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© All rights reserved
First Published : December 2019
Law stated in this book is as amended upto 31st October, 2019
Published by :
Taxmann Publications (P.) Ltd.
Sales & Marketing :
59/32, New Rohtak Road, New Delhi-110 005 India
Phone : +91-11-45562222
Website : www.taxmann.com
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E-mail : [email protected]
Disclaimer
Every effort has been made to avoid errors or omissions in this publication. In
spite of this, errors may creep in. Any mistake, error or discrepancy noted may be
brought to our notice which shall be taken care of in the next edition. It is
notified that neither the publisher nor the author or seller will be responsible for
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is suggested that to avoid any doubt the reader should cross-check all the facts,
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publishers. Breach of this condition is liable for legal action.
All disputes are subject to Delhi jurisdiction only.
Contents
P
A
G
E
l Chapter-wise Marks Distribution I-7
l Previous Exams Trend Analysis (May 2018 Onwards) (New Syllabus) I-9
l Chapter-wise comparison with study material I-11
Chapter 1
A
c
c
o
u
n
t
i
n
g
f
o
r
E
S
O
P
u 1.1
Chapter 2
B
u
y
b
a
c
k
&
e
q
u
i
t
y
s
h
a
r
e
s
w
i
t
h
d
i
f
f
e
r
e
n
t
i
a
l
r
i
g
h
t
s
u 2.1
Chapter 3
A
m
a
l
g
a
m
a
t
i
o
n
u 3.1
Chapter 4
I
n
t
e
r
n
a
l
r
e
c
o
n
s
t
r
u
c
t
i
o
n
u 4.1
Chapter 5
L
i
q
u
i
d
a
t
i
o
n
u 5.1
Chapter 6
B
a
n
k
i
n
g
u 6.1
Chapter 7
N
B
F
C
u 7.1
Chapter 8
C
o
n
s
o
l
i
d
a
t
e
d
f
i
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
u 8.1
Chapter 9
A
c
c
o
u
n
t
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g
S
t
a
n
d
a
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u 9.1
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10.1
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P.27
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S G G
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N )
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N b b
O a
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l
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y
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9 9
1 1
0 0
2 2
s y .
v
p a o
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h M N
s
r - -
e
n
Solved Paper
Solved Paper
t
r
Chapter 10
a
P
u
I-6
CHAPTER-WISE MARKS DISTRIBUTION
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
S. Chapter Sub- M N M N M N M N M N M N M N M N M N M N M N
No top-
ics
1 Account- AS 4 2 2 5 4 4 4 4 5 5 5 5 5
ing Stan-
dards AS 5 6 2 4 4 4 5 4 5 5
AS 7 2 4 4 5 5 5 5 5 5 5
AS 9 2 4 5 5 4 5 5 5 5 5
AS 4 4 5 4 5 5 4 4 5 5
14
AS 4
17
AS 8 5
18
AS 4 8 5 4 8 4 5 5 4 5 (O) 5 5
19 5 (N)
AS 5 4 5 5 5 5 5 5 5 5 5
20
AS 5
22
AS 5
24
As 26 4 5 5 5 4 5 5 5 5 (O) 5
5 (N)
AS 4 4 5 5 5 9 4 5 5 5(O) 5
29
2 Account- 2 5 4 4 4 8 8 5 10 5 5
ing for
ESOP
3 Buy 8 4 4 12 6 8 10 5 10 15
Back &
Equity
shares
with dif-
ferential
rights
I-7
C
H
A
P
T
E
R
-
W
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E
M
A
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K
S
D
I
S
T
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I
B
U
T
I
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N
I-8
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
S. Chapter Sub- M N M N M N M N M N M N M N M N M N M N M N
No top-
ics
4 Amalga- 16 16 16 16 16 16 16 16 5 15
mation (O)
20(N)
5 Internal 16 16 16 16 16 16 10 15
Recon-
struction
6 Liquida- 8 4 8 8 16 4 16 16 4 5 (O) 10 10 5
tion 5 (N)
7 Banking 8 14 13 16 8 13 18 8 4 4 12 4 14 10 8 6 12 5 10 15
(O)
10(N)
8 NBFC 5 10 5 5
9 Consol- 20 10 10 15
idated
Financial
State-
ments
10 Partner- 6 2 16 16 16 4 16 16 4 4 20 4 4 9(O) 25
ship 20(N)
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r r r r r r r r r T T r r r r r r r r r r r r T r
P P P P P P P P P P P P P P P P P P P P P P
PREVIOUS EXAMS TREND ANALYSIS
Marks
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A A A A A A A A A A A A A A A B A I L B N C P
Chapter
10
1
2
3
4
5
6
7
8
9
No.
1 ACCOUNTING FOR ESOP
CHAPTER
THEORY QUESTIONS
Que. 1 : Explain ‘Employee’s stock option plan’. (Nov. 2009) (2 Marks)
‘
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mder
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BASIC QUESTIONS ON ESOP - EXPENSE COMPUTATION
Que. 2 : PQ Ltd. grants 100 stock options to each of its 1,000 employees on
1-4-2015, conditional upon the employee remaining in the company for 2
years. The fair value of the option is ` 18 on the grant date and the exercise
price is ` 55 per share. The other information is given as under:
(i) Number of employees expected to satisfy service condition are 930 in
the 1st year and 850 in the 2nd year.
(ii) 40 employees left the company in the 1st year of service and 880 em-
ployees have actually completed 2 year vesting period.
You are required to compute ESOP cost to be amortized by PQ Ltd. in the
years 2015-2016 and 2016-2017.
Ans.
Calculation of ESOP cost to be amortized
2015-2016 2016-2017
F
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Que. 3 : At the beginning of year 1, the enterprise grants 1,000 stock options
the end of year 3, the enterprise has sold 55,000 units, and the stock options
period. You are required to examine and give comment in light of the relevant
During year 2, the enterprise increases the sales target to 1,00,000 units. By
to each member of its sales team, conditional upon the employees remaining
in the employment of the enterprise for three years, and the team selling more
than 50,000 units of a particular product over the three-year period. The fair
Guidance Note that whether the company should recognise the expenses on
Twelve members of the sales team have remained in service for the three-year
Also state will your answer differ if, instead of modifying the performance
target, the enterprise had increased the number of years of service required
dc i
t f aeetsr c o
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Ans. Paragraph 19 of the Guidance Note on Share Based Payments
r i tt s prment v t
net n e st
i i a o dnoz e
value of the stock options is ` 15 per option at the date of grant.
oppeds sst u mie r t s f m n e o i
cgout e i e ntr e a e o d
r s fic e n
tnc k q v r
r i s , s h hvt oa i t s g
e i e c ed. i ndoo t t n f d i a o
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d c
p e ( be
for the stock options to vest from three years to ten years.
et s f v t e e
re
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t bx
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r
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e s
s
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m rs rv e i h t c e o
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Furthermore, paragraph 26(c) of the Guidance Note
o f n p u cn
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e u enoeg r s e
t t t fiw c r ese
F t eens t t
a coth
i e a i
d t m i
d s
c
a s r
hri
G nvb rah nit ntsvd nor e onoc e
N oi fodt
e i ad e tat
n oni o ie t p
I
T i
t
i cm,sgs
u e
dnm
i
,
meyn csu. mt i n v ht
r
e
N d e
r nt e nnt u oeu mfr a geqee epsr t n
U the base of options granted or not.
ns eaas
r i
t e Gct l
t m u s
i
tg nd
i
o r t
o h
t oes e
k re
O oe hmhe m dei ra
t t t
s eN s e k aev e
C cict i s vu en sns sa e eh ct e
C
A ev fst fnr ha
t r i
min d
o vis
rgte uo hot
c a t e t h
cr o e o t fso ee t e ep n c s s ged,
ne e t r Os o mnahri fi hr n a eep i
r n e
ast a e .in t e i
y d bt hri i vc
i
meahbe s 4eriostu c snt l i , e z e n
rth mt t f 2t tafi le e p u e t nce
oe i ma o a , o a p fie p G r a t g e
f
r ze
t
s
e
s
i
u mer hel
phe
l e
z efs
f s
i
d ean f o hen orH
ni uo ohni t c s .
e
pg
i
n er
v
ees t b atcil
r n n a a mte
e
r y e esn
r e
l hem g o aog vse w ,
e hed e l
e h c
i o
ao b t u atc t ee h k t n v i
rcao sn
l t t u r s e c r
i u
aha s
i ywi fi T i
l
,e
e r t
i
oea i a oe a nar a c r otc ehen d
Frv dthi po r f t pl n e s ywso
Conclusion :
h e rp s
do not vest.
oa n v t ,ti ooeb
t t )
n e u p e o nhe
t srel r mos l l c
tae a , a t
Analysis :
es e c d e t o n c s t p o t
s
i e t
s t
a pua v fi
ei eis ds
ted
i
t
i eeca i m i
t
i e g
n
r
pbvd
e c meq t r v eeas e ed z
i i
rhe i
oo
wd
oor
n
arp n
aotn hhon
t t t
d
aeo nn t
s
e onf egr o on o hco ge
irt Hmg ft i mt
1.2
t tt t nc I it v
s edadei td 0 0 0 o
e ce l h, e n
1.3
0 0 0
their options for 16,000 shares only and the remaining options lapsed. The
when the market price was ` 120 per share. The options were to be exercised
Que. 4 : X Co. Ltd. has its share capital divided into equity shares of ` 10
each. On 1.1.20X1 it granted 20,000 employees’ stock option at ` 50 per share
company closes its books on 31st March every year. Show Journal entries
between 15th March, 20X2 and 31st March, 20X2. The employees exercised
(with narration) as would appear in the books of the company up to 31st
e h u
`
y nir cof t din 0 0 0 ,
au aa , , , e
o
l mquwoem 0
6
0
6
0
2 c
res tte
p , , , n
orec h n s 1 7 1 e
m f e s i unr
I 1 1 H
e r cauh o. o .
s
2 e i cd h 0 0 0 e
1 pv cwcew 0 0 0 e
`
( eret , a vs 0 0 0 y
hse Bs i , , , o
d t eoee e 0 0 0 l
o
i
r gfs . vncy
e e
0
,
8
2
,
1
2
,
1
p
m
e noa
i
r lk
l r o 1 1 e
p y sei
r aespl
r f a y wt o
t
a i
d e s d c
i m
e n n l v e . . r
. . d
y oye o u r e d r r e
t
- mftt i o e o D D D n
o wsl vi
In the books of X Co. Ltd.
e fr op r c ) sn s a
oeeee
P e t x n r
BASIC QUESTIONS ON ESOP - JOURNAL ENTRIES
o 0 e e
O
S
r
h des shwp
/
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i
t
g
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e a ) e
Journal Entries
eme a h g e e 0 0
, oe s t r
R e t t p n h n s 0 6 l
p h p nn a
O h s uy ter i t i
t n 0
, 1 mt
x eu s
F t nneat z m s e 6 [ e po n;
G r
e i
, e e h io
t n n e
v p 1
( c eo
t n mc o1
i
v f
i hry eg rr x c / e o
i oc t X
N
dthl eofa e / A hd t cA p 0
Particulars
I o t e a es O2
T
N 0 edtehe
r k t
c de
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o
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l m t
s
s
n es krl
i
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k i 6 o0 s t e y
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t v i 1 c2 y i
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s P ded
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es
s s
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stn
ta
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a a
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`
wpt u t l o o1
x× trpoa lette
h k
n p 0
, T T( ni
i
e ars fi
o TA
nn
i sb
i
es l e o wci c z r a m6 Bgu r e a l
non u t i
v i e B E[1 (ap P Br
(t yi
r
l
sen k n fi n w
March, 20X2.
oi r v t
Working Notes:
i
t t e
r co
oi eegoo n
ery
a
r
p
o ehet tnsce
e
22
XX t
mtsa e d eic on
e 0 c b r 0. 2 Ne
n0 at, e fiei v
fid r 2.
. 3 X
u0 s ehib dle 3 1 . .
m1, egtd oo t u
os
03
. 3
.
