Q1.M Ltd.is absorbed by N Ltd.

agrees to make the following payments:

*Cash Rs.8 per share for 20,000 shares of Rs.10 each issued by M Ltd.
*Issue three shares of Rs.15 each every five shares held in M Ltd.
*Discharge Rs 2,00,00011% debentures of M Ltd.at 10% premium by issuing 12% debentures in N
Ltd at par.
*13% preference shareholders of Rs.2,00,000 (Face value of Rs.100 each) of M Ltd. are discharged at a premium of
20% by issuing necessary number of 16% preference shares of N Ltd.(Face value Rs.100 each)
*Rs.30,000 cash to creditors by M Ltd. in final settlement of their account.
Determine the amount of purchase consideration as per AS-14.

Q2. Star Limited agreed to take over Moon Limited on 1st April,2022.The terms and conditions of takeover were as
follows:
i)Star Limited issued 70,000 Equity shares of ₹100 each at a premium of ₹10 per share to the equality shareholders of
Moon Limited.
ii)Cash payment of ₹1,25,000 was made to the equity shareholders of Moon Limited.
iii)25,000 fully paid Preference shares of ₹70 each issued at par to discharge the preference shareholders of Moon
Limited.
You are required to:
a)give the meaning of “consideration for the amalgamation ”as per AS-14,and
b)Calculated the amount of purchase consideration.

Q3.The abstract of the balance sheet of the AXE Ltd.as on 31st March 2011,are as follows:
Liabilities ₹
Equity share capital (Rs.100 each) 15,00,000
12% preference share capital(Rs.100 each) 8,00,000
13% debentures 3,00,000
On 31st March,2011,BXE Ltd, agreed to take over AXE Ltd.on the following terms:
*For each preference share in AXE Ltd.Rs10 in cash and one 9% preference share of Rs.100 BXE Ltd.
*For each equity share in AXE Ltd Rs.20 in cash and one equity share in BXE Ltd.of Rs100 each.It was decided that
the extent of Rs.10,000.Actual expenses amounted to Rs.12,500.
You are required to compute the amount of purchase consideration.

Q4.S.Ltd is absorbed by P.Ltd.S Ltd. gives the following information on the date of absorption:
Sundry Assets 13,00,000
Share capital:
2,000 7% Preference shares of ₹100 each (fully paid-up) 2,00,000
5,000 Equity shares of ₹100 each (fully paid-up) 5,00,000
Reserves 3,00,000
6% Debentures 2,00,000
Trade payables 1,00,000
Additional information:
P.Ltd has agreed:

i)to issue 9% Preference shares of ₹100 each,in the ratio of 3 shares of P.Ltd for 4 preference shares in S.Ltd.
ii)to issue to the debenture-holders in S Ltd. 8% Mortgage debenture at ₹96 in lieu of 6% Debentures in S Ltd which
are to be redeemed at a premium of 20%;
iii)to pay ₹20 per share in cash and to issue six equity shares of ₹100 each issued at the market value ₹125 in lieu of
every five shares held in S.Ltd
;and
iv)to assume the liability to trade payables.
You are required to calculate the purchase consideration.

Q5.The following is the Balance sheet of A Ltd.as on 31.3.2007:

Liabilities ₹ Assets ₹
14,000 Equity shares of Rs.100 14,00,000 Sundry Assets 18,00,000
Each fully paid Discount on issue of 10,000
General Reserve 10,000 Debentures 30,000
10% Debentures 2,00,000 Preliminary expenses 60,000
Sundry Creditors 2,00,000 Profit and Loss Account
Bank Overdraft 50,000
Bills Payable 40,000
19,00,000 19,00,000

R Led agreed to take over the business of A Ltd. Calculate purchase consideration under Net Assts method on the
basic of the following:
The market value of 75% of the sundry assets is estimated to be 12% more than the book value and that of
unrecorded liability of Rs 25,000.Calculate purchase consideration.

Q6.The following are the balance sheet of Pratiksha Ltd. and Nidhi Ltd. as on 31st March,2008:

Balance sheet of Pratiksha Ltd as on 31st March,2008 (₹ in Lakh)

Liabilities ₹ Assets ₹
Share capital Fixed assets 350
20 lakhs shares of Rs10 each 200 Investments 250
General Reserve 250 Current assets 300
Profit and Loss Accounts 150
Debentures 175
Current Liabilities 125
900 900

Balance sheet of Nidhi Ltd as on 31st March,2008 (₹ in lakh)

Liabilities ₹ Assets ₹
Share capital Fixed 150
9 lakhs shares of Rs 10 each 90 Current assets 100
General Reserve 50
Profit and Loss Account 40
Current liabilities:
Creditors 50
Bills payable 20
250 250

Pratiksha Ltd.agrees to take over Nidhi Ltd.Find out the ratio of exchange of shares on the basis of the book values.

Q7.The following is the balance sheet of A Ltd.as on 31st March 2007:

Liabilities ₹ Assets ₹
1,00,000 Equity shares of Rs.100 each 1,00,00,000 Fixed Assets 80,00,000
11% Preference shares of Rs100 each 20,00,000 Investments 3,00,000
General Reserve 5,00,000 Stock 51,00,000
13% Debentures 12,00,000 Debtors 14,00,000
Sundry Creditors 10,00,000 Bank 4,00,000
Bills Payable 4,00,000
Provision for Tax 1,00,000
1,52,00,000 1,52,00,000

Additional information:

a)B Ltd.takes over A Ltd on 5th April,2007.

b)11% Preference shareholders of A Ltd.are discharged at a premium of 10% by issuing 12% preference shares of Rs
100 each.
c)The net assets value of per equity share of A Ltd.is Rs 500 and that of B Ltd.is Rs.800.B Ltd will issue equity shares
to satisfy the equity shareholders of A Ltd.on the basis of intrinsic value. However, the purchase consideration to be
based on the basis of per value only.The face of equity share of B Ltd is Rs.100

d)Debenture holders of A Ltd.are to be discharged at a premium of 15% by issuing 14% jdebentures in B Ltd.

