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Question Bank Solutions for B.Com (General) Semester 6 (TYBcom) - University of Mumbai - Financial Accounting(Financial Accounting and Auditing 9)

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Following are the Balance Sheets of .X Ltd. and y Ltd :

Balance Sheet
as on 31st March1 , 2018

Liabilities XLtd,Rs YLtd.Rs Assets XLtd,Rs YLtd,Rs
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
General Reserves 200,000 4,50,000. Debtors 9,00,000 10,00,000
12% Debentures of Rs.100 each 5,00,000 3,00,000 Bank 7,00,000 5,50,000
      Preliminary - 1,00,000
Sundrv Creditors 7,00,000 5,50,000 Expenses    
  99,00,000 67,00,000   99,00,000 67,00,000

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 :

Assets XLtd. YLtd.
Building 28,00,000 18,20,000
Machinery 31,50,000 16,00,000

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.

[1] Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Chapter: [1] Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Concept: Amalgamation

Shubha Ltd. absorbed Sushma Ltd. with effect from 1st April, 2018 when their Balance Sheets as .on 31st March, 2018 were as under :

Liabilities

Shubha

Ltd

Sushma

Ltd

Assets

Shubha

Ltd

Sushma

Ltd

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,
Loans Advances:
   
Revaluation Reserve 20,000 - Stock 2,90,000 1,60,000
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           
Sundry Creditors  1,60,000 2,00,000      
  12,00,000 8,00,000   12.00.000

8,00,000

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.

[1] Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Chapter: [1] Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Concept: Amalgamation

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.

[1] Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Chapter: [1] Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Concept: Amalgamation

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
Reserve Fund 76,000 5,000 Stock 35,000 18,000
Employee's Provident Fund 6,000   Debtors 25,000 16.000
Sundry Creditors 30,000 16;000 Bank 6,000 2,000
Profit & Loss A/c 4,000  

Misc. Expenses not written off Advertisement

Expenses

        _ 5,000
  3,56,000 1,41.000   3,56.000 1,41,000

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.

[1] Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Chapter: [1] Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Concept: Amalgamation

Fill in the blanks 

One liquidation of a company and one formation of a company is called _______________

[1] Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Chapter: [1] Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Concept: Amalgamation

Fill in the blanks 

Net asset means _____________

[1] Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Chapter: [1] Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Concept: Amalgamation

Fill in the blanks 

One liquidation of a company and one formation of a company is known as ____________and two liqidations companies of and one  formation of a company is known as____________

[1] Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Chapter: [1] Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Concept: Amalgamation

Fill in the blanks
In case of Amalgamation, if the value of net assets taken over is more than the payment made, the difference is tenμed as________and if the value of net assets taken is less than the payment made, the difference is termed as______

[1] Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Chapter: [1] Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Concept: Amalgamation

State whether the fol/owing statements are True or False:
Only the assets and liabilities taken over by the purchasing company should be transferred to Realisation A/c.

[1] Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Chapter: [1] Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Concept: Amalgamation

State whether the fol/owing statements are True or False:
Under amalgamation, cash and bank balance is not transferred to Realisation A/c when it has been taken over by the purchasing company.

[1] Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Chapter: [1] Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Concept: Amalgamation

Multiple Choice Questions 
__________takes place when existing company takes over the business of another existing company.

[1] Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Chapter: [1] Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Concept: Amalgamation

Multiple Choice Questions 
Amalgamation of companies is governed by_____________

[1] Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Chapter: [1] Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Concept: Amalgamation

Multiple Choice Questions :

Under 'Purchase Method' excess of purchase consideration over the net assets taken over is accounted as __________

[1] Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Chapter: [1] Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Concept: Amalgamation

Match the pairs:

  Column A   Column B
(1) No-new company is formed. (a) Purchase Method
(2) 'Goodwill or Capital Reserv (b) Transferred to Realisation A/c
(3) Scheme of Amalgamation (c) Absorption
(4) Transferer Company  (d) Reqires approval of High Court 
(5) Profit on Realisation  (e) To be liquidated

 

[1] Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Chapter: [1] Amalgamation, Absorption and External Reconstruction (Excluding Intercompany Holdings)
Concept: Amalgamation

Fill In the blanks :
................. is the mean of exchange rate in force during a period.

[2] Accounting of Transactions of Foreign Currency
Chapter: [2] Accounting of Transactions of Foreign Currency
Concept: Accounting of Transactions of Foreign Currency

Fill In the blanks :
................ currency is the currency used in presenting the financial
statements.

[2] Accounting of Transactions of Foreign Currency
Chapter: [2] Accounting of Transactions of Foreign Currency
Concept: Accounting of Transactions of Foreign Currency

State whether the following statements are True or False :
An enterprise should disclose the, amount of exchange differences included in the net profit or loss of the period.

[2] Accounting of Transactions of Foreign Currency
Chapter: [2] Accounting of Transactions of Foreign Currency
Concept: Accounting of Transactions of Foreign Currency

State whether the following statements are True or False :
Inventories is a monetary item.

[2] Accounting of Transactions of Foreign Currency
Chapter: [2] Accounting of Transactions of Foreign Currency
Concept: Accounting of Transactions of Foreign Currency

State whether the following statements are True or False :
A foreign currency transaction arises when an enterprise buys or sells goods or services whose price is denominated in the reporting currency.

[2] Accounting of Transactions of Foreign Currency
Chapter: [2] Accounting of Transactions of Foreign Currency
Concept: Accounting of Transactions of Foreign Currency

State whether the following statements are True or False :
Exchange rate is the ratio for exchange of two currencies.

[2] Accounting of Transactions of Foreign Currency
Chapter: [2] Accounting of Transactions of Foreign Currency
Concept: Accounting of Transactions of Foreign Currency
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