1
Date
r r
Ans.
e× ha omn o 5 o 1
r Tt f mwi n 1t 3
A
C
C
O
U
N
T
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G
F
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S
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P
1.4
2
.
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a
rf
kren
e
te
Pc
r
c m
i
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=2
1 t
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p e
e
r=px
s e
h7n
a
r
ep
wrn
hs
e
r
ea
a
sie0
s
t
oe
cq
ku
ov
p
t
i
on
nto
pt
r
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ce
emA
=p
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,ct
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es
nts
co
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e
t
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e o
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fl
i
e
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e
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r
e
s 0
i
a
l
ed
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pt
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d
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b
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r
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o
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d
1
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h
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.
i.e.
Que. 5 : On 1st April, 20X1, a company offered 100 shares to each of its 500
employees at ` 50 per share. The employees are given a year to accept the
offer. The shares issued under the plan shall be subject to lock-in on transfer
for three years from the grant date. The market price of shares of the company
on the grant date is ` 60 per share. Due to post-vesting restrictions on transfer,
the fair value of shares issued under the plan is estimated at ` 56 per share.
On 31st March, 20X2, 400 employees accepted the offer and paid ` 50 per
share purchased. Nominal value of each share is ` 10.
Record the issue of share in the books of the company under the aforesaid plan.
F
a
i
r
v
a
l
u
e
o
f
a
n
o
p
t
i
o
n
=
5
6
-
5
0
=
6
Ans. ` ` `
Ns
uh
mr
be
e
r
o
f
s
h
a
r
e
s
i
s
s
u
e
d
=
4
0
0
e
m
p
l
o
y
e
e
s
×
1
0
0
s
h
a
r
e
s
/
e
m
p
l
o
y
e
e
=
4
0
,
0
0
0
a
s
F
a
i
r
v
a
l
u
e
o
f
E
S
O
P
=
4
0
,
0
0
0
s
h
a
r
e
s
×
6
=
2
,
4
0
,
0
0
0
` `
V
e
s
t
i
n
g
p
e
r
i
o
d
=
1
m
o
n
t
h
E
x
p
e
n
s
e
s
r
e
c
o
g
n
i
z
e
d
i
n
2
0
X
1
-
X
2
=
2
,
4
0
,
0
0
0
`
Date Particulars ` `
3
1
.
3
.
2
0
X
1
B
a
n
k
(
4
0
,
0
0
0
s
h
a
r
e
s
×
5 n
0
) a
D D
. r
r
2
0
,
0
0
,
0
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0
`
EA
m/
p
l
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s
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0
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h
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e)
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p
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P
r
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fi
t ox
& Ee
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s
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r
.
2
,
4
0
,
0
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m
yA
s
t
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0
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n
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c
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e
i
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gn
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mr
p
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er
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kr
c fi
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ss
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i
n)
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a
n
f
d
t
A
c
Que. 6 : A company has its share capital divided into shares of ` 10 each. On
1-1-20X1, it granted 5,000 employees stock options at ` 50, when the market
price was ` 140. The options were to be exercised between 1-3-20X2 to 31-03-
20X2. The employees exercised their options for 4,800 shares only; remaining
options lapsed. Pass the necessary journal entries for the year ended 31-3-
20X2, with regard to employees’ stock options.
0 0 0 n n0 0
o o3
1.5
0 0 0 market price was ` 730. The options were to be exercised between 1st January 0
shares only; the remaining options lapsed. The company closes its books on
Que. 7 : A Company has its share capital divided into shares of ` 70 each. On
1st April 2010, it granted 20,000 employees’ stock options at ` 40, when the
2011 to 15th March 2011. The employees exercised their options for 18,000
(May 2011) (5 Marks)
31st March every year. Pass Journal entries with regard to employees’ stock
i
Cr.
`)
Cr.
( 0
, 0
, 0
, t
p e1
r 0
,
8 4 2 o a 0
`
4 2
, 3
, d.l h= 0
,
6 4 na se 8
aot rar 1
et e h
cn ps
0 0 0 i
r 0r 0 0 0
0 0 0 i 0 0 0
Dr.
`)
Dr.
( 0 0 0 P0 9e 0 0 0
,
0 ,
2 ,
2 t0 p ,
0 ,
0 ,
0
e 0
`
4
, 3
, 3
, k,0 +3 0
, 2
, 2
,
2 4 4 r2
a e1 8 7 6
3
, r 1 1
M4 a
`
. r
. . n h=
r r e se
`
D D D e= rc
e i
.
r . r
r .
w0 ppr D D D
t0
e 0t
In the books of Company
P 00 s b,8 4e c oce g
c 03 e a t4 / t t n
-
O
-
/ 81 s s n k A u nri i
S A , n n u× r o d
`
E 4 e e =a e op
Journal Entries
Journal Entries
s f p p o0 s n i t n
`
R e c9 0m n t a
s so) x m s 1r e o p e t
O
n e h e i i
t ok s
t
F c emc n o D= e p p kr
`
e x u
c yua c -ov ca
`
G p / / oie o e o o
=e om
Particulars
N x A l i
t s
e 0e n
I e l A p m a sar 5c k t n
T a e50 s e e o
i c s n o
N n t m mr n y s h i
r t o 0e i
o i ep o ns a 0h t
`
t
Particulars
U i p u t e
n l er =p s s p
t i af p 0w
a u p n o
`
O a C m oto m pe tn.
n e s ,
0
C s
n e t ae o m e
xp ui
oal p e 240 k
C
e e r thi c c o E0 optt m ec f c
A p r
a P ncr c c f n9 co o y/ o o
t
a s o t o oA t
`
m h s eap e o
i cf n c l ta s
S e mee s e
s r) t Ao i s p g n s
`
o i
t 0 y
o o e
f s a = e n aes e
c y i
r t1 s
i s e s mnt0 e mi r c e
s t
i u o c L l nns n0 0 y End g e ) / y
e u l
l r d p ae e5 u 0
i u o goy0 A o
c c a fe p o, a 3 l
`
/ e q e o x n m r
t p mc 4 l
p ot npl1 k p
y a Ec m- 2 Ts i
`
A o E S gse gx eis6, m e n m/c
k l o o nren t o/ ne o0 r d Bms a
`
p i fi i C4 Pf E (ei B EA
n m
T T e aa o TA e n e1 so
`
a Bht r Bio e e =
B E (sa P (t y i
t t0
`
o= i n 0
- l r u
Working Note:
1 p e uo 8 0 1 ,
3 c cc ,
4 1 1 5
o mri ec 0 0 1
2 × 2
options.
t Ep Sa , 2 .
r
Date
2 X 1 ,
1 a
X2 -
3 .
1 .
2 l
i . 1
-X - r n M1
3
Date
Ans. p
Ans.
- - 1 A a o20
1 3 3 J t
0 0 0 0 0 0 0
0 0 0 0 0 0 0
2011. The employees exercised their options for 4,800 shares only; remaining
Que. 8 : A company has its share capital divided into shares of ` 10 each. On
(Nov. 2011) (4 Marks)
1-4-2010, it granted 5,000 employees stock option at ` 50, when the market
price was ` 140. The options were to be exercised between 1-12-2010 to 28-2-
options lapsed. Pass the necessary journal entries for the year ended 31-3-2011,
Cr.
Cr.
(` )
0
, 0
, 0
, 0
, 0
, 0
, 0
,
0 0 0 0 0 8 4
8
, 6
, 8
, 2
, 5
, 4 2
,
1 1 1 6 4 6
2 1
0 0 0 0 0
0 0 0 0 0
Dr.
(` )
Dr.
0
, 0
, 0
, 0
, 0
,
0 0 0 0 2
8
, 2
, 5
, 4
, 3
,
1 6 4 2 4
1
c n
. /
. A o . . r
.
r r i
t r r
D D e a D D D
s s
In the books of Company
P 0 i
m r g s n n c s c 00
0u n x n e e / d e / 03
-
O e
-
S 0i h i e o p p A n e) A 81
E ,
8 t d i
t x m) a y0 ,
4
Journal Entries
1emf n n p e ont s t
s o4
l g f
`
R o a o
i o n cu e t p 1 n
i so)
O c c sr t
s t o s u d e h
/ / e p e t a k i so n o m
F A A ea s u s c t e e es n emc
`
yt i n o a ecc p n a c c yua
G l c o s oa t oie
with regard to employees’ stock option.
oa t ya x /
Particulars
N a m l r e s n o t w s / l m
I t
i u p hxe n p f e os
l e i
t se t A A p
T p i ce o m o p p s n p Pc u l e50
N a m ma i
t o o o Oi o a m mr
o e m ml t ep
Particulars
U c e ee n p c s i k Spr n i u
r o0i o p o e& t o p i af
`
O e
r p t 1e a) c ft a c Et i a m oto
C a t a r k s
e l c s o s o 0e t c t ae
C s n c e res / e fi n] t
s 0k p e
r
h e fh A e ro e0) o e thi c
`
A s i eo ) o
t y or e p5 s 0r r p ncr
y t
i messn s s oc f a y
s o f r e ,
5 a k a s eap
t r ro l / yh s s p m- e c h e
i u tr s p r l
o p no 0 fm o s mee
u c o
l aei e meA t s L m at o4 y o t i
t 0
q e l
a hpp t e Es
n
e00 r
t e
c1
s(
o
l te
n
n s y
t
i
r t1
o s
i
E S gys0o
2
y
o n g,0
& E
gns e p c ah s
e i
u u l
l c
r
l t o e× m/ r c c a fe
`
o o nit1k p oe n2 fi ne g w / e q e o x
T T i
e u o c m/c Tp i
e r o T i
e p y0
o0 EA g0 A y
o E S gse
Bqft ` Bo r Bx l 0 ong n5 k l o o nren
(eos EA (f P (e p , Ti i n p T T i
m5 e a m e aa
`
B Bht
E[ (@ B E (sa
`
1 1
1 1
0 0
2 2 , .
b
, , l
i .oe
6 1 r c
Date
1 3 p et F
.
r .
r A0 D0h1
Date a a t01 t01t1
Ans.
M M s s 80
1 2 1 222
1.6
A
C
C
O
U
N
T
I
N
G
F
O
R
E
S
O
P
1.7
Date Particulars Dr. Cr.
(` ) (` )
32
1
s
t1
M
a
r
.
E
m
p
l
o
y
e
e
s
s
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1
8
,
0
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p
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e)
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s
t
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k
i
s
32
1
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t1
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r
.
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o TA
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.
4
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,
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Que. 9 : On 1st April, 2012, a company offered 100 shares to each of its 400
employees at ` 25 per share. The employees are given a month to accept the
shares. The shares issued under the plan shall be subject to lock-in to transfer
for three years from the grant date i.e. 30th April, 2012. The market price of
shares of the company on the grant date is ` 30 per share. Due to post-vest-
ing restrictions on transfer, the fair value of shares issued under the plan is
estimated at ` 28 per share. (May 2012) (4 Marks)
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Ans. ` ` `
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Que. 10 : Arihant Limited has its share capital divided into equity shares of
` 10 each. On 1-10-2012, it granted 20,000 employees’ stock option at ` 50
per share, when the market price was ` 120 per share. The options were to be
exercised between 10th December, 2012 and 31st March, 2013. The employ-
ees exercised their options for 16,000 shares only and the remaining options
lapsed. The company closes its books on 31st March every year. Show Journal
Entries (with narration) as would appear in the books of the company upto
31st March, 2013. (May 2013) (4 Marks)
0 0 0 0 0 0
0 0 0 0 0 0
the market price was ` 50 per share. The options were to be exercised between
Que. 11 : J Ltd. has its share capital divided into equity shares of ` 10 each.
tions for 3,600 shares only and the remaining options lapsed. The company
On 1.1.2018 it granted 5,000 employee stock options at ` 30 per share, when
15th March, 2018 and 31st March, 2018. The employees exercised their op-
entries (with narration) as would appear in the books of the company up to
closes its books on 31st March every year. You are required to prepare journal
`
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Journal Entries in the books of Arihant Ltd.
1 1 1
Journal Entries in the books of J Ltd.
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31st March, 2018.
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Record the issue of shares in the books of the company under the aforesaid
April 2017 for ` 30. Option would be exercisable within a year it is vested.