Calculate purchase consideration.

Q8.A purchasing company has agreed to issue one share of Rs.7 called up for every three shares in the vendor
company. Find the amount of purchase consideration if there are 1,00,000 shares in the vendor company.The shares
of the purchasing company are quoted at Rs21.in the market. The shares are issued at ₹21 by purchasing company
.Also pass journal for discharge of purchase consideration in the books of purchasing company.

Q9.The trial balance of Star Ltd and Moon Ltd as on 31st March,2012 is as under:

Particulars Star Ltd Moon Ltd

Dr. Cr. Dr. Cr.
Equity shares of Rs 10 each 2,10,000 1,50,000
9% redeemable preference share of 90,000
Rs 100 each
Securities premium 10,500
Capital redemption reserve 60,000
General reserve 49,500 75,000
8% debentures 60,000 90,000
Godwill 15,000
Land - - 30,000
Building 75,000
Plant 3,00,000 1,35,000
Fixtures 5,000 15,000
Vehicles 10,000 15,000
Stocks 1,20,000 75,000
Debtors 80,000 50,000
Advances 50,000 35,000
Cash and bank 20,000 20,000
Creditors 1,20,000 1,35,000
6,00,000 6,00,000 4,50,000 4,50,000

On 1st April,2012,Sun Ltd.was formed by amalgamation Star Ltd.and Moon Ltd.on the following terms:

1.Sun Ltd .to issue 60,10% Debentures of ₹1,000 each to debenture holders of Star Ltd.

2.The debenture holders of Moon Ltd insisted that they should be allotted equity shares in Sun Ltd.Accordingly;they
were allotted 9,000 equity shares of ₹10 each.

3.Preference shareholders of Star Ltd, insisted for allotment of 900,11%Redeemable preference shares of ₹100 each.

4.The Equity shareholders of Star Ltd.are to be allotted 10 equity shares at par for 7 equity shares hold by them.The
shares of Sun Ltd.are ₹ 10 each.

5.The equity shareholders of Moon Ltd will get:

a)6 equity shares of Sun Ltd at par for 5 equity shares held by them;

b)A cash payment of ₹2 per share of Moon Ltd.

You are required to show Purchase consideration payable to Star Ltd and Moon Ltd as per AS-14.

Q10.Following is the balance sheet of A Ltd.as on 31st March,20X1

Particulars Notes ₹(000)

 Equity and Liabilities
1 Shareholders’ funds
Shares capital 1 22,50
Reserves and Surplus 2 9,00
2 Non-current liabilities
Long-term borrowings 3 7,00
3 Current liabilities
Trade Payables 5,00
Total 43,50

Assets
1 Non-current assets
Property, Plant and Equipment 4 32,50
Non-current investments 5 6,00
2 Current assets
Inventories 2,00
Trade receivables 2,00
Cash and Cash equivalents 1,00
Total 43,50

Notes to accounts

1 Share capital ₹ in (‘000)

Equity share capital
1,50,000 Equity Shares of ₹ 10 each 15,00
7,500 14% Preference Share of ₹100 each 7,50
22,50
2 Reserves and Surplus
General reserve 9.00
3 Long-term borrowing
Secured
15% Debentures 7.00
4 Property ,Plan and Equipment
Land and Building 32.50
5 Non-current investments
Investments at cost 6.00

B Ltd agreed to take over the assets and liabilities on the following terms and condition:

a)Discharge 15% debentures at a premium of 10% by issuing 15% debentures of X Ltd.

b)PPE at 10% above the book value and investments at par value.

c)Current assets at a discount of 10% and Current liabilities at book value.

d)Preference shareholders are discharged at a premium 10% by issuing 15% preference shares of Rs.10 each

e)Issue 3 equity shares of ₹10 each for every 2 equity shares in B Ltd. and pay the balance in cash.

Calculate Purchase consideration.

Q11.Neel Ltd.and Gagan Ltd.amalgamated to form a new company on 1.04.20x1 following is the Balance Sheet of
Neel Ltd.and Gagan Ltd as on 31.3.20x1

Particulars
 Equity and Liabilities
1 Shareholder’s funds
Share capital 7,75,000 8,55,000
2 Current liabilities 6,23,500 5,57,600

Total 13,90,500 11,12600

Assets
1 .........
Property ,plant and Equipment 12,35,000 12,54,000
2 Current assets 1 1,63,500 1,58,600

Total 13,96,500 14,12,600

Notes to accounts

1 Property, plant and Equipment

Land and Building 7,50,000 6,40,000
Plant and machinery 4,85,000 6,14,000
12,35,000 12,54,000
Following is the additional information:

i)The assets of Neel Ltd and Gagan Ltd are to be revalued as under:

Neel Gagan
₹ ₹
Plant and machinery 5,25,000 6,75,000
Building 7,75,000 6,48,000
ii)The purchase consideration is to be discharged as under:

a)Issue 24,000 equity shares of ₹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 Gagan
₹ ₹
1st year 2,62,800 2,75,125
IInd year 2,12,200 2,49,875
Total 4,75,000 5,25,000

c)Issue 12% preference shares of ₹10 each fully paid up at par to provide income equivalent to 8% return on net
assets in the business as on 31.3.20x1 after revaluation of assets 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

Q12.A Ltd and Z Ltd are engaged in similar line lof business.They decided to amalgamate their business as on 1st

April,2008 by forming J ltd with an authorised share capital of Rs.70,00,000 consisting of 6,00,000 Enquiry shares of
Rs 10 each and 1,00,000, 9% Cumulative Preference Shares of Rs10 each.

