value, with the following exceptions:
(a)
(b)
(c)
(d)
Goodwill of Ram Limited and of Shyam Limited is to be valued at Rs.1,60,000 and
Rs.60,000 respectively.
Motor Vehicles of Ram Limited are to be valued at Rs.60,000.
The debentures of Shyam Limited are to be discharged by the issue of 6%
Debentures of Ram and Shyam Limited at a premium of 5%.
The Debtors of Shyam Ltd. realized fully and Bank Balance of Shyam Limited are
to be retained by the liquidator and the Sundry Creditors of Shyam Lid. are to be
paid out of the proceeds thereof.
You are required to:
(i)
(ii)
Compute the basis on which shares in Ram and Shyam Limited will be issued to
the Shareholders of the existing companies assuming that the nominal value of
each share in Ram and Shyam Limited is Rs.10.
Draw up a Balance Sheet of Ram and Shyam Limited as of 1 st April, 2011, the
date of completion of amalgamation.
(iii) Write up Journal entries, including Bank entries, for closing the books of Shyam
Limited.
PROBLEM NO.26
The summarised Balance Sheet of Mars Limited as on 31st March, 2012 was as follow:
Liabilities
Share Capital.
1,00,000 Equity shares of
Rs.10 each fully paid up
Reserve and surplus:
Capital reserve
Contingency reserve
Profit and loss A/c
Current Liabilities &
Provisions:
Bills payable
Sundry creditors
Provision for income tax
Rs.
10,00,000
42,000
2,70,000
2,52,000
40,000
2,26,000
2,20,000
20,50,000
21
Assets
Fixed Assets:
Land and building
Current Assets:
Stock
Sundry debtors 1,60,000
Less : Provision for
doubtful debts
(8,000)
Bill receivable
Cash at bank
Rs.
7,64,000
7,75,000
1,52,000
30,000
3,29,000
20,50,000
VIJAYAWADA. Ph:9494528337
CA/INTER/GR-II/COMPANY ACC/AMALGAMATION
On 1st April, 2012, Jupiter Limited agreed to absorb Mars Limited on the following
terms and conditions:
(1)
Jupiter Limited will take over the assets at the following values:
Rs.
Land and building
10,80,000
Stock
7,70,000
Bills receivable
30,000
(2)
Purchase consideration will be settled by Jupiter Ltd. as under:
4,100 fully paid 10% preference shares of Rs.100 will be issued and the balance
will be settled by issuing equity shares of Rs.10 each at Rs.8 paid up.
(3)
Liquidation expenses are to be reimbursed by Jupiter Ltd. to the extent of
Rs.5,000.
(4)
Sundry debtors realized Rs.1,50,000. Bills payable were settled for Rs.38,000.
Income tax authorities fixed the taxation liability at Rs.2,22,000 and the same
was paid.
(5)
Creditors were finally settled with cash remaining after meeting liquidation
expenses amounting to Rs.8,000.
You are required to:
(i)
Calculate the number of equity shares and preference shares to be allotted by
Jupiter Limited in discharge of purchase consideration
(ii)
Prepare the Realisation account, Bank account, Equity shareholders account and
Jupiter Limited’s account in the books of Mars Ltd.
22
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