Que. 12 : Suvidhi Ltd. offered 50 shares to each of its 1500 employees on 1st
is ` 50 per share on grant date. Due to post vesting restrictions on transfer,
On 31st March, 2018, 1200 employees accepted the offer and paid ` 30 per
(May 2018 - New Course) (5 Marks)
three years from the grant date. The market price of shares of the company
The shares issued under the plan shall be subject to lock-in on transfer for
r
the fair value of shares issued under the plan is estimated at ` 38 per share.
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Journal Entries in the books of Suvidhi Ltd.
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- `
Que. 13 : A company has its share capital divided into shares of ` 10 each.
On 1-1-20X1, it granted 5,000 employees stock options at ` 50, when the
market price was ` 140. The options were to be exercised between 1-3-20X2
to 31-03-20X2. The employees exercised their options for 4,800 shares only;
remaining options lapsed. You are required to prepare the necessary journal
entries for the year ended 31-3-20X2, with regard to employees’ stock options.
Ans.
In the books of Company
Journal Entries
Date Particulars Dr. Cr.
( ,
(
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Que. 14 : A company has its share capital divided into shares of ` 10 each.
On 1-1-20X1, it granted 5,000 employees stock options at ` 50, when the
market price was ` 140. The options were to be exercised between 1-3-20X2
to 31-03-20X2. The employees exercised their options for 4,800 shares only;
remaining options lapsed. Pass the necessary journal entries for the year ended
31-3-20X2, with regard to employees’ stock options.
A
C
C
O
U
N
T
I
N
G
F
O
R
E
S
O
P
1.11
Ans.
Journal Entries in the books of company
Date Particulars Dr. Cr.
( ,
(
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1
-
3
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Que. 15 : Lucky Ltd. grants 100 stock options to each of its 1,500 employees
on 1-4-2014 for ` 40, depending upon the employees at the time of vesting of
options. Options would be exercisable within a year it is vested. The market
price of the share is ` 70 each. These options will vest at the end of year 1 if
the earning of Lucky Ltd. is 15%, or it will vest at the end of the year 2 if the
average earning of two years is 13% or lastly it will vest at the end of the third
year if the average earning of 3 years will be 10% 8,000, unvested options
lapsed on 31-3-2015. 6,000 unvested options lapsed on 31-3-2016 and finally
4,000 unvested options lapsed on 31-3-2017.
The earnings of Lucky Ltd. for the three financial years ended on 31st March,
2015; 2016 and 2017 are 14%, 10% and 8% respectively.
1,250 employees exercised their vested options within a year and remaining
options were unexercised at the end of the contractual life.
You are required to give the necessary journal entries for the above and also
prepare the statement showing compensation expense to be recognized at the
(November 2018 - New Course) (10 Marks)
end of each year.
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
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3
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1.12
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employees at ` 50 per share. The employees are given a month to accept the
on the grant date is ` 60 per share. Due to post-vesting restrictions on transfer,
for three years from the grant date. The market price of shares of the company
On 30th April, 2013, 400 employees accepted the offer and paid ` 50 per share
offer. The shares issued under the plan shall be subject to lock-in on transfer
Que. 16 : On 1st April, 2013, a company offered 100 shares to each of its 500
Record the issue of shares in the books of the company under the aforesaid plan.
Year 3
2016-17
`
s 0
the fair value of shares issued under the plan is estimated at ` 56 per share.
0i
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purchased. Nominal value of each share is ` 10.
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QUESTIONS ON ESPP
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o or og uh
Ans.
o r te a e x 0
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1.14
ADVANCED QUESTIONS ON ESOP
Que. 17 : The following particulars in respect of stock options granted by a
company are available:
Grant date April 1,2008
Number of employees covered 300
Vesting condition: Continuous employment upto 31/03/11 100
Nominal value per share (` ) 10
Exercise price per share (` ) 40
Fair value of option per share on grant date (` ) 20
Exercise date July 31, 2011
The number of options to vest per employee shall depend on company’s av-
erage annual earning after tax during vesting period as per the table below:
Average annual earning after tax Number of options per
employee
Less than ` 100 crores Nil
` 100 crores to less than ` 120 crores 30
` 120 crores to less than ` 150 crores 45
Above ` 150 crores 60
Position on 31/03/09
(a) The company expects to earn ` 115 crores after tax on an average per
year during vesting period.
(b) Number of employees expected to be entitled to option = 280
Position on 31/03/10
(a) The company expects to earn ` 130 crores after tax on an average per
year during vesting period.
(b) Number of employees expected to be entitled to option = 270
Position on 31/03/11
(a) The company earned ` 128 crores after tax on an average per year
during vesting period.
(b) Number of employees entitled to option = 275
Position on July 31, 2011
Number of employees exercising option = 265
Compute expenses to be recognised in each year and value of options forfeited.
A
C
C
O
U
N
T
I
N
G
F
O
R
E
S
O
P
1.15
Ans.
(A) Computation of expenses to be recognized in each year
Year Calculation Expense for Cumulative
Period (`) expense (`)
2
0
0
8
-
0
9
(
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8
0
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3
0
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o
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s
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(B) Value of option forfeited as on July 31, 2011
F
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.
` `
Que. 18 : The following particulars in respect of stock options granted by a
company are available:
Grant date April 1, 2011
Number of employees covered 50
Number options granted per employee 1,000
Fair value of option per share on grant date (` ) 9
The options will vest to employees serving continuously for 3 years from
vesting date, provided the share price is ` 70 or above at the end of 2013-14.
The estimates of number of employees satisfying the condition of continuous
employment were 48 on 31/03/12, 47 on 31/03/13. The number of employees
actually satisfying the condition of continuous employment was 45.
The share price at the end of 2013-14 was ` 68.
Compute expenses to recognise in each year and show important accounts in
books of the company.
Ans.
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,
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,
4 ,
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, = 2 , 2 n 2 4 t t t os
l
4 n 1 = i fi fi fi p n
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Employees’ Compensation A/c
`
`
m = e e n = r r r
`
= e e
s = m s a P P P Em
2 h n 2 3 e n 2 4 y y y yo
ESOP Outstanding A/c
P
1 c e 1 1 h e 1 1 B B B BC
O
- s p - -
2 c p - -
3
S 1 x 1 1 s x 1 1
E 1 e e 1 0 e 1 0 2 3 4 2 3
R 0 h
t 0 2 e s 0 2 1 1 1 1 1
2 s 2 h a 2 - - - - -
Year
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F n r
e n n e n n 1 1 1 1 1
e i r i
` Year
G i d s i e e s
i i e 0
2
0
2
0
2
0
2
0
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N
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e
s n 0 i
n e
s s d 0 n e
s s
T n u 0 g n n n 0 g n n 0 0 0 0 0 0
N e 9 t 0 o e e 9 u 0 o
c e e 0 0 0 0 0 0 0 0
U p s ,
3 s c p p d ,
5 p p 0
, 0
, 0
, 0
, 0
, 0
, 0 0
O x e 2 r
a e 0 x x e 0 e
r x x 4 4 8 8 3 3 0
, 0
,
`
`
e = v , r e e = t , e e 4 4 3 3 2 2 4 4
`
C
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1 ,
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C s e t y o
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`
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g p x × r = g o p c × e f0 g o O O u c
o n e e f
o 2 o c n a y o o c O e
c o 0 p c e o 0 3 0 c e P/c P/c c
e i s
e 0 e × e r i s
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r t r 0
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, = u5 r O/ a
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a
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i
t f s s v 0 i
t i
t f s o v4 i
t i
t i i n
o = e o = i od od oi o
Year 2012-13
Year 2013-14
p f v e 0 p p f r e p p Tn Tn Td T
o o v 0 o o0 o e v= o o0
`
e e d i , e e p i
f u
l r u
l e t
a 3 f f0 u
l r u
l t
a f f0 2
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i 1
Year
u r m r e m u u,3 r m r t m13 u u,2 1 2 3 1
l i i p ( l l i i s l l 1 1 1
Year
u 1 u 1 0
1.16
a a a x u a a a a e u0 a a 0 0 0
`
V N = V V N V V V 2 2 2 2
F F E C F F C2
`
0 0 0 0 0
1.17
0 0 0 0 0
Que. 19 : X Ltd. granted 500 stock options to its employees on 1.4.2011 at
` 50 per share. The vesting period is 2 years and the maximum exercise period
is one year. Market price on that date is ` 140 per share. All the options were
exercised on 30.06.2014. Pass journal entries giving suitable narrations, if the
(Nov. 2014) (8 Marks)
0 0 0 0 0 0
Credit
(`)
0 0 0 0 0 0 0
, 0
, 0
, 0
, 0
,
0
, 0
, 0
, 0
, 0
, 0
, 8 8 8 8 9
4 8 2 2 3 5 1 1 1 1
`
4
, 3
, 8
, 8
, 2
, 0
,
1 1 2 2 1 4
0 0 0 0 0
0 0 0 0 0
Debit
(`)
0
, 0
, 0
, 0
, 0
,
c c 8 8 8 8 9
/ / 1 1 1 1
d A d A
/ ’n
s / ’n
s
b e o b e o . . . . .
e eti e eti r r r r r
ya ya D D D D D
Journal entries in the books of X Ltd.
c os c os
n l
p n n l
p n
a
l e a
l e
a mp a mp c natht r c natht r c
B Em B Em / i c a / i c a /
y yo y yo A desig / e A desig / e A
P B BC B BC g ee a A y g ee a A y g
O n s
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i ytr e e n
S c i
d n os s ht) c i
d n os s ht) c i
d
E / n gl n t / n gl n t / n
R 4 A opn e n opn e n
1
- e a
t cmo p fu A a
t cmo p fu A a
t
face value of equity share is ` 10 per share.
Year
O 3 s s eed x o o s
e s eed x o o s
e s
F 1 n t
u r e E c n t
u r e E c n t
u
G 0 e O stos n ec O stos n ec O
N 2 p e i
t s a e e i
t s a e
I x n s dr o
i ns p n s dr o
i ns p n
T E o neo t es x o neo t es x o
0 0 0 0 i etm a po E i etm a po E i
Particulars
N n t n s xl t n s xl t
U 0 0 0 0 o p pa as n e n p pa as n e n p
O 0
, 0
, 0
, 0
, i O xr ) e d o O xr ) e d o O
2 2 5 5 t eg ,r t p nn ti eg ,r t p nn ti
`
C a k n ha k n ha k
C 8
, 8
, 0
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Que. 20 : You are provided with the following details in respect of ABC Limited:
(i) 10,000 equity shares of nominal value of ` 10 each (under ESOP) were
issued on 31st March, 2014;
(ii) Exercise price of equity shares granted under ESOP was ` 160 per share;
(iii) Market price of share was ` 400 each on the date of the grant;
(iv) Vesting of shares was in the ratio of 30%, 60% and 100% after 1 year,
2 year and 3 year respectively from the date of grant;
(v) Vested options can be exercised up to 1 year from the date of vesting;
(vi) The number of shares expired and exercised are as under:
Years ended
Particulars 31.03.2015 31.03.2016 31.03.2017
Vested Options Lapsed during the year - 200 600
Unvested Options Lapsed during the year 400 600 1,000
Options Exercised during the year 2,500 2,000
From the above details you are required to calculate:
(i) Employee Compensation Expense for the year ending 31st March, 2015,
31st March, 2016 and 31st March, 2017
0 0 0 0
1.19
(i) Computation of Employee Compensation Expense (Refer Working Note)
0 0 0 0
Entries relating to ESOP lapsed and options exercised were passed at the end
(ii) Balance of Employee Stock Option Outstanding Account as on 31st
(Nov. 2017) (8 Marks)
2017
2017
0
, 0
, 0
, 0
,
0 0 0 8
Cost to be recognized in the year
4
, 4
, 2
, 4
,
2 2 9 6
1
ending on 31st March
0 0 0 0 0
0
2016
0 0 0 0
2016
0 0 0 0 0
,
,
8 ,
0 ,
8 ,
0 2
3
March, 2015, 31st March, 2016 and 31st March, 2017
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, 4
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2015
0 0 0 0 0 0
2015
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(ii) Balance of ESOP Outstanding Account
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Total
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Vesting Date as on 31st March
O
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of the respective financial year.