The Balance Sheet of A Ltd and Z Ltd.as on 31st March,2008 are as follows:

Liabilities A Ltd Z Ltd Assets A Ltd Z Ltd

Equity Share 30,00,000 8,00,000 Land & building 12,00,000 -
8% Pref. Share Capital 10,00,000 - Plant 31,00,000 -
 General Reserve 16,00,000 - Furniture - 1,90,000
P & L A/c 1,80,000 64,000 Vehicles - 80,000
Sundry Creditors 1,00,000 42,000 Patents 4,00,000 -
Stocks 7,00,000 4,78,000
Debtors 1,60,000 1,24,000
Bank Balance 3,20,000 34,000
58,80,000 9,06,000 58,80,000 9,06,000

The following terms were agreed upon by the parties:

a.J Ltd to allot 4,50,000 Equity shares @Rs 10 each to A Ltd,and pay cash Rs.10,90,000 as consideration

whole of assets expect bank balance.

b.Z Ltd is to receive 75,000 Equity Shares @ Rs.10 each and Cash Rs12000 as consideration for whole of assets
except the bank balance.

c.All assets are taken over at book value.

d.J Ltd,is to issue remaining Equity shares and Preference share at par for cash. This issue is fully subscribed

e.Both A Ltd and Z Ltd,are to pay other liabilities and Preference shareholders individually.

f.J Ltd,is to pay and bear liquidation expenses of Rs.10,000 for A Ltd and Rs 1,000 for Z Ltd.the formation expenses of
J Ltd is Rs.36,000.

Show necessary joumal entries in the books of A Ltd and Z Ltd.Also pass the journal entries in the books of Ltd and
show the Balance Sheet of Ltd.

Q13.Exe Ltd was would up on 31.3.2004 and its Balance Sheet as on that date is given below:

Balance Sheet of Exe Ltd as on 31.3.2004

Liabilities Rs Assets Rs
Share Capital: 12,00,000 Fixed Assets 9,64,000
1,20,000 Equity Shares of Rs 10
each
Reserve & Surplus: Current Assets:
Profit prior to incorporation 42,000 Stock 7,75,000
Contingency reserve 2,70,000 Sundry Debtors 1,60,000
Less:PBD 8,000
1,52,000
P & LA/c 2,52,000 Bills Receivable 30,000

Current liabilities: Cash at Bank 3,29,000

Bills payable 40,000
Sundry Creditors 2,26,000
Provisions:
Provision for income-tax 2,20,000
22,50,000 22,50,000

Wye ltd took over the following assets at values shown as under:
Fixed assets Rs.12,80,000;stock Rs.7,70,000;and Bills Receivable Rs30,000.Purchase consideration was settled by
Wye Ltd as under;Rs.5,10,000 of the consideration was satisfied by the allotment of fully paid 10% Preference Shares
of Rs.100 each.

The balance was settled by issuing equity shares of Rs.10 each of Rs.8 per share paid up.

Sundry Debtors realized Rs.1,50,000.Bills was settled for Rs.38,000.Income-tax authorities fixed the taxation liability
at Rs.2,22,000.Liquidation expenses are to be reimbursed by Wye Ltd.to the extent of Rs.5,000.Creditors were finally
settled with the cash remaining after meeting liquidation expenses amounting to Rs.8000.

You are required to:

1.Calculate the number of equity shares and preference shares to be allotted by Wye Ltd in discharge of purchase
consideration.

2.Prepare the Realisation Account, Cash/Bank Accounts,Equity shareholders Account and Wye Ltd Account in the
books of Exe Ltd.

3.Pass Journal Entries in the books of Wye Ltd.

Q14.wye Ltd. acquires the business of Zed Ltd whose summarised balance sheet on 31st December,2014 is as under:

Liabilities Rs Assets Rs
Share capital of Rs.100 each Goodwill 2,00,000
6% Preference share capital 4,00,000 Land & Buildings 4,00,000
Equity share capital 8,00,000 Plant and Machinery 6,00,000
Capital reserve 1,00,000 Patents 50,000
Profit & Loss A/c 50,000 Inventory 1,50,000
6% Debentures 2,00,000 Trade receivable 1,80,000
Interest outstanding on above 12,000 Cash at bank 70,000
Workmen’s compensation reserve 8,000 Underwriting 40,000
(Expected liability Rs.5,000) commission
Trade payables 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:

a.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.

b.For each preference share in Zed Ltd Rs.10 in cash and one 9% preference share of Rs.100 each in Wye Ltd.

c.For each equity share in Zed Ltd .Rs20 in cash and one equity share in Wye Ltd of Rs.100 each having the market
value of Rs.140.

d.Expense of liquidation of Zed Ltd are to be reimbursed by Wye Ltd.to the extent og Rs.10,000.Actual expenses
amounted to Rs.12,500.

e.Wye Ltd..Valued Land and building at Rs.5,50,5000,Plant and Machinery at Rs.6,50,000 and patents at Rs.20,000.

