Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Accounting of Transactions of Foreign Currency
- Accounting of Transactions of Foreign Currency
- Purchase of Goods in Foreign Currency
- Account for Foreign Currency Transactions
- Purchase of Fixed Assets in Foreign Currency
- Foreign Currency Loan
- Foreign Exchange Accounting
- Accounting of Transactions of Foreign Currency Problems
- Statement of Affairs and Deficiency Account Problems
Liquidation of Companies
Underwriting of Shares and Debentures
Accounting for Limited Liability Partnership
- Meaning of Amalgamation
- Objectives of Amalgamation
- Advantages of Amalgamation
- Disadvantages of Amalgamation
Following are the Balance Sheets of Rohan Ltd. & Sohan Ltd. as on 31st March, 2018.
|Share Capital:||Fixed Assets :|
|9% Preference Shares of Rs.100 each||6,00,000||9,00,000||Goodwill||1,50,000||1,50~000|
|Equity Shares of Rs.100 each||9,00,000||15,00,000||Land & Building||6,00,000||7,50,000|
|Reserves & Surplus :||Plant & Machinery||4,50,000||6,00,000|
|Export Profit Reserve||30,000||45,000||Current Assets|
|Profit & Loss A/c :||15,000||30,000||Loans & Advances :|
|Secured Loans :||Stock||3,00,000||4,50,000|
|12% Debentures· of Rs.100 each||3,00,000||4,50,000||Sundry Debtors||1,50;000||3,00,000|
|Unsecured Loans||Bills Receivables||75,000||1,50,000|
|Current Liabilities &
Mohan Ltd. was formed to take over the business of Rohan Ltd. and Sbhan Ltd. with an authorized share capital Rs. 30,00,000 consisting of Rs. 20;000, 13%. Preference shares of Rs.100 each and 1,00,090 Equity share of Rs.10 each.
1. 9% preference shareholders of both the companies are issued equal numbers of 13% preference shares of Mohan Ltd. at a price of Rs.125 each.
2. Mohan Ltd. will issue 4 equity shares for 3 equity shares of Rohan Ltd and 4 equity shares for 5 equity shares of Sohan Ltd. The shares are to be issue at 35 each.
3. 2o % debentureholders of both the companies are discharged by Mohan Ltd . by .issuing such number of its 15% debentures of Rs.100 each so as to maintain the same amount of interest.
4. Mohan Ltd. agree to take over all assets and all liabilities at book values except the following :
(i) Tangible fixed as.sets at 10% more than book values.
(ii) Investments and sundry debtors at 90% of their book values.
5.Export profit reserves are to be maintained for 3 more years. You are required to:
(i) Compute purchase consideration of Rohan Ltd. and Sohan Ltd.
(ii) Pass Journal Entries in the books of Mohan ltd. by applying Purchase method.
Multiple Choice Questions
__________takes place when existing company takes over the business of another existing company.
Multiple Choice Questions :
Under 'Purchase Method' excess of purchase consideration over the net assets taken over is accounted as __________
Following are the Balance Sheets of .X Ltd. and y Ltd :
as on 31st March1 , 2018
|EquityShareCapital of Rs. 10 each||75,00,000||45,00,000||Building||25,00,000||15,50,000|
|Export Profit Reserves||3,00,000||3,00,000||Machinery||32,50,000||17,00,000|
|Profit & Loss Alc||7,00,000||6,00,000||Stock||25,50,000||18,00,000|
|12% Debentures of Rs.100 each||5,00,000||3,00,000||Bank||7,00,000||5,50,000|
z Ltd. was formed to acquire all assets and liabilities of x Ltd. and y Ltd. on the following terms :
1. Z Ltd. to have an authorized share capital of Rs.5 crores divided into 5,00,000 equity shares of 100 Rs each.
2. The business of both companies were taken over for a total price of Rs. 1.2 crores to be discharged by Z Ltd. by issue of equity shares of Rs .100 each at a premium of 20%.,
3. The shareholders of X Ltd. and Y Ltd. to get shares in Z Ltd. in the ratio of net assets values of their respective shares.