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1.20
G G G o o
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-
-
a l h r
Que. 1 : State the conditions of issuance of Sweat Equity Shares by Joint
(Nov. 2012) (4 Marks)
(May 2014) (4 Marks)
Que. 2 : Give four conditions to be fulfilled by a Joint Stock Company to buy
a i t t u h r
e t ,oy d duti s s a f
r u
l e
cpl e egnl
t e i s y
n
h
s d
l
a o i h s r )oti a n
s r t i
l eBI e p e a
pm
BUY BACK & EQUITY SHARES
s e e nr h
WITH DIFFERENTIAL RIGHTS
hE l
e
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r
l
te
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et
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s
t
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i
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sf
back its equity Shares.
n w c ih nc t
i t t t i 7g u l c de p
ai nnc oe u s ynnc e 7n o e
THEORY QUESTIONS
se a kh s
mw f h oou nh qdbign ni s sh ct e
t i i eeetoa e t af r
Stock Companies.
ylo o
l t t s at s u c ow i
i r f bo a
no eby u
l a hh
t ti
a d B e d t o
l k lo h
r m ena.y r c a s
CHAPTER
af u o e sic g r efl
o c i s ye s
p e sd sd o s h womf o s a c r uv e
s e e ih e lnc c b ee br h
mh i s r s l w scsa re y
oft es eonw tn ere n haa e h u pl
so
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s fi Ah Tr l
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u ( ( f 1 2 3 4
ii
iii
iv
Ans.
Ans.
s ( ( o
s
i t
e f sr l
a ee 0 0 0 0
h o e
i e i hth 0 0 0 0
Que. 3 : U Ltd. (a listed company) resolves to buy back 4 lakhs of its fully
the purpose, it issues 1 lakh 11% preference shares of ` 10 each at par, the
entire amount being payable with applications. The company uses ` 16 lakhs
of its balance in Securities Premium Account apart from its adequate balance
in General Reserve to fulfil the legal requirements regarding buy-back. Give
paid equity shares of ` 10 each at ` 22 per share from the open market. For
t n t
ith c t 0 0 0 0
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m t hn 1 1 1 1 4 4
Journal Entries (In the Books of U Ltd.)
i h f p
necessary journal entries to record the above transactions.
L t w co e yto
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QUESTIONS WITHOUT 3 TEST
T l o e o
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Ans.
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2 .
3 .
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2.2
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Working Note:
Amount to be transferred to Capital Redemption Reserve account (CRR)
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e
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r
s
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c
h
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b
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k
(
1
0
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0
0
,
0
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,
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e
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m
o
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t
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e
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t
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c
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3
0
,
0
0
,
0
0
0
Que. 4 : A Limited furnishes the following summarized Balance Sheet as at
31st March, 2017:
Liabilities (` in lakhs) Assets (` in lakhs)
Equity share capital 2,400 Machinery 3,600
(fully paid up shares of ` 10 each) Furniture 450
Securities premium 350 Investment 148
General reserve 530 Inventory 1,200
Capital redemption reserve 400 Trade receivables 500
Profit & loss A/c 340 Cash at bank 1,500
12% Debentures 1,500
Trade payables 1,400
Other current liabilities 478
7,398 7,398
On 1st April, 2017, the company announced the buy back of 25% of its equity
shares @ ` 15 per share. For this purpose, it sold all of its investments for
` 150 lakhs.
On 5th April, 2017, the company achieved the target of buy back.
You are required to:
(1) Pass necessary journal entries for the buy-back.
(2) Prepare Balance Sheet of A Limited after buy-back of the shares.
8 2 0 0 0 0 2 0 0 8 0 0
4 0 0 0 0 2 0 0 7 0 5
(` in Lakhs)
1 9 9 6 8
, 3
, 5
, 4 4 ,
, 5 0
,
Amount
) 1 1 1 1 6 4
Cr.
s
h
k
a
l 0
n 5 0 0 0 0 0
i 0 0 0 3 7
S 1 6 3 9 5
T (
Dr.
`
Note No
G
I 1 2 3
R
L . . r
. . . r
.
A r r r r
I D D D D D D
T
Balance Sheet (After buy back)
N
E y y to
h t
(In the books of A Limited)
R u u gd
E b b ue
F n f or
F
I o o br
s t ffe
Journal Entries
D o
r n
H e u c es) s
T
I
d
l o /
A unt
l a e
r
W t ) c o c a r
t n u
n / h c e vs u t
S t
e fi A e a) v le o n
E r nes r
e a c e
m o k a or s nva
r c b
R r
t p c h c a e i e e
A s s
Particulars
e a / eh r ms e D
H v n b o A dS oer v
S n o /
c c t ay n nre %
i / y e k o
i 2
Y d A
f l u u c mt
i t oes
t 1
T c o o A b a u p l ee
r -
I / l
s a s d b tq c a f r s s
U A e t m e t n / c m u n s g e
i
Q l t
i u r n y eE A / e u n t
t a n p i u mh A d qmo l i i
l
E n s e a m
a
h
u
o b c e e
s r eoi t p w i
(2) Non-Current Liabilities
& e n m c s / yk v s trp r b
m o t e e m) s A aa r l
o a n f m u o a
i
r e pL e r
(1) Shareholder’s Funds
K y l
1. Equity and Liabilities
t s r
t e p t ak r s L t use S r s s
C s fi i k i ore l o e t t
(1) Non-current assets
e a eac a e0 e d d l e
(3) Current Liabilities
A c v o v h s u h n h6 r d p ma e a n b b n s s
B / n
r i s e
i q hb
t s a t l n a r t
i a e t s
A n
I P g t E B f a a C ahl p a m y r
r e a
Y y i
r gy y go r t o gsa a s r a u s
U k o t
o n i u o nit t
i o nk e fi nki t C e e p c s e
l
B n T i u
T e c T i
e u u T i
e c n o T i
e cp v t a b
a e e r - e r i
B B q e Bq q Ba G r Baa r e g d e d
e g
( E S (e E (b P (bc a s
e
n a h x n
h o r t i a
Particulars
S R L T O F T
II. Assets
1 5 5 ) ) ) ) l
) a ) )
l l l
Date
7 i
r i
r i
r ( ( ( ( t
( o ( (
1
a
b
a
b
a
i
Ans. 0 p p p T
2 A A A
2.4
0 0 0 0 2 0 ) 0
0 0 0 0
2.5
0 0 5 0 2 5 0 5 5 0 5
(` in Lakhs)
` in lakhs
2 ,
, 5
5 7 , 3
, 0
, 5 1 ,
, 6 9 7
Amount
1 6 0 1 4 1 1 (
0
8
1
`
- 0 0 2 0 0
0 5 7 0 5
S 0
, 2 6 4
,
T 1 3
H
Note No
G
I 4
R ) 0 0 0 ) )
L 0 0 0 0 0 2 0
3 3 0 7 5
3 5 0 4 7
A
I 5 5 4 3 3 3 (
T ) ( (
N h
E c
R a
E e l
F 0 L a k
F 1 / r c
P e
Notes to Accounts
I
D n a
f m b
`
o e
H o G y
T s r
f u
I e
r s m b
W e o n
a r r
S h a f o
E s h s d
R p s e i
a
A u f r
a p t s
e
H d o h n r
S i k s m e a
s a c m 7 h
4. Cash at bank after buy-back
Y t p e a f u t 1 s
T n v o i s 0
I e y
l r
e b
- k m e 2 f
U l
a l s y c e v , o
Q s v u e u a r n l
i k
E t i F s R R b b p i R r c
n s u ( u - r f R p a
& e e q l
a l R n o y m o o A s
t b
K m l e t p C o t u f e C t n
t b h i r i
t e b u t c l s e y
C s a s p u e o p u i n / a to 1 u
A e v a a S v t d o m e A s r s n m b
B v i
e c l c r r m r t e m n e t t r
n y c a e d e e e e e r s o e o s
e o
Y i d t n s f u t s f s
(2) Current assets
U t r e i r a e s d f
s p s o t ns s y s v f
n o r n p a R n e n d s u L fi a a r e a n t
B
e t e a a h s a R a re e j o r e e r e i n
r n d h C s e l
a r l r e i
t d & r l n u c f e
r e a s y v r T a T f v i A P T b i t n o m
u v r a e t
i r e : t s r r : t : : i
g h i a e
r e : e u n y
Particulars
C n C n s i d ns s fi s c l l
I T a u s
e e s p
d ae c s o d s n a r a a a
) ) ) l
) a
h q
R G
e a r e e r d e a M u b S P
S E L C A TR S L P A L T F h : :
( ( ( t
( o s d s
s
a
b
c
d
T . . . a d e
1 2 3 C A L
B
U
Y
B
A
C
K
&
E
Q
U
I
T
Y
S
H
A
R
E
S
W
I
T
H
D
I
F
F
E
R
E
N
T
I
A
L
R
I
G
H
T
S
2.6
Que. 5 : Dee Limited furnishes the following Balance Sheet as at 31st March,
2008:
` ‘000 ` ‘000
Liabilities
Share capital:
Authorised capital 30,00
Issued and subscribed capital:
2,50,000 Equity shares of ` 10 each fully paid up 25,00
2,000, 10% Preference shares of ` 100 each
(Issued two months back for the purpose of buy back) 2,00 27,00
Reserves and surplus:
Capital reserve 10,00
Revenue reserve 30,00
Securities premium 22,00
Profit and loss account 35,00 97,00
Current liabilities and provisions: 14,00
1,38,00
Assets
Fixed assets 93,00
Investments 30,00
Current assets, loans and advances (including cash and bank 15,00
balance)
1,38,00
The company passed a resolution to buy back 20% of its equity capital @
` 50 per share. For this purpose, it sold all of its investment for ` 22,00,000.
You are required to pass necessary journal entries and prepare the Balance
Sheet. (Nov. 2009) (8 Marks)
Ans.
Journal Entries
(In the books of A Limited)
Particulars Dr. Cr.
(` in ‘000)
(
)
B
a
n
k
A
c
c
o
u
n
t
D D
. r
r
2
2
,
0
0
i
P
r
o T
fi
t o
a I
n n
d v
L s
o t
s
s e
A n
c t
c A
o c
u c
n
t u
8
,
0
0
e
m
o
n
t
3
0
,
0
0
(o
Bf
e
i
nu
gy
t
hb
ea
i
nk
v)
e
s
t
m
e
n
t
s
s
o
l
d
a
t
l
o
s
s
f
o
r
t
h
e
p
u
r
p
o
s
e
b
c
0 0 0 0 0 0 0 0 0 0 0 0
2.7
0 0 0 0 0 0 0 0 0 0 0 0
Cr.
,
5 ,
0 ,
3 ,
5 ,
0 ,
2 ,
9 ,
4 5 ,
3 ,
2 5
2 2 2 3 2 6 1 ,
0 9 1 ,
0
` ‘000
1 1
(` in ‘000)
0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0
Dr.