Close the books of Zed Ltd .Give journal Entries and Prepare the Balance Sheet of Wye Ltd after Amalgamation.

Q16.Galaxy Ltd.and Glory Ltd.are two companies engaged in the same business of chemicals .To mitigate
competition, a new company Glorious Ltd,is to be formed to which the assets and liabilities of the existing
companies, with certain excepting, are to transferred. The summarized Balance Sheet of Galaxy Ltd.and Glory Ltd.as
on 31st March,2020 are as follows:
 Galaxy Ltd .( ₹) Glory Ltd .( ₹)
Equity & Liabilities
1.Shareholders’ fund
Share Capital
Equity shares of ₹ 10 each 8,40,000 4,55,000
Reserves & Surplus
General Reserve 4,48,000 40,000
Profit & Loss A/c 1,12,000 72,000
2.Non – current Liabilities
Secured Loan
6% Debentures 3,30,000
3.Current Liabilities
Trade Payables 4,20,000 1,83,000
Total 18,20,000 10,80,000
Assets
1.Non-current assets
Property, Plant & Equipment
Freehold property, at cost 5,88,000 3,36,000
Plant & Machinery,at cost less Depreciation 1,40,000 84,000
Motor vehicles,at cost less depreciation 56,000 -
2.Current Assets
Inventories 3,36,000 4,38,000
Trade Receivables 4,62,000 1,18,000
Cash at Bank 2,38,000 1,04,000
Total 18,20,000 10,80,000

Assets and Liabilities are to be taken at book value ,with the following exceptions:

1.the Debentures of Glory Ltd are to be discharged, by the issue of 8% Debentures of Glorious Ltd.at a premium of
10%(Write assumptions considered)

2.plant and Machinery of Galaxy Ltd . ₹4,48,000;Glory Ltd. ₹2,52,000.

3.Goodwill is to be valued at:Galaxy Ltd ₹4,48,000;Glory Ltd. ₹1,68,000

4.Liquidator of Glory Ltd is appointed for collection from trade debtors and payment to trade creditors .He retained
the cash balance and collected ₹1,10,000 from debtors and paid ₹1,80,000 to trade creditors. Liquidator is entitled
to receive 5% commission for collection and 2.5% for payments. The balance cash will be taken over by new
company.

You are required to:

5.Compute the number of shares to be issued to the shareholders of Galaxy Ltd.and Glory Ltd. assuming the nominal
value of each share in Glorious Ltd.is ₹10.

Prepare Balance Sheet of Glorious Ltd,as on 1st April,2020 and also prepare notes to the accounts as per Schedule III
of the Companies Act,2013.

Q17.The financial position of two companies M/s. Abhay Ltd.an M/s .Asha Ltd as on 31-3-20x5 is as follows:
 Balance Sheet as on 31-3-20X5

Sources of Funds Abhay ltd . ₹ Asha Ltd. ₹

Share Capital-Issued and Subscribed
15,000 equity shares @₹100,fully paid 15,00,000
10,000 equity shares @₹100,fully paid 10,00,000
General Reserve 2,75,000 1,25,000
Profit & Loss 75,000 25,000
Securities Premium 1,50,000 50,000
Contingency Reserve 45,000 30,000
12% Debentures,@ ₹100 fully paid - 2,50,000
Sundry Creditors 55,000 35,000
21,00,000 15,15,000
Application of Funds
Land and Buildings 8,50,000 5,75,000
Plant and Machinery 3,45,000 2,25,000
Goodwill - 1,45,000
Inventory 4,20,000 2,40,000
Sundry Debtors 3,05,000 2,85,000
Bank 1,80,000 45,000
21,00,000 15,15,000

They decided to merge and form a new company M/s.Abhilasha Ltd as on 1-4-20X5 on the following terms:

1.Goodwill to be valued at 2 years purchase of the super profits. The normal rate of return is 10% of the combined
share capital and general reserve. All other reserves are to be ignored for the purpose of goodwill. Average profits of
M/s.Abhay Ltd .is ₹2,75,000 and M/s Asha Ltd .is ₹1,75,000.

2.Land and Buildings, Plant and machinery and Inventory of both companies to be valued at 10% above book value
and a provision of 10% to be provided on Sundry Debtors.

3.12% debentures to be redeemed, by the issue of 12% preference shares of M/s.Abhilasha Ltd.(face valueof
₹100),at premium of 10%.

4.Sundry creditors to be taken over at book value.There is an unrecorded liability of ₹15,000 of M/s.Asha Ltd as on 1-
4-20X5.

5.The bank balance of both companies to be taken over by M/s.Abhilasha Ltd after deducting liquidation expenses of
₹60,000 to be borne by M/s.Abhay Ltd and M/S Asha Ltd in the ratio of 2:1.

You are required to:

i)Compute the basis on which shares of M/s.Abhilasha Ltd are to be issued to the shareholders of the existing
company assuming that the nominal value of per share of M/s. Abhilasha Ltd is ₹100.

Draw Balance Sheet of M/s.Abhilasha Ltd as on 1-4-20X5 after the amalgamation.

