Question

Following are the Balance Sheets of Rohan Ltd. & Sohan Ltd. as on 31st March, 2018.

Liabilities	Rohan Ltd Rs.	Sohan Ltd Rs.	Assets	Rohan Ltd Rs.	Sohan Ltd Rs.
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
General Reserve	75,000	90,000	Computer	3,00,000	4,50,000
Revaluation Reserve	45,000	60,000	Investments	1,50,000	1,50,000
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 & Provisions :	1,50,000	75,000	Banks	1,95,000	3,75,000
Sundry Creditors	2,25,000	1,80,000
Bills Payable	30,000	45,000
	23,70,000	33,75.000		23,70.000	33.75.000

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.

Answer 1

Computation of Purchase Consideration

	Rohan Ltd. Rs.		Sohan Ltd. Rs.		Mohan Ltd. Rs.
I. 9 % Preference Shareholders :
13% Preference Shares of Rs.100 each	6,00,000		9,00,000		15,00,000
Securities Premium of Rs.25 each	1,50,000	7,50,000	2,25,000	11,25,000	3,75,000	18,75,000
II. Equity Shareholders :
Rohan Ltd. : 12,000 shares `(9000xx4/3)`	1,20,000
Sohan Ltd. : 12,000 shares  `(15000xx4/5)`			1,20,000		2,40,000
Securities Premium of Rs.25 each
Rohan Ltd. (12,000 x 25)	3,00,000	4,20,000
Sohan Ltd. (12,000 x 25)			3,00,000	4,20,000	6.00.000	8.40.000
		11.70,000		15.45.000		27,15,000

Journal of Mohan Ltd.

No.	Particulars	Dr. Rs	Cr.Rs
1.	Business Purchase A/c      Dr.	27,15,000
	To .Liquidator of Rohan Ltd. A/c		11,70,000
	To Liquidator of Sohan Ltd. A/c		15,45,000
	(Being the purchase of business as per agreement dated ...)
2.	Land & Building A/c          Dr.	6,60,000
	Plant & Machinery A/c      Dr.	4,95,000
	Computer A/c                  Dr.	3,30,000
	Investments A/c              Dr.	1,35,000
	Stock A/c                        Dr.	3,00,000
	Debtors A/c                    Dr.	1,35,000
	Bills Receivable A/c          Dr.	75,000
	BankA/c                          Dr.	1,95,000
	To 12% Debentures  A/c		2,40,000
	To Unsecured Loans A/c		1,50,000
	To Sundry Creditors A/c		2,25,000
	To Bills Payable A/c		30,000
	To Business Purchase A/c		11,70,000
	To Capital Reserve  A/c		5,10,000
	(Being the assets and liabilities taken over)
3.	Liquidator of Rohan Ltd. A/c	11,70,000
	To Equity Share Capital A/c		1,20,000
	To 13% Preference Capita A/c		6,00,000
	To Securities Premium A/c		4,50,000
	(Being the purchase consideration discharged)
4.	12% Debentures A/C      Dr	2,40,000
	To 15% Debentures A/c		2,40,000
	(Being the issue of 15% debentures to 12% debentureholders of Rohan Ltd.)
5.	Land & Building A/c        Dr.	8,25,000
	Plant & Machinery A/c    Dr.	6,60,000
	Computer A/c                Dr.	4,95,000
	Investment A/c              Dr.	1,35,000
	Stock A/c                      Dr.	4,50,000
	Debtors A/c                  Dr.	2,10,000
	Bills Receivable A/c        Dr.	1,50,000
	Bank A/c                      Dr.	3,75,000
	To 12% Debentures A/c
	To Unsecured Loans A/c
	To Sundry Creditors A/c
	To Bills Payable A/c
	To Business Purchase A/c
	To Capital Reserve A/c
	(Being the assets and liabilities taken over)
6.	Liquidator of Sohan Ltd.     Dr	15,45,000
	To Equity Share Capital  A/c		1,20,000
	To 13% Preference Capital A/c		9,00,000
	To Securities Premium A/c		5,25,000
	(Being the purchase consideration discharged)
7.	12% Debentures A/c        Dr	3,60,000
	To 15% Debentures A/c		3,60,000
	(Being the issue of 15% debentures to 12%' debentureholders of Sohan Ltd.)
8.	Amalgamation Adjustment A/c                                 Dr	75,000
	To Export Profit Reserve A/c (Rohan)		30,000
	To Export Profit Reserve A/c (Sohan)		45,000
	(Being the statutory reserve brought forward)