S ,
5 ,
0 ,
0 ,
3 ,
5 ,
0 ,
2 ,
0 ,
3 ,
9 ,
7
T 2 2 2 Balance Sheet of Dee Limited as on 1st April, 2008 2 1 2 2
` ‘000
H
G
I
R
L k
A . r
. . . . n
I r r r r a
T D D D D D b
N d
E d yd
t n
R e i e
(After buy back of shares)
t u r p a
E s qer u
F t u
j es d h
F n d f i s
I u a t fn a a
D o n o p c
H c k u ear p y g
T t c c o ut ) ) u l n
I n t A a c l
a st k d l i
W u n ) b) c vve n c i u d
o u k k ynt A u a a f u
S c o c c e lr
a o b p h l
E c c a a uu v nsec c c
A c b b bo r i ec t y y
l a n
R
A y nc e mra n u l e i
(
A
t k y u oc s u b u 0
H n c k u t e oee o f s
S u a c b n b ea
l R nev
r c n
o h 0
1
e
c
o b a u n b m t offer c c n
Y
c y b n o o au n n t s A e a ) ns a
T o u o lo d e f 0
`
I c u y c e yi i a e k a :
l o 0 io v)
U A b u e c l am o t utn r c a 0 , d0
Q l n b u A b pe c p quo a m t 1 s 8 s
i a0
E a
t o s d
t m
a
y mpr c
A m eoi
k b
-
t
n t i
p e
r e
v - ov d5,
i e a e tc t n a f a 0 r
`
& p e r n u us e d n p y u e c o h r
e 0 p n2
a l a u i p i e v e uba u o s s , a-
K
C b h o m m mti r R m b c m d s : e 5 d 0
C a s e eri e ot e c y e e e s r 3 n s0
A e y m r u r s l mh d s
e A a b r c u ( n,
B r a y
t a P i pcu e a agr e r p :
l i a n l
p n c a a2
a p i m R t
i u a k a r
c h e r o / s o2
Y h u e s e ee p eo l h n e t
i s s r u i
t e A ie l +
Particulars
U S m q h
t e
i r hs e a hb a s a h
t p b y e s e p v t s0
B u E t P t t u C t t
i B a u t f
e v m r
e s il t 0
y i g i
r gns n gesp y g l
a c i
u r d r s s i e ,
t
i m o n u o ni e o nr a t
i o n t s P n e e e o b
l s
t s 5
u T i T i v T i u T i i d d q a s d r a e s 1
q e
r e c
e e a e e ac q e p e n E % s e e d li s a (
B Bg Bho B a s a 0 r r e n t s )
Liabilities
E P ( S (a R (st E ( c i
r 0 e l l u a n A te
n
e o d 0 1 v
r a a n c
r h e 0
, 0 e t t e t re d en
r
u 0 0 i i v fi e a
) ) ) ) a t
u s 0 0 s
e p p e o r x r l
h s , , R
a a
R r u i ua
S A 2 2 C C P C F Cb
iii
iv
( ( ( ( I
ii
v
B
U
Y
B
A
C
K
&
E
Q
U
I
T
Y
S
H
A
R
E
S
W
I
T
H
D
I
F
F
E
R
E
N
T
I
A
L
R
I
G
H
T
S
2.8
Que. 6 : Following is the summarized Balance Sheet of C Ltd. as on 31st
March, 2016:
Liabilities Amount
(` )
Equity shares of ` 10 each, fully paid up 12,50,000
Bonus shares of ` 10 each, fully paid up 1,00,000
Share option outstanding Account 4,00,000
Revenue Reserve 15,00,000
Securities Premium 2,50,000
Profit & Loss Account 1,25,000
Capital Reserve 2,00,000
Unpaid dividends 1,00,000
12% Debentures (Secured) 18,75,000
Advance from related parties (Unsecured) 10,00,000
Current maturities of long term borrowings 16,50,000
Application money received for allotment due for refund 2,00,000
86,50,000
Fixed Assets 46,50,000
Current Assets 40,00,000
86,50,000
The Company wants to buy back 25,000 equity shares of ` 10 each, on 1st
April, 2016 at ` 20 per share. Buy back of shares is duly authorized by its
Articles and necessary resolution has been passed by the Company towards
this. The buy-back of shares by the Company is also within the provisions of
the Companies Act, 2013. The payment for buy back of shares will be made
by the Company out of sufficient bank balance available shown as part of
Current Assets.
You are required to prepare the necessary journal entries towards buy back
of shares and prepare the Balance Sheet after buy back of shares.
Ans. :
Journal Entries for buy-back of shares (In the books of C Ltd.)
Debit (` ) Credit (` )
(
)
E
q
u
i
t
y
s
h
a
r
e
s
b
u
y
-
b
a
c
k
a
c
c
o
u
n
t
D
r
.
5
,
0
0
,
0
0
0
a
T
o
B
a
n
k
a
c
c
o
u
n
t
5
,
0
0
,
0
0
0
(@
B
e
i
n2
g0
bp
ue
yr
bs
ah
ca
kr
o
f)
2
5
,
0
0
0
e
q
u
i
t
y
s
h
a
r
e
s
o
f
1
0
e
a
c
h
`
e
`
(
)
E
q
u
i
t
y
s
h
a
r
e
c
a
p
i
t
a
l
a
c
c
o
u
n
t
D D
. r
r
2
,
5
0
,
0
0
0
b
S
e
c
u
r
i
t
i
e
s
p
r
e
m
i
u
m
a
c
c
o
u
n
t
2
,
5
0
,
0
0
0
T
o
E
q
u
i
t
y
s
h
a
r
e
s
b
u
y
-
b
a
c
k
a
c
c
o
u
n
t
5
,
0
0
,
0
0
0
(
B
e
i
n
g
c
a
n
c
e
l
l
a
t
i
o
n
o
f
s
h
a
r
e
s
b
o
u
g
h
t
b
a
c
k
)
0 0 0 0 0 0 0 0 0 0
2.9
0 0 0 0 0 0 0 0 0 0
`
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
Credit (` )
0 0 5 5 0 0 0 0 0 0
5 0 2 7 5 5 5 0 5 0
Amount
,
2 ,
1 ,
2 ,
8 ,
9 ,
1 ,
6 ,
5 ,
1 ,
1
1 2 2 1 8 4 3 8 1
S 0 0 0 0 0
T 0 0 0 — 0 0
`
H 0 0 0 0 0
, , , , ,
Note No.
G 0 5 0 0 0
Balance Sheet of C Ltd. as on 1st April, 2016
Debit (` )
I 5 1 2 3 4 2 5 0 0
R , , , , ,
L 2 1 2 4 2
A 1
I
T
N l l l ) )
E na a a 0 0 0 0
R . oi
i t t t 0 0 0 0
E r t p o o 0
, 0 0
, 0
F D p a T T 0 , 0 ,
F mc 0 0 5 0
I ,
5 5
, ,
2 5
,
e
D t df 1 2 2
H n eo
r
( (
T u l e
I o a u
l
W c t
ia)
c p v
S a ale s
E e ca k t
R v onr v h c n
A r t i e c a u
2 Current assets (40,00,000 - 5,00,000)
H e s s
m a b o
S s
e e e e - c
r vor
r n 0 y c
Y t e e 1 u A
T n n s f e b
I u o
i e o r s s
e e g
f f
`
U o t r s g i r n
Q p t h u t o i
EQUITY AND LIABILITIES
c en l n i
l s a d
E c m ee
r g p i i e R h n
& a e f t u r w b l r R s a
2. Reserves and Surplus
e d fex o u o a a a c m r t
K v e o r S r i
l t h / s C o s
2 Non-current liabilities
C r r r t h r t i
p s A e u f t
u
e l d o o i
1 Shareholders’ funds
A e
s l e
f hk a b n s a y s rv t m n O e
a n
1 Non-current assets
B e s t t e t c t s r e o v
Notes to Accounts
t c i a r i e i r
3 Current liabilities
Y r i noa p m r e e u o s e
f r t n e
p
1. Share Capital
e at b a s r u s
s r q L e s p a o
i s
U
u a r
t c e e c a a E d er n s z
i t e
B C gvet e v t
- h a e l
i p R
n o h r r
e g r
e d s 0 n u r i t O
e T ne
i rg a s n e y 0 a n T t
i U l
a
v e su h e o h
t x t 0 t e r e t
e Beo i i , : u : r
Particulars
S R L O F u 0 fi s s i
R (rb o v s c s a p
ASSETS
q 1
, r e e e e h a
) ) ) ) ) E 1 P R L S L S C
( ( ( ( (
b
a
a
)
(
c
B
U
Y
B
A
C
K
&
E
Q
U
I
T
Y
S
H
A
R
E
S
W
I
T
H
D
I
F
F
E
R
E
N
T
I
A
L
R
I
G
H
T
S
2.10
` `
C
a
p
i
t
a
l
R
e
d
e
m
p
t
i
o
n
R
e
s
e
r
v
e
2
,
5
0
,
0
0
0
2
2
,
2
5
,
0
0
0
3. Long-term borrowings
S
e
c
u
r
e
d
1
2
%
D
e
b
e
n
t
u
r
e
s
1
8
,
7
5
,
0
0
0
U
n
s
e
c
u
r
e
d
l
o
a
n
s
1
0
,
0
0
,
0
0
0
2
8
,
7
5
,
0
0
0
4. Other Current Liabilities
Cb
uo
rr
rr
eo
nw
ti
ms
a
t
u
r
i
t
i
e
s
o
f
l
o
n
g
t
e
r
m
1
6
,
5
0
,
0
0
0
n
g
U
n
p
a
i
d
d
i
v
i
d
e
n
d
1
,
0
0
,
0
0
0
Ad
pu
p
l
i
cf
a
t
i
or
ne
mu
on
nd
e
y
r
e
c
e
i
v
e
d
f
o
r
a
l
l
o
t
m
e
n
t
2
,
0
0
,
0
0
0
1
9
,
5
0
,
0
0
0
e
o
r
f
Que. 7 : The following summarized Balance Sheet P Limited (a non-listed
company) furnishes as at 31st March, 2017:
` `
Equity & Liabilities
Share capital:
Authorised capital
2,50,000 Equity shares of ` 10 each fully paid up 25,00,000
5,000,10% Preference shares of ` 100 each 5,00,000 30,00,000
Issued and subscribed capital:
2,40,000 Equity shares of ` 10 each fully paid up 24,00,000
3,000,10% Preference shares of ` 100 each 3,00,000 27,00,000
(Issued two months back for the purpose of buy back)
Reserves and surplus:
Capital reserve 10,00,000
Revenue reserve 25,00,000
Securities premium 27,00,000
Profit and loss account 35,00,000 97,00,000
Current liabilities
Trade payables 13,00,000 16,00,000
Other current Liabilities 3.00,000 1,40,00,000
Assets
Tangible assets
Building 25,00,000
0 0 0 0 0
2.11
0 0 0 0 0
On 1st April, 2017, the company passed a resolution to buy back 20% of its
(RTP)
equity capital @ ` 60 per share. For this purpose, it sold all of its investment
0 0 0 0 0
76,00,000
30,00,000
34,00,000
1,40,00,000
,
0 ,
0 ,
0 ,
0 ,
0
0
, 8
, 0
, 8
, 8
,
(b) Give the Balance Sheet of the company after buy back of shares.
0 8 4 1 8
3 2 2 2
The company achieved its target of buy-back. You are required to:
S 0 0 0 0 0 0 0
T 0 0 0 0 0 0 0
H 0 0 0 0 0 0 0
G , , , , , , ,
31,00,000
20,00,000
12,00,000
7,00,000
15,00,000
I 0 0 0 0 0 0 0
R 0
, 0
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, 0
, 0
, 8
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,
L 5 5 4 4 4 1 8
A 2 2 2 2
I
Cr.
T
N
E
(In the books of P Limited)
R . r
r . . r
r . .
r .
r .
r
E D D D D D D D
Dr.
F
F
I e t k t een
n cm n
Journal Entries
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a fti
r o bi o )
T o n t
n c m c v p
f k
c
I f u ) c ye c lo m
o u a ) a
(a) Give necessary journal entries and
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s
s c
c o c k bp e nte0
i u d 0 b
o c a c v e0 t y
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A a t c k u t y eti s nc a,
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Q o c eck l
a n d mt c m eo d 8 b t t
E c A t o s
e t m a A tb e , - n n
c t ma i e r n u y us e n r 4 y u
Cash and bank balance
& A n tb p l a i a i n e d ueser ( u o e
Non-current Investments
s a b u m p mi v e or t b c m
K t s e e y c a h o m ega r
e R fn c y
C n s m vu y s m e r s ma s u s
A o t nb e a y r u pa e l
a aha no e A a
Trade receivables u L s i r t a P i c r p
B o e ef a p i e s m e R t
i esrc a k e
c d v ho h u hd) p hyta h n
Particulars
Y c n n S m q h e e e a s a h
t e i t et t t s
for ` 25,00,000.