Q18.The following was the Balance Sheet of Rashmi Limited as on 31st March,2018:

Particulars Note No. Amount

Equity and Liabilities:
(1) Shareholders’ fund
(a) Share capital 1 18,00,000
(b)Reserve and Surplus 2 8,40,000
(2) Non-current liabilities:
Long-term Borrowings 3 2,85,000
(3) Current Liabilities:
Trade Payables
 30,00,000
Assets:
(1) Non-Current Assets:
(a) Fixed Assets
-Tangible 4 18,00,000
-Intangible Assets(Goodwill) 1,40,000
(b)Non-current Investments 1,60,000
(2) Current Assets:
Inventories 6,24,000
Trade Receivables 1,08,000
Cash & cash equivalents 1,68,000
30,00,000

1 Share Capital:
Issued, Subscribed and Paid up
1,80,000 shares of ₹ 10 each fully paid up
Total
2. Reserve and Surplus: 4,10,000
General Reserve
Profit & Loss A/c 1,30,000 1,00,000
Less; Preliminary Exp 30,000 2,50,000
Export Profit Reserve 80,000
Investment Allowance Reserve 8,40,000
Total
3. Long-term Borrowing:
9% Secured Debenture of ₹100 each fully paid up 2,85,000
Total 2,85,000
4. Tangible Assets:
Freehold Property 12,40,000
Plant & Machinery 5,60,000
Total 18,00,000
5. Non-Current Investments:
Other Investments 1,60,000
(Current Market vaue₹1,30,000)
1,60,000
st
On 1 April,2028,Nitin Ltd. agreed to absorb the business of Rashmi ltd.on the following terms and conditions:

1.The purchase consideration world be settled by Nitin Ltd.as under:

a.3,00,000 equity shares of ₹10 each issued by Nitin Ltd by valuing its share at ₹12 per share.

b.Cash payment equivalent to ₹5 for every share in Rashmi Ltd.

2.The issue of such an amount of fully paid 10% debentures in Nitin Ltd at 95% as is sufficient to discharge 9%
debenture in Rashmi Ltd at a premium of 25%.

3.Nitin Ltd.will takeover the Freehold property at 120% more than the book value and Plant & Machinery at10% less
than the book value. Inventories at ₹5,20,000 and Trade receivables at their book value subject to a provision of 8%
for doubtful debts. Investments will be taken over at current market value. Nitin Ltd. Will take over trade payables at
book value.

4.Liquidation expenses are to be reimbursed by Nitin Ltd,to the extent of ₹30,000.The cost of liquidation: ₹50,000.

5.Statutory reserves are to be maintained for 2 more years.

You are required to:

a)Prepare the realisation Accounts, Nitin Ltd Accounts, Shareholders Accounts and Debenture Accounts in the book
of Rashmi Ltd.and

b)Write up journal entries in the books of Nitin Ltd. regarding acquisition of business.

Q19.Given below are the Balance sheets of two companies as on 31st December 1992:

M Ltd

Liabilities Rs Assets Rs
Capital: Patent Rights 2,00,000
Issued & Fully paid: Land & Buildings 6,00,000
50,0008% Cumulative Preference 5,00,000 Plant & Machinery 15,50,000
Share –Rs 10 each

1,50,000 Equity share-Rs 10 each 15,00,000 Stock 3,50,000

General Reserve 8,00,000 Sundry 80,000
P & L A/c 90,000 Cash & Bank 1,60,000
Sundry Creditors 50,000
29,40,000 29,40,000
K Ltd

Liabilities Rs Assets Rs
Capital Goodwill 70,000
Issued & Fully paid: Motor Vehicle 40,000
40,000 Shares of Rs 10 each 4,00,000 Furniture 25,000
P & L A/c 32,000 Stock 2,39,000
Sundry Creditors 21,000 Sundry Debtors 62,000
Cash & Bank 17,000
4,53,000 4,53,000

It has been agreed that both these companies should be wound up and a new company MK Ltd should be formed to
acquire the assets of both the companies on the following terms:

a)MK Ltd is to have an authorised capital of Rs.30,00,000 divided into 50,000,5% cumulative preference shares of Rs
10 each and 2,50,000 equity shares of Rs 10 each.

b)MK Ltd is to purchase the whole of the assets of M Ltd(except cash and Bank balances)for Rs 27,95,000 to be
settled as to Rs 5,45,000 in cash and as to the balance by issued of 1,80,000 equity shares, credited as fully paid,to
be treated as valued at Rs 12.50 each.

c)MK Ltd is to purchase the whole of the assets of K Ltd (except cash and Bank balances)for Rs 3,81,000 to be settled
as to Rs.6,000 in cash and as to the balance by issue of 30,000 equity shares, credited as fully paid,to be treated as
valued at Rs 12.50 each.

d)MK Ltd is to make a public issue of 50,000,5% cumulative preference shares at per and 30,000 equity shares at the
issue price of Rs 12.50 per share,all payable in full on application.

e)M Ltd and K Ltd both are to be wound up,the two liquidators distributing the shares in MK Ltd in kind among the
equity shareholders of the respectively companies.

f)The liquidator of M Ltd is to pay the preference shareholders Rs 10 in cash for every share held in full satisfaction of
their claims.

g)It is estimated that the costs of liquidation (including the liquidators’ remuneration)will be Rs 5,000 in cash of M
Ltd and Rs 2,000 in the cash of K Ltd and that the preliminary expenses of MK Ltd will amount to Rs 18,000 exclusive
of the underwriting commission of Rs 23,750 payable on the public issue.The scheme has been sanctioned and
carried through in its entirety.
h)Mr D, who mooted the scheme, was allotted 10,000 equity shares (fully paid) at Rs 12.50 per shares in
consideration of his services.

You are required to:

1)Set up the closing entries in the books of M Ltd in the form of journal entries together with the closing cash book
entries; and

2)Draw up the initial Balance Sheet of MK Ltd on the basic that all assets other than goodwill are taken over at the
book value.