4. The debe~tures of both the companies to be converted into equivalent number of 14% debentures of Rs.100 each in Z Ltd. at a discount of 10%.
5. All the tangible assets of both the co.mpanies are taken over by Z Ltd .. at book values except Following :
6. Sundry Creditors of X Ltd. and Y Ltd. are . taken over at Rs.6,50,000 and Rs.5,00,000 respectively.
7. Statutory reserves are to be maintained for 3 years more.
You are required to
(i)Compute Purchase Consideration of X Ltd. and Y Ltd.
(ii) Pass Journal Entries in the books of Z Ltd.
(iii) Prepare Balance Sheet after amalgamation. Apply Purchase Method.
Shubha Ltd. absorbed Sushma Ltd. with effect from 1st April, 2018 when their Balance Sheets as .on 31st March, 2018 were as under :
|Share Capital :||Fixed Assets :|
|.11 % Preference Shares of' 100 each||2,00,000||2,00,000||Land and Building||2,20,000||1,40,000|
|Equity Shares.·of' Rs 100 each||5,00,000||2,00,000||Plant & Machinery||4,20,000||2,60,000|
|Reserves & Surplus :||Current Assets,
|Export Profit Reserve||40,000||20,000||Sundry Debtors||1,20,000||1,40,000|
|General Reserve||2,00,000||60,000||Bills Receivable||1,30,000||90,000|
|Secured Loans :||Bank||20,000||10,000|
|10% Debentures of'100||-||1,20,000|
|15% Debentures of'100||80,000||-|
|Current Liabilities & Provisions|
Terms of Amalgamation :
1. Subha Ltd. will issue 8 equity shares for 5 equity shares in Sushma Ltd.
2. 11 % preference shareholders. of Sushma.Ltd. will be issued an equal number of equity shares in Shubha Ltd.
3 . 10 % debenturesholders ·of .Sushma Ltd. are discharged .by Sushma Ltd. by issuing equal number of its 15% debentures of Rs.100 each.
4. All the assets and liabilities of Sushma Ltd. are taken over at book values except the following :
Fixed assets at 10% inore than book, value. Stock at ~ 1,44,000.
Debtors at 1,25,000. Bills receivables at Rs. 81,000.
You are required to :
(i) Computer Purchase Consideration.
(ii) Prepare Ledger Accounts to close the books of Account of Sushma Ltd.
Following are the Balance Sheets as on 31st March, 2018 of Nisha Ltd. and Usha Ltd:
|Liabilities||Nisha Ltd Rs.||
Usha Ltd Rs.
|Assets||Nisha Ltd Rs.||Usha Ltd Rs.|
|Equity Share Capital : (Rs.100 per share)||2,00,000||1,20,000||Land & Building||70,000||_|
|15% Debentures||40,000||_||Plant & Machinery||2,20,000||1,00,000|
|Employee's Provident Fund||6,000||Debtors||25,000||16.000|
|Profit & Loss A/c||4,000||
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The two companies agree to amalgamate and form a new company Mis. Ujala Ltd. which takes over the assets and liabilities of both the companies. The authorized capital of Ujala Ltd. is Rs. 20,00,000 consisting of 2,00,000 equity Shares of Rs 10 each. The assets of Nisha Ltd. are taken over at 90% of the book value with the exception of land and buildi.ng which are accepted at book vatue. Both the companies are to receive 10% of the net valuation of their respective business as Goodw .The purchase consideration is to be satisfied by Ujala Ltd. in its fully paid shares at 10% premium. In return of debentures of Nisha Ltd.debentures of the same . amount and denomination are to be issued by Ujala Ltd.
Close the books of Nisha Ltd. and Usha Ltd. and show the Opening Balance Sheet of Ujala Ltd. under Purchase Method.