U A a I s u E t t r tn u C i e e B t
B t o go y i g i
r P gs u n guv v y g
Current assets k np t o n o nu e o nqr r t o n
Machinery
fi i i m i u i o i e e e i i
o T T T T T
Inventory
n u v u
Furniture
a e r q e e c e jc e e s s q e
B r
P Bu E
r
P B e
S Bdc R Bfe e E B
(p ( (aa (orr (
) ) ) )
Ans.
)
iii
iv
( ( ( ( (
ii
v
i
0 0 0 0 0 0 0 0 0 0 0
Balance Sheet of P Limited as on 1st April, 2017(After buy back of shares)
0 0 0 0 0 0 0 0 0 0 0
0
, 0
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, 0
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, 0
, 0
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0 0 0 0 0 0 0 0 0 2 0
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2 8 6 6 6 0 6 0 2 1 8
(` )
2 6 1 0
, 7 3 0
, 3 2 6
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R 9 , , , , , , ,
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Note No
L 1 2 1 1 2 3
A
I
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N
E 0 0 0 0 0 0
R 0 0 0 0 0 0
0
, 0
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Total
Total
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p c o s i
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l i n
Q r d e
r u o s b p e
E u s e s c e a
(1) Shareholder’s Funds
S e e c a e d r a C m
Reserves and Surplus
& b r n h r e m y t
(1) Non-current assets
l : i a s n a s
K (2) Current Liabilities
a
t
d
n s
l
a r h ep
r
s
f
a
h e
r
h
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/ v
I. Equity and Liabilities
C i a t t
i c
s s e u o s a r i
t i e t A n
A p e p b y f f h a e p m m v r
(2) Current assets
a s s a t e d
i n o s e00 v m e r e s i
B e s u i r u e s
Notes to Accounts
C v a c s u Ppa o
i . f y0 r e r i s f n
o o
Share Capital
Y e r d q t o o e8, e d P m e s l
U r e d e d E %ly a n h4 s
e e s r n s
d s
B a s e s n i
l k t r r e es e a n o
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fi
d r s s s
Particulars
t u 2 i 0c c e y r c a p p c s s v s e
s o s
( ( ( u s 9a 0a e p u ua a a e
II. Assets
e e e r e
b
a
a
A s ,
1 p ,
3 R O B Db h C C S Lof R Lre P L
I e s
2.12
2
B
U
Y
B
A
C
K
&
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Q
U
I
T
Y
S
H
A
R
E
S
W
I
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H
D
I
F
F
E
R
E
N
T
I
A
L
R
I
G
H
T
S
2.13
Que. 8 : Following is the summarized Balance Sheet of C Ltd. as on 31st
March, 2016 :
Liabilities Amount (` )
Equity shares of ` 10 each, fully paid up 12,50,000
Bonus shares of ` 10 each, fully paid up 1,00,000
Share option outstanding Account 4,00,000
Revenue Reserve 15,00,000
Securities Premium 2,50,000
Profit & Loss Account 1,25,000
Capital Reserve 2,00,000
Unpaid dividends 1,00,000
12% Debentures (Secured) 18,75,000
Advance from related parties (Unsecured) 10,00,000
Current maturities of long term borrowings 16,50,000
Application money received for allotment due for refund 2,00,000
86,50,000
Fixed Assets 46,50,000
Current Assets 40,00,000
86,50,000
The Company wants to buy back 25,000 equity shares of ` 10 each, on 1st
April, 2016 at ` 20 per share. Buy back of shares is duly authorized by its
Articles and necessary resolution has been passed by the Company towards
this. The buy-back of shares by the Company is also within the provisions of
the Companies Act, 2013. The payment for buy back of shares will be made
by the Company out of sufficient bank balance available shown as part of
Current Assets.
You are required to prepare the necessary journal entries towards buy back
of shares and prepare the Balance Sheet after buy back of shares.
Ans.
Journal Entries for buy-back of shares
(In the books of C Ltd.)
Particulars Debit (` ) Credit (` )
(
)
E
q
u
i
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y
s
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r
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.
5
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c
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)
0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
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,
Amount `
Credit (` )
0 0 5 5 0 0 0 0 0 0 5
5
, 0
, 2
, 7
, 5
, 5
, 5
, 0
, 5
, 0
, 2
,
2 1 2 8 9 1 6 5 1 1 2
1 2 2 1 8 4 3 8 1 2
`
S 0 0 0 - 0 0 0 0
T 0 0 0 0 0 0 0
H 0 0 0 0 0 0 0
G ,
0 ,
5 ,
0 ,
0 ,
0 ,
0 ,
5
Note No `
Balance Sheet of C Ltd. as on 1st April, 2016
Debit (` )
I 5 1 2 3 4 2 5 0 0 5 7
R , , , , , , ,
L 2 1 2 4 2 2 8
A 1 1
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r r eb 0 b g r
I n n ht s , f e e
`
U u o et h s s e 5 o r n
i s
Q i
t eo g u g i
t - a d e s
EQUITY AND LIABILITIES
E o p r
f tu l n
i i
l 0 s s R h n R g
c o p w i 0 e u s a n s
& c m fveb r b 0 l
a r l c R m r t n i e
a e o u o a , t a p / s C o s o w r
K e d r S r i
l 0 i h r u t i
2 Non-current liabilities
v e rse l
a r t 0 p s u A e o i f u t o u
C
e t l d o , a v t m n e p r t
1 Shareholders’ funds
A r r f ei a b n s 0 c y
t S s r
s o O v m r n
e r n e r
Non-current assets
B s l s p t t 4 l i d e
o s e i n r o e
Notes to Accounts
a i a r a e r e
3 Current liabilities
e t nnc a p m r e ( t e
r u n L e f p t
a o e b b
Y r i ao a s r u s s i a q a s z i s d d e
U p r i s ) e e s t p E r
d e n s i t e e m e D
Particulars
e a t t f c c a e h l p
Particulars
B u p o v t
- s a s s
e n u a e
i i R R r r
C gm v e e
r r
e g r
e d s C 0 a n r t t O l l e u %
n o e a s n e a e y 0 v
r T i
r U e a a t
- c 2
e T ne
i uer e h x t r t
i 0
, e t e
fi : u : r t
i t
i g e 1
v h o t i
Particulars
e e dl s S R L O F n a u 0 s o v c a p p n S
Beae 1 e r e
Less
Less
e h q e h a a o
ASSETS
R (rvr r S E ,
1 R P R S S C C L
) ) ) ) ) r
( ( ( ( ( u
b
a
a
) C
2.14
( 1 2 .
1 .
2 .
3
c
B
U
Y
B
A
C
K
&
E
Q
U
I
T
Y
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H
A
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W
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T
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D
I
F
F
E
R
E
N
T
I
A
L
R
I
G
H
T
S
2.15
Particulars ` `
U
n
s
e
c
u
r
e
d
l
o
a
n
s
1
0
,
0
0
,
0
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0
2
8
,
7
5
,
0
0
0
4
.
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t
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r
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r
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t
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i
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b
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s
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a
t
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1
6
,
5
0
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0
0
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s
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en
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QUESTIONS WITH 3 TEST
Que. 9 : Following is the summarized Balance Sheet of Complicated Ltd. as
on 31st March, 2016:
Liabilities Amount
(` )
Equity shares of ` 10 each fully paid up 12,50,000
Bonus shares 1,00,000
Share option outstanding Account 4,00,000
Revenue Reserve 15,00,000
Securities Premium 2,50,000
Profit & Loss Account 1,25,000
Capital Reserve 1,00,000
Revaluation Reserve 1,00,000
Unpaid dividends 1,00,000
12% Debentures (Secured) 18,75,000
Advance from related parties (Unsecured) 10,00,000
Current maturities of long term borrowings 16,50,000
Application money received for allotment due for refund 2,00,000
86,50,000
Fixed Assets 46,50,000
Current Assets 40,00,000
86,50,000
The Company wants to buy back 25000 equity shares of ` 10 each, on 1st
April, 2016 at ` 20 per share. Buy back of shares is duly authorised by its
Articles and necessary resolution has been passed by the Company towards
this. The payment for buy back of shares will be made by the Company out
of sufficient bank balance available shown as part of Current Assets.
Comment with your calculations, whether buy back of shares by the Company
is within the provisions of the Companies Act, 2013. If yes, pass necessary
journal entries towards buy back of shares and prepare the Balance Sheet
after buy back of shares. (May 2016) (12 Marks)
0 0 0 0 0 0 0 2 0 0 0 0 * 7 3es 0 e ee ens
h urv ha
TEST 3. Debt Equity Ratio Test: (Loans cannot be in excess of twice the
(a) Determination of Buy back of maximum No. of shares as per the
TEST 2. Resources Test: (Maximum permitted limit 25% of Equity paid up
0 5 0 0 0 5 2 1 0 0 0 0 7 6 8r 0 l
`
0 7 0 0 0 2 3 0 0 5 0 6 6 0a 0 t a e t
,
5 ,
3 ,
0 ,
5 ,
5 ,
6 ,
0 ,
5 ,
5 ,
2 ,
5 1
, ,
1 ,
7 h ,
5 e ves fme
`
4 c o
(Shares)
3
, 3 5
, 7
, 2
, 0
, 4 2 2
, 1
, 2
, 5 4
, 2S 2 i lR
1 3 8 2 8 8 4 2 ,
9 5 w a sIt
1 1 3 4 2 3 2 t nn
i e .
r y
`
n mio a l
`
`
`
S a ot hn
T f - 0
h
t np so
H + o 2 eem des
G 0 o 0 e
r hd er
I 0 i 0 o t ua
t 0
`
R 0
, a ,
5 @ m oRe sh
L 0 r 2 t s
i s
A
I 0 0
, e ,
2 k e ll
a n s
T 1 1 h
t 3 ] c
a b uia
t uu
N ( ) n
E / + n b
( b t qp po
`
i ) o ea
*Note: Section 68(2)(d) of the Companies Act, 2013
R )
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.
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+ a , ( E pc s ff
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o a e msu r r oas
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, 0 t
h c ,
0 n u u h
t
r
a or eet t
i
TEST 1. Shares Outstanding Test
H 2 0
, g a 1 a f f k h ce eb d
S 1 0 u b + t s s c
a
s
e S r de
Y 5 o y 0 n r r b r eft f l eu
t
T ( ,
2 b u 0 i
a e e a d ha fal c s
`
Equity Funds post Buy Back)
I g b 0 d d y h e t o i s
U n g + ) e r ,
5
m l
o l
o u s s
o yes tsh r
t i
Q i n b o 7 e h h b f p u s e
d i
d 0 ( n f , b e e o bv k e
`
E n 0 d 8 r d o r oc r b
capital + Free Reserves)
a n 0 e a s 1 o r e r r de
& t a ,
0 ) n r c e ( t a
h
a
h t
t e P ees sa
e sto
K s
t t
s 0 u a t r
a ) y s s i b k wr r b i
f h a
Companies Act, 2013
C u t , ( t / / m m c a t e
`
o u 5 s s s h h i y y r a oe h Rar
A
o 1 d r r t s ( u t t e u te hg
`
B s ) ( n e e s f q) i i n B su Rh
e s ) d p e o s e2 u u p y b r fo Cc
Y r e ( u l r d / q q ef o
`
U a r l ( f o e a r n) ma e e) m me u dts i
e kb fh
`
B h a a
t s ’
s h c h b u0 u( t 3 u uar B
h e i fi o
Section 69(1)
Section 69(2)
s i e r r s f0 n e3 l ce w
f s p v e r
a p f m 0 m) e r 8 m
i
mh
is a o d ar
o e a
c r d h k o u n0
a0, i(
n s u0, x x u oan bha ny
e l t on
`
Particulars
Particulars
Particulars
r h o S r N i 1 e 7 a aer t i -
e t p s
e h
c
a e o,
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A t l y s). i
t a
b f u r f b l P F2 a a ueR a
o e
r o b a r t z p
m % d
i
e
e a % y m u
t epi bh im
l
Ans. u a h u u c ) ) ) ) ) ) ) nftR i
2.16
N 5 r 5 B N ha C t o
2 P F S 2 A ( ( ( ( ( ( ( Tc Oo UC
(
d
a
g
c
e
f
eem d k )
1 )
2 0 2 3 3 n .e
0 0 0
ereo e c a h
2.17
r t ( ( 5 1 8 8 2t 0 0
Number of
shares
f ff a a 7 3 0 0 c 0 0
r l b , , , , t n , ,
Credit (` )
add u -
y 3 0 7 7 i i 0 0
`
ne c u 3 4 2 2 t h 0
, 0
,
ta l
a b a @it 5 5
o d c h
nalu d t sw
Statement showing maximum number of shares to be bought back
l e e s e s
si
i tc b t
t i r i
S px l
l i e n a y 0 0 0
T Rae i
w m 7 h o hn 0 0 0
H Rce r 6 t i
s sa 0 0 0
G k e 6 yp , , ,
Ceb p , f u 0 0 0
Debit (` )
I r c 1 o l t 0 5 5
R ,ao a m 4 c i m ,
5 ,
2 ,
2
e b , t n u o
L
chs t t u 5 s
o qc
A
I nsa h m a
e c ee
T e.h
e g i l
`
N . u x = [ d 0h
E Hi o a y k n 0t
R .yc k b m c a 0y . . .