Q20.The following are the summarized Balance Sheets of P Ltd and Q Ltd as on 31st March,2014:

P Ltd. Q Ltd P Ltd Q Ltd

Share Capital Fixed Assets 7,00,000 2,50,000
Equity Shares of ₹ 10 6,00,000 3,00,000 Investments 80,000 80,000
each
10% Pref.Shares of ₹ 2,00,000 1,00,000 Current Assets
100 each
Reserves and Surplus 3,00,000 2,00,000 Inventory 2,40,000 3,20,000
Secured Loans: Trade receivables 4,20,000 2,10,000
12% Debentures 2,00,000 1,50,000 Cash at Bank 1,10,000 40,000
Current Liabilities:
Trade payables 2,50,000 1,50,000
15,50,000 9,00,000 15,50,000 9,00,000

Details of Trade receivables and trade payables are as under:

P Ltd.( ₹) Q Ltd.( ₹)
Trade receivables

Debtors 3,60,000 1,90,000

Bills Receivable 60,000 20,000
4,20,000 2,10,000
Trade payables
Sundry Creditors 2,20,000 1,25,000
Bills Payable 30,000 25,000
2,50,000 1,50,000

Fixed Assets of both the companies are to be revalued at 15% above book value. Inventory 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:

i)8 Equity Shares of ₹ 10 each will be issued by P Ltd.at per against 6 shares of Q Ltd.

ii)10% Preference Shareholders of Q Ltd.will be paid at 10% discount by issue of 10% Preference Shares of ₹ 100
each at per in P Ltd.

iii)10% Debenture holders of Q Ltd are to be paid at 8% premium by 12% Debentures in P Ltd issued at a discount of
10%.

iv) ₹30,000 are to be paid by P Ltd to Q Ltd for Liquidation expenses. Sundry Creditors of Q Ltd. includes ₹10,000 due
to P Ltd.

Prepare:

a)Journal entries in the books of P Ltd.

b)Statement of consideration payable by P Ltd.

Q21.The summarized Balance Sheet of A Ltd.and and B Ltd as on 31st March,2022 are as under:

A Ltd.(in ₹) B Ltd.(in ₹)
Equity shares of ₹ 10 each, fully paid up 30,00,000 24,00,000
Securities Premium Account 4,00,000
General Reserve 6,20,000 5,00,000
Profit and Loss Accounts 3,60,000 3,20,000
Retirement Gratuity Fund Account 1,00,000
10% Debentures 20,00,000
Unsecured Lone (including loan from A Ltd.) 6,00,000 8,20,000
Trade Payables 1,00,000 3,40,000
71,80,000 43,80,000
Land and Buildings 28,00,000 21,00,000
Plant and Machinery 20,00,000 7,60,000
Lone-term advance to B Ltd. 2,20,000
Inventories 10,40,000 7,00,000
Trade Receivables 8,20,000 5,20,000
Cash and Bank 3,00,000 3,00,000
71,80,000 43,80,000
B Ltd is to declare and pay ₹ 1 per equity share as dividend, before the following amalgamation takes place with Z
Ltd.

Z Ltd .was incorporated to take over the business of both A Ltd and B Ltd.

a)The authorized share capital of Z Ltd .is ₹60 lakhs divided into ₹6 lakhs equity shares of ₹10 each.
b)As per Registered Valuer the value of equity shares of A Ltd.is ₹18 per share and of B Ltd.is ₹ 12 per share
respectively and agreed by respective shareholders of the companies.

c)10% Debentures of A Ltd to be issued 12% Debentures of Z Ltd.at per in consideration of their holdings.

d)A contingent liability of A Ltd. of ₹2,00,000 is to be treated as actual liability.

e) Liquidation expenses, including Registered Valuer fees of A Ltd. ₹ 50,000 and B Ltd. ₹ 30,000, respectively, to be
borne by Z Ltd.
(f) The shareholders of A Ltd. and B Ltd. are to be paid by issuing sufficient number of fully paid-up equity shares of ₹
10 each at a premium of ₹ 10 per share.

Assuming amalgamation in the nature of purchase, you are required to pass the necessary journal entries
(explanations not required) in the books of Z Ltd. and prepare a Balance Sheet of Z Ltd. immediately after the
amalgamation of both the companies.

Q22. The following is the summarized Balance Sheet of A Ltd. as on 31st March, 2012:

Liabilities Rs. Assets Rs.

8,000 Equity Shares of Rs. 100 each 8,00,000 Building 3,40,000
10% Debentures 4,00,000 Machinery 6,40,000
Loan from A 1,60,000 Inventory 2,20,000
Trade payables 3,20,000 Trade receivables 2,60,000
General Reserve 80,000 Bank 1,36,000
Goodwill 1,30,000
Share Issue Expenses 34,000
Total 17,60,000 Total 17,60,000

B Ltd. agreed to absorb A Ltd. on the following terms and conditions:

(a) B Ltd. would take over all assets, except bank balance, at their book values less 10%. Goodwill is to be valued at 4
years’ purchase of super profits, assuming that the normal rate of return be 8% on the combined amount of share
capital and general reserve.

(b) B Ltd. is to take over trade payables at book value.