E d t
i e d a s ,
5 b r r r
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a fo
e n 2 e kr cs. h u t
u cp aa3 s h
Journal Entries for buy-back of shares
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nfR o aA bs 1
`
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a bt
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n
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Working Note:
, i i u
20 × 10 = ×
o an aa ms 0 t t t s u T i 0 u T i
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r n e c e
yn
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Particulars
s t t 0 O c u nx e e B
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= v s u E me] s
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y
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b
a
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`
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0 0 0
0
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5 0 2
Amount `
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R , , , , , , ,
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Note No.
L 1
Balance Sheet of Complicated Ltd. as on 1st April, 2016
A
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I o etht s e g r
e
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U o i
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i s
Q p r u t a e
EQUITY AND LIABILITIES
c f t u l n i
l s h d
E c m eo p i i e s R s n R
& a e fv b r w b l r u R a e n
e d o r u o a a a l
p c m r t
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i
2 Non-current liabilities
r e
r rs a r p s u A e o i f u e
s t
C e eit l d o t v n e p
1 Shareholders’ funds
A e l f
s r p a b n a y S s r t m O e
s a n s c o v m
1 Non-current assets
B e nna t e t l t
i s e r e i r R
Notes to Accounts
t i a r d o s e n
3 Current liabilities
Y r i aioc) p m r e a
t e u n L e f r t
a o e n e
e p r a s r u s
s i r q a s p z i s o d
U
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Particulars
R Beae S R L O F a u 0 s o v s c s a p v p
(rvr h q 1 e r e h a e a
ASSETS
, e e e
) ) ) ) l ) l S E 1 R P R L S L S C R C
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t
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2.18
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2.19
` `
3
.
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Que. 10 : SMM Ltd. has the following capital structure as on 31st March, 2017:
` in crore
Particulars Situation Situation
(i) Equity share capital (shares of ` 10 each) 1,200 1,200
(ii) Reserves:
General Reserves 1,080 1,080
Securities Premium 400 400
Profit & Loss 200 200
Infrastructure Development Reserve (Statutory 320 320
Reserve)
(iii) Loan Funds 3,200 6,000
The company has offered buy back price of ` 30 per equity share. You are
required to calculate maximum permissible number of equity shares that can
be bought back in both situations and also required to pass necessary Journal
Entries. (May 2017) - (8 Marks)
S
t
a
t
e
m
e
n
t
s
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s
h
a
r
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s
t
o
b
e
b
o
u
g
h
t
b
a
c
k
Ans.
Number of shares (in crores)
Particulars When loan fund is
` 3,200 crores ` 6,000 crores
S
h
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s
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t
s
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0 0 0 0 0 0 0 s 0 e
e ses
2 2 8 4 0 8 8 3 rr
` in crores
`
7 7 4 2 (Shares in crores) 2 6 8 r
,
1 ,
1 ,
2 o oa
Credit
r rh
`
c c s
0 0 4
2 0 2 2
0 0 0 0 0 0 1 3 7
2 4 8 0 8 4
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`
S
T
(applicable only when loan fund is ` 3,200 crores)
Debit
H
G
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R
L . . r
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. .
A r r r r
I D D D D D D
Journal Entries for the Buy Back
T
N ls)
E y t/
n na
R t
i e oite
E u uv i
t prv
q or p ae
F e t ce mcs
F n cs
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T r t a c cre u l sr )
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i o h 0
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A t
n k c b y
s u a r
s e t v 0 s t
H kr c a s nm s salt 4 e h
u ce t a k s t o b ou o e
s e ned r g
S o ap n b c e
r n L n L r vi + o u
Y c b0 u a a u ei r mm r o
TEST 1. Shares Outstanding Test
c o y o & o l m & n e 0 c
T a y3 c u b h c e b o s oe g 8 n
b
I
U k u c b y s c t l
fi aer t i
fit
e
r ne n g 0
, s i e
b@ u f o b yp f n e b
`
Q c a n o a o p eo d i i 1 r
a t r l b r a as r m et e d d )
s ( ( n
`
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s r d a
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t f f a r e c n e c
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r / d ft
o
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t
t
s a
t
s
o
r r n u r
a t
c a h m v m uuA v r xu t o f
TEST 2. Resources Test
C b n c a s a
l r r re u t c r i h a
A c e0 y l e e u i c e
s s l e o o u c s s s h
e a m1 e a y e r s i mses a f e k o n
i d r r t
B r k y r P t
i c P e m eo o t
e i s hc s n n e e s
Y a n af a u n s R e r L R p nt a e s
e ( i u d
l p e
h h a t atob r r
`
U s a po s m q c e
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l P Pd l a r a r l ( f o e a
& a
`
B E t a t t a a ’ h c
B y ges y u
i g i r gget r C gveh h h t s s e i h
Working Notes:
t o t o r o s i e r r s
i T nr
i i m T n
i u e
n T
nr
i fie o ne
i rg f s p v e r
a p f
u e a u e e c e e ao n T e sou o e a r d h o
q q Bhr e c e l k
Particulars
Particulars
Bh r B e Be r h s o S c r
E (s E P ( S G (cP G (rb e t p e h a e
b f
o u r e f
o b b
m d e r
a y m
) ) ) u % i e % u u
a h
2.20
N 5 r 5 B N
( ( ( 2 P F S 2
b
a
c
B
U
Y
B
A
C
K
&
E
Q
U
I
T
Y
S
H
A
R
E
S
W
I
T
H
D
I
F
F
E
R
E
N
T
I
A
L
R
I
G
H
T
S
2.21
TEST 3. Debt Equity Ratio Test: (Loans cannot be in excess of twice the Equity
Funds post Buy Back)
Particulars When loan fund is
` 3,200 ` 6,000
crores crores
( (
) )
L
o
a
n
f
u
n
d
s
(
)
3
,
2
0
0
6
,
0
0
0
a `
Mi
i
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ih
me
ur
ma
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y:
t
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,
6
0
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3
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n
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2
1
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)
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( (
) )
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(
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2
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8
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8
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MIX QUESTIONS (BUY BACK; REDEMPTION OF PREFERENCE SHARES;
REDEMPTION OF DEBENTURES; ESOP’S; BONUS)
Que. 11 : The following was the balance sheet of M Ltd. as on 31st March, 2016
Equity & liability (` in lakhs) Assets (` in lakhs)
Authorised Capital: Fixed Assets 1,12,000
Equity shares of ` 10 each 80,000 Investments 24,000
Issued Capital Cash at Bank 13,200
Equity Shares of ` 10 each 64,000 Trade Receivables 66,000
Fully Paid Up
10% Redeemable 20,000
Preference Shares of 10
each, Fully Paid Up
Reserves & Surplus:
Capital Redemption Reserve 8,000
Securities Premium 6,400
General Reserve 48,000
Profit & Loss Account 2,400
9% Debentures 40,000
Trade Payables 26,400
2,15,200 2,15,200
On 1st April, 2016 the Company redeemed all its Preference Shares at a
Premium of 10% and bought back 25% of its Equity Shares at ` 20 per Share.
In order to make Cash available, the Company sold all the Investments for
` 25,200 Lakhs and raised a Bank Loan amounting to ` 16,000 lakh on the
Security of the Company’s Plant.
0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0
for this. The amount of Securities premium will be utilized to the maximum
Give the necessary Journal Entries considering that the buy back is authorised
by the articles of company and necessary resolution is passed by the company
0
, 2
, 0
, 0
, 0
, 0
, 0
, 0
,
4 1 2 2 2 6 6 4
2 2 3 1 1 5
` in lakhs
Cr.
0 0 0 0 0 0 0 0 0 0 0
S 0 0 0 0 0 0 0 0 0 0 0
T 2
, 0
, 0
, 0
, 0
, 0
, 4
, 6
, 0
, 0
, 0
,
H 5 0 2 2 6 6 4 1 6 2 2
G 2 2 1 1 1 1 2 3
I
R
Dr.
L
A . . r
. . . r
. . r
. . . r
.
I r r r r r r r
T D D D D D D D D D D D
N
E
R
(In the books of M Ltd.)
E d e f f e) tof )
k
F e c c o o ds u c
F
I t
i / n i
v e ot a
D d A e n n oar tu b
Journal entries
e r
e o o rh s o
H r l
a f i i
t pS r y
T c t e t ) p c fie u
I g i r p% oe / dnc B
W n p P m0 m t c ) ) A
e ea e
i a e1 e n 0 r dl c
S e C f
o d de ) 0 k
u c i n
E b e c df er c k 0 g a v a
t r n / eo e s e / c , ob a
R fi a o A r R i
l f A c a 2 fib re n
A o h i m i
t e / b
- - g y ph fi
H r S t
p s nu n u r k A y 0 n u o
S p r
e oi o P c u 0 i kt t c
,) e m m f a k b 4 c B cd k / c
Y d c
t n e d
l ee mo b c , n n an n A /
T e a 6 a o ba
I c nn e d o l r l un y b n ( l a s A
U / au r
d
e
R
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e
b
aa
P c b
ac
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/ u y
o c a e
b l y B r k
Q c A l o e r yt / ept A B u e / ( um e
m d c
E / oc
s s c e
f n a A y/ r l u A b
c a b u c o l a
aa aA n b d
& A s
o sA Pr o h p, m ps Pm a o m / y ni / r o b
extents allowed by law.
s t S s e t
i e t A a oms ) A f h y
K t L n s e u e sd p e r n u e n e u
C n d eos e
l l
b e
c
te
nar i mr e
i e a l
b a
h u i e p mrv e n
a e r b c
m ua m v m k a
A
B
e
m n mL a
a
b a
y n
e
uh e ih
t
iR
r
C a
y S o
m e r
e uPe
i r o a h s /
t os r e r u s L t e A
Y t
s s
t e d m
n e
a
pc
r
e me P mS un
c r a y
t a P s
e i mei
s
e k
S
n e r k
U c e
v
fiv
o n a e / f
e anc s ec
rn
e eo a
h
p i
u e s m
R e et
r i R c n a c
o n
a
h n
Particulars
B / r I t d mA r e
i Pe Sm S m q h e
i r
l P pur l / a S a
A n P g fie us P gre t u u E t t a a A B L e B
I o R i e i
r r gi y i g i
r r gecr r
g e y
k o o nr mr o ne u ofe nm t
i m o n u e o nS e k o n f t
i o
n T iP %
T e a T i
e f c Te i u T i c n T i n n T i u T
eh e e e e e e e e e
a Bo 10 r Br e r Br q r B e
G Bfe a B r q
B (t PS (P S P (P E P ( S (oG B ( P E
Ans.
2.22
1 2 3 4 5 6 7
B
U
Y
B
A
C
K
&
E
Q
U
I
T
Y
S
H
A
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S
W
I
T
H
D
I
F
F
E
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E
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R
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H
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2.23
Particulars Dr. Cr.