(c) 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 inventory of A Ltd.
on 31st March, 2012.Trade payables 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 on 1 st
April,2012 after the takeover

Q23.Summarised Balance Sheets as on 31st March, 2015

Liabilities Gee Ltd. ₹ Pee Ltd ₹ Assets Gee Ltd. ₹ Pee Ltd. ₹
Equity share capital (₹10 per 25,00,000 15,00,000 Buildings 12,50,000 7,75,000
share)
14% Preference share 11,00,000 8,00,000 Plant and machinery 16,25,000 8,50,000
capital(₹100 each)
General reserve 2,50,000 2,50,000 Furniture and fixtures 2,87,500 1,75,000

Export profit reserve 1,50,000 1,00,000 Investments 3,50,000 2,50,000

Investment allowance reserve - 50,000 Inventory 6,25,000 4,75,000
Profit and loss A/c 3,75,000 1,25,000 Trade receivables 4,50,000 5,15,000
15% Debentures(₹100 each) 2,50,000 1,75,000 Cash at bank 3,62,500 2,60,000
Trade Payables 2,25,000 1,75,000
Other current liabilities 1,00,000 75,000
49,50,000 33,00,000 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, 2015. The purchase consideration is discharged as follows:

a. Issued 1,65,000 equity shares of ₹ 10 each at par to the equity shareholders of Pee Ltd.

b. Issued 15% preference shares of ₹ 100 each to discharge the preference shareholders of Pee Ltd. at 10%
premium.

c. The debentures of Pee Ltd. will be converted into equivalent number of debentures of Gee Ltd.

d. The statutory reserves of Pee Ltd. are to be maintained for two more years.

e. Expenses of amalgamation amounting to ₹ 10,000 will be borne by Gee Ltd.

f. Details of trade receivables and trade payables are as under:

 Gee L td. Pee Ltd
Trade payables
Trade payables 1,50,000 75,000
Bills payables 75,000 1,00,000
2,25,000 1,75,000
Trade receivables
Debenture 4,00,000 4,60,000
Bills receivables 50,000 55,000
4,50,000 5,15,000

Show the opening Journal entries and the opening balance sheet of Gee Ltd.as on 1st April,2015 after amalgamation,
on the assumption that the

i)Amalgamation is in the nature of the merger.

ii)Amalgamation is in the nature of the purchase.

Q24. Super Express Ltd and Fast Express Ltd were in competing business. They decided to form a new company
named Super-Fast Express Ltd.the Balance Sheet of both the companies was as under:

Super Express Ltd

Balance Sheet as on 31st December, 20X1

Liabilities Rs. Assets Rs.

20,000 Equity Shares of Rs. 100 each 20,00,000 Buildings 10,00,000

Provident Fund 1,00,000 Machinery 4,00,000

Sundry Creditors 60,000 Inventory 3,00,000

Insurance Reserve 1,00,000 Trade Receivables 2,40,000

Cash at Bank 2,20,000

Cash in Hand 1,00,000

22,60,000 22,60,000
 Fast Express Ltd

Balance Sheet as on 31st December, 20X1

Liabilities Rs Assets Rs

10,000 Equity Shares of Rs.100 each 10,00,000 Goodwill 1,00,000

Employees Profit-sharing A/c 60,000 Buildings 6,00,000

Sundry Creditors 40,000 Machinery 5,00,000

Reserve Account 1,00,000 Inventory 40,000

Surplus 1,00,000 Trade Receivables 40,000

Cash at Bank 10,000

Cash in Hand 10,000

13,00,000 13,00,000

The assets and liabilities of both 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 amounting to 30,000
shares (20,000 for Super Express Ltd and 10,000 for Fast Express Ltd).

Prepare opening balance sheet of super- fast Express Ltd considering pooling method.

Q25.The following are the Balance Sheets of M Ltd and N Ltd as on 31st March,2009:

Liabilities M Ltd. (₹ in lakhs) N Ltd. (₹ in lakhs)

Fully paid equity shares of ₹10 each 3,600 900

10% Preference shares of ₹10 each, fully paid up 1,200 -

Capital Reserve 600 -

General Reserve 780 -

Profit and Loss Account 2,100 -

8% Redeemable debentures of ₹1,000 each 2,421 -

Trade Creditors 870 300

Provisions 39 39
 11,571 1,239

Assets

Plant and Machinery 4,215 468

Furniture and Fixtures 2,400 183

Motor Vehicles - 51

Stock 2,370 444

Sundry Debtors 1,044 237

Cash at Bank 1542 240

11,571 1,623

A new Company MN Ltd. was incorporated with an authorised capital of ₹ 15,000 lakhs divided into shares of ₹ 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:

a. 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.

b. 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.

c. Expenses on the liquidation of M Ltd. and N Ltd. amounting to ₹ 6 lakhs are to be borne by MN Ltd.

d. 8% redeemable debentures of N Ltd. to be converted into 8.5% redeemable debentures of MN Ltd.

e. Expenses on incorporation of MN Ltd. were ₹ 15 lakhs.

You are requested to:

1. Pass necessary Journal Entries in the books of MN Ltd. to record above transactions, and
2. Prepare Balance Sheet of MN Ltd. after merger.

Q26.The following was the Balance Sheet of V Ltd. as on 31st March, 2015
Particulars Note No. Amount (₹ in lakhs)

Equity and Liabilities

(1) Shareholders’ Funds

(a) Share Capital 1 1,150

(b) Reserves and Surplus 2 (87)

(2) Non-current Liabilities

(a) Long-term Borrowings 3 600

(3) Current Liabilities

Trade Payables 170

Other Current Liabilities 4 30

Total 1,863

Assets

(1) Non-current Assets

Property, Plant & Equipment 5 1,152

(2) Current Assets

Inventories 380

Trade Receivables 256

Cash and Cash Equivalents 6 75

Total 1,863

Notes:

₹(in lakhs)
1.share Capital

Authorised:

Issued, Subscribed and Paid up 800

350
35 Lakh 12% Cumulative Preference Shares of ₹ 10 each, fully paid up
Total 1150
2.Reserves and Surplus

Debit Balance of Profit & Loss Account (87)

Total (87)
3.Lone-Term Borrowing

10% Secured Cumulative Debentures of ₹100 each,fully paid up 600

600
4.Other current liabilities

Outstanding Debenture Interest 30

30
5.Property,Plant & Equipment

Land and Buildings 445

Plant and Machinery 593

Furniture, Fixtures and Fittings 114

Total 1152
6.Cashband Cash equivalents

Balance at Bank 69

Cash in hade 6
Total 75

On 1st April, 2015, 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 ₹10 each issued at a premium of
₹2.50 each for every five shares held by them in V Ltd. Preference shareholders of V Ltd. would get 13% Cumulative
Preference Shares of ₹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 ₹100 each, fully paid up after
the takeover 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 ₹2 lakhs. P Ltd. discovered that its trade payables included ₹7 lakhs due to V Ltd. for goods
purchased.

Also, P Ltd.’s Inventory included goods of the invoice price of ₹5 lakhs earlier purchased from V Ltd., which had
charged profit @ 20% of the invoice price.

You are required to:

1. Prepare Realisation A/c in the books of V Ltd.

2. Pass journal entries in the books of P Ltd. assuming it to be an amalgamation in the nature of merger.

Q27. Sun and Neptune had been carrying on business independently. They agreed to amalgamate and form a new
company Jupiter Ltd. with an authorised share capital of ₹ 4,00,000 divided into 80,000 equity shares of ₹ 5 each. On
31st March, 2018, the respective Summarised Balance Sheets of Sun and Neptune were as follows:
 Sun(₹) Neptune(₹)
Fixed Assets 6,35,000 3,65,000
Current Assets 3,27,000 1,67,750
9,62,000 5,32,750
Less: Current Liabilities (5,97,000) (1,80,250)
Representing Capital 3,65,000 3,52,500

Additional Information:

a)Revalued figures of Fixed and Current assets were as follows:

Sun(₹ ) Nepture(₹ )
Fixed Assets 7,10,000 3,90,000

Current Assets 2,99,500 1,57,750

(b) The debtors and creditors include ₹ 43,350 owed by Sun to Neptune.
The purchase consideration is satisfied by issue of the following shares and debentures.

1. 60,000 equity shares of Jupiter Ltd. to Sun and Neptune 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:

Sun (₹) Neptune(₹)

2016 Profit 4,49,576 2,73,900
2017 (Loss)/Profit (2,500) 3,42,100
2018 Profit 3,77,924 3,59,000
2. 15% debenture in Jupiter Ltd. at par to provide an income equivalent to 8% return business as on capital
employed in their respective business as on 31st March, 2018 after revaluation of assets.
You are required to:
(1) Compute the amount of debentures and shares to be issued to Sun and Neptune.
(2) Prepare a Balance Sheet of Jupiter Ltd. showing the position immediately after amalgamation.
Q28.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:

Particulars Notes ₹K Ltd ₹L Ltd.

1 Equity and Liabilities
Shareholders’ funds
Share capital 1 12,00,000 6,00,000
Reserves and Surplus 2 3,71,375 1,97,175
2 Non-current liabilities
Long-term borrowings 3 2,00,000 2,00,000
3 Current liabilities
Trade Payables 1,00,000 2,10,000
Total 18,71,375 12,07,175
Assets
1 Non-current assets
Property,Plant and Equipment 4 11,30,000 8,20,000
Intangible assets 5 80,000 -
2 Current assets
Inventories 2,25,000 1,40,000
Trade recivables 2,75,000 1,75,000
Cash and Cash equivalents 1,61,375 72,175
Total 18,71,375 12,07,175
Notes to accounts
1 Share Capital K Ltd. L Ltd.
Equity shares of ₹ 100 each 8,00,000 3,00,000
7% Preference Shares of ₹100 each 4,00,000 3,00,000
12,00,000 6,00,000
2 Reserves and Surplus
General reserve - 1,00,000
Profit and loss accounts 3,71,375 97,175
3,71,375 1,97,175
3 Long-term borrowings
5% Debentures
Secured loan - 2,00,000
2,00,000 2,00,000
4 Property,plant and Equipmen
Land and Buildig 4,50,000 3,00,000
Plant and machinery 6,20,000 5,00,000
Furniture and fittings 60,000 20,000
11,30,000 8,20,000
5 Intangible assets
Good will 80,000 -
80,000 -
6 Cash and Cash Equivalents
Cash at Bank 1,20,000 55,000
Cash in hand 41,375 17,175
1,61,375 72,175

The terms of amalgamation are as under:

(A) (1) The assumption of liabilities of both the Companies.
(2) Issue of 5 Preference shares of ₹20 each in L.K. Ltd. at ₹18 paid up at a premium of ₹4 per share for each
preference share held in both the Companies.
(3) Issue of 6 Equity shares of ₹20 each in L.K. Ltd. at ₹18 paid up at a premium of ₹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.
(4) Issue of such amount of fully paid 6% debentures in L.K. Ltd. as is sufficient to discharge the 5% debentures in K
Ltd. at a discount of 5% after takeover.
(B)(1) The assets and liabilities are to be taken at book values. Inventory and trade receivables to be raised at 2% and
2½% respectively, for which provisions are to be made.
(1) The trade receivables of K Ltd. include ₹20,000 due from L Ltd.
(C)The L.K. Ltd. is to issue 15,000 new equity shares of ₹20 each paid up at a premium of ₹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.