(a
Bn ` in lakhs
e
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)
Que. 12 : The following is the Summarized Balance Sheet of M/s. Vriddhi
Infra Ltd. as on 31st March, 2016:
Equity & Liabilities Amount Assets Amount
Shareholders Fund
1. (a) Share Capital: 10,00,000 1. Non-Current Assets 21,50,000
1,00,000 Equity Shares (a) Fixed (Tangible)
of 710 each fully paid up Assets:
Land & Building
(b) Reserve & Surplus:
Securities Premiums 3,00,000 Plant & Machinery 15,00,000
General Reserve 2,50,000 (b) Non-current 2,00,000
Investment
Profit & Loss Account 1,50,000
Surplus
2. Non-Current Liabilities 2. Current Assets 5,50,000
Long-Term Borrowings:
(a) Trade Receivables
10% Debentures 20,00,000 (b) Inventories 1,80,000
(Secured by floating
charge on all assets)
Unsecured Loans 8,00,000 (c) Cash and Cash 40,000
Equivalents
3. Current Liability & 1,20,000
Provisions
Trade Payables
Total 46,20,000 46,20,000
On 21st April, 2016 the Company announced the buy back of 25,000 of its
equity shares @ ` 15 per share. For this purpose, it sold all its investment for
` 2.50 lakhs.
0 0 0 0 0 0 0 )
0
0 0 0 0 0 0 0 0
On 25th April, 2016, the company achieved the target of buy back. On 1st
May, 2016 the company issued one fully paid up share of ` 10 each by way
You are requested to pass necessary Journal Entries for the above transactions.
(Nov. 2016) (6 Marks)
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
0 0 5 5 0 0 0 ,
0
Cr.`
0
, 5 7
, 7
, 5
, 5
, 5
, 5
2 3 3 2 1 1 ,
2
+
of bonus for every five equity shares held by the equity shareholders.
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0 0
S
T 0 0 0 0 0 0 0 0
,
H ,
0 ,
0 ,
5 ,
5 ,
0 ,
0 ,
0 0
4
Dr.`
G 5
, 5
, 2
, 7
, 5
, 5
, 5
, (
I 2 2 1 3 2 1 1 [
R 0
L 0
A 0
,
All necessary workings should form part of your answer.
I 5
In the books of Vriddhi Infra Ltd.
T .
r . r
r . .
r .
r .
r .
r 8
N D D D D D D D
E
g
`
R f r
E y
t o ee
uv
se
v n o n
i
F i l r o
i f t
F u t a re t e n
I q n vee s p r u
e
Journal Entries
D u c s m a o
H o / ler
a r e h m
T c) A neo n d s
I t ) c o cs e i e y a
W n t / t ae v mreti r t t
e fi A nar c r p c l) i f
S m o k / e of / a s c u ) a
E r
t p e oh A s n m A t
i e / qd r
s c u c S e me e p r A el d
R e a dk) / ey L r ood v aa l se er
A v n b A dt a uh v
H Particulars n o /
c c y c ai & n
o
t rre r
e c
ch
fs t
S i / u tba k mqu P i lfl ) s i
p nes o
Y c f d A
o l A b n c
a /
c
t
p a s a w e /
A
o s
u a or
ba k
/ o l uy tE ue t a r nn c
T s a s b n / m qr i l eh n
(1,00,000 - 25,000) x 5 x10
I A e t m e ou 0 p n s oo e
U t l
a t
i u r mb y e0 A e ea
hah
e o e
r
i
t b c r ns a
n p i a u * m0 e d tsct i a / a oy b
1
Q n s e a m h an b c , v e t a ze h t s
E e n m c o / y5 r r n r p h i
lu A fui i
m o t e e s s a2 e ukoe m s i s s o e
& t t s r r
p y
t ers e
r
A pf s l
a octp e s t
u
s
s e y
t eq er
K s
e fie a i he a k eo e t
i madae s d u
eo
i r
a i ue h
C c
/ v o v h
n
s
e u
q
t d
l h n
a hk
t
R p
a abr r e
r
n
o ht h u
q se t
s v ,
A n r i s i
t o s c l t t s i
B A I P g y i
r
E geh y B ga a
r C gyf e n l
a B gve s E gyfit
a
Y k o
T
t
o n i
i u
T e u o
T nr
i
t
i o
T nb
i e o
T nus
i b n
u
o t
i o
T ne
i r u o
T nr
i h]
U n c e a u e y n e c p e s n e e t0
B a B q e Bh q Bu e Bfr ac a Be o Bv d0
B ( E S (s E (b G (ot a C (r B (e e0
,
m5
u7
Date 2016
1 5 y
a
s3
s ,
2 2 a
l
i l
i M ss
r r i
`
p p t
Ans.
t s
2.24
s I
A A 1 * e
l
B
U
Y
B
A
C
K
&
E
Q
U
I
T
Y
S
H
A
R
E
S
W
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T
H
D
I
F
F
E
R
E
N
T
I
A
L
R
I
G
H
T
S
2.25
Que. 13 : Alpha Ltd. furnishes the following summarized Balance Sheet as
at 31st March, 2017:
` in lakhs ` in lakhs
Equity & Liabilities
Shareholders’ Funds
Equity share capital (fully paid up shares of ` 10 each) 2,400
Reserves and Surplus
Securities Premium 350
General Reserve 530
Capital Redemption Reserve 400
Profit & Loss Account 340 1,620
Non-current Liabilities
12% Debentures 1,500
Current Liabilities
Trade Payables 1,490
Other Current Liabilities 390 1,880
Total 7,400
Assets
Non-current Assets
Fixed Assets 4,052
Current Assets
Current Investments 148
Inventories 1,200
Trade Receivables 520
Cash and Bank 1,480 3,348
Total 7,400
(i) On 1st April, 2017, the company announced buy-back of 25% of its
equity shares @ ` 5 per share. For this purpose, it sold all its investment
for ` 150 lakhs.
(ii) On 10th April, 2017 the company achieved the target of buy-back.
(iii) On 30th April, 2017, the company issued one fully paid up equity share
of ` 10 each by way of bonus for every four equity shares held by the
equity shareholders by capitalization of Capital Redemption Reserve.
You are required to pass necessary journal entries and prepare the Balance
Sheet of Alpha Ltd. after bonus issue.(May 2018 - New Course) (10 Marks)
8 2 0 0 0 0 0 2 mseds e
4 0 0 0 5 5 ohhno
1 9 9 6 4 4 rk.
f a T a
trp
s0l d fiu
Cr.
eo
(` in lakhs)
e 4
0 0 0 0 0 0 0 0 2 r
a 3 z
i
l rp
5 0 0 0 3 7 5 5 i Pe
1 6 3 9 5 4 4 h t dth
sfu
`
ko nr
cteao
S
Dr.
T
H anbef
G . . r
. . . r
. . . . buovd
s r
I r r r r r r r yol e e
r
R D D D D D D D D D umy a s e
L
l baa e d
A
I n k ka n y s
s fem Rsi
T o c ct o r
e o o ln
a ai i h a
(In the books of Alpha Limited)
N s b bp t v L et o
E r
e y c ya)
p e d u,erc
t v e
R
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l u / ucw m
e r
o n l
a n r
e ne
o b A boa d f a vus e b
F
F h f ) ftl
o e e t
fi lcoe Go
I e
r o R de r r o a rml s
Journal Entries
D
a t R eeh a r ncl
H h n C urt
l r l
a h P i aa oa
T c s u ( a e r
e t s o mee r ry
I t ) o e vsf i y t ovn f a
W n t / y
t c v ln p ) p t ner (
e fi A i
u
c
a r a aas c
/ 1 a
c) c
i
u d
e esm
t
S m o k e nr . r os g s
E
s
r
t p c q
e c n s
e i
mtn t A N
. fr
s
e /
A
q
e t r
e
t
lre nh
m u
R a o) r e W n a k
e
v n b o / osu v o a l s f
unr o o
neo
A A es n r ( h a u e c s a
H n o /
c c y t dre v e t ) n
m / a o ml
S i / u e k aa o
i orc c s c nss i
p
nd
t A r qi f a00
Y c f d A
o l A b u c
a mh t
p t
le
e
s a e /
A ou
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be s s t
et
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/ o d r t e
T
I A e t
l
s a m s
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n
c
/ c m a
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n c
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U t l
a t
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r i c r ne n L
I a u a
e t
e
n p A d i lb s od l g
`
Q n s e a i a u u mi e erese t a i / a or f d n a s
m h o b c e p t e A h mreb n
E e n m c s / yu v s r
s tf e h u u s fa
o o n o ti
& m o t e e
r m s A aq r l
o a n r m s s s
es
h e a t al ent
K
t
s t s r
fie a
p y
t
i
a e
r
a k pE
h
e
s
e
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i
u n
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d
s
u eis e
r
y
t
i uy
l t
a fifi gat hea
t r g
C c e
v o v h s u e)
k h n ek r d p mr o
i e n ho
t a u sti s o
o r ni
i e e.
Particulars
/ n
r i e q hc a ha n a t r o t h q s u n r r p d f r
A
A n P g s i
t E t s B t l
a a C afp l B e s E i q o P P r ani f g R
B I y i
r ga y gL r gesm a gv s ge g e cad gR
Y k o t
o n i u o nb t
i o n0 e t o
fi nr t
i o ner u o nr t
fio n) f a
n T i u
T e c T i y u T i 6 n o T i e p T i n T i i
o T e c s o c f )C
U
B a B q e e
Bu q e
Bf e r e ad
Bhe a e
Bes o e
Bo
u r B/ nt/ot o
B ( E S (b E (o G P (sr C (r B (f P (A asAnn
r e t
t vLt our
rr i oe
f
0 0 0 oe&acs
s n c
1 1 1 3 Fe P i Aan
l
i l
i l
i l
i r b
m str
r r r r eo ms
Note:
2017
Date
Ans. p p p p er
2.26
A A A A r oof
f fcLo
0 2 0 0 0 2 2 0 0 0 2 0
2.27
5 7 0 9 9 0 5 0 2 3 0 5
(` in Lakhs)
2 8 5 4 3 ,
5 0 2 5 7 ,
5 2
lakhs
, , , , , ,
Amount
2 1 1 6 4 1 6 ` in 2
- 0 0
Balance Sheet (After buy back and issue of bonus shares)
5 5
S 5
T
Note No.
H
G
I 1 2 3
R ) 0 0 ) ) 0
L 0 0 0 0 0 0
3 3 0 7 3 5 5 0 3
4
A
I 5 5 4 5 4 3 (
3
T ( (
N
E
R
E
F
s
e m m k
F r o o c
I a r r a
D h f f b
H s s s s y
T e p e
r e
r s u
I r u a a e b
W u d h h r
a n
t
n i s s h o
S a s
E e p f f d
R b y o o s i
a
A e l
l ) u p
D u 0 k k n
H f5 c c o m
S % h4 a a b
Y 2 s
t k e b
- b
- f u
1 n a+ v y y o i
T
I - s e l 0 r
e u u m
U s s
g e l 50 s b b e e
Q u i
t s a 26 e u r
l n
i i
l t v
i 2- s R R o o s p
E p s w i n u ( u t t s
i r
& r e
i b e s q l0 l R n r m o
s s u t
i o a
i m e
l e a
t 0 p C o e e o f
K e d S l
i r
r s l s s b i 4 r i
t u u f u t c
C i n l b o s e t t t t
s a h p 2 u e o
t p d d n i n /
A t
i u a d a b e
i l
b n e e e v s a( S v m e A
B l
i F t
i n i t a e s
s s
t s
s v i a l c- r r m r r o
i e m
i d e e e e s
Notes to Accounts
b s p a L m l
i y r a e a s n e c a eh) s f e f f t r t s
Y a ’ a s t b a r s t i y c d t
i r n e s d s s a p s o
U i r C e n r
e a u t s l e
e s r
t o e n p a c a R n e n n s
i s u L
B L e v e t i p c n a b s n t r a a ha s a R a as. l
i e j
d d e r r - L e r e
r d i a e n e C se e l r r r t i d &
n l
o r e r g d e r g r e d h y0 v a T l
a T Tre U t
i A
h a s u n t a h u e t
n n r v a s e t 1 r r t r t
a h e C o n r t c x
i a e u n r a r i e e :
s i :L :n. :
s u :
s fi
Particulars y e
r S R - L e T O - F T r C I T C a u s n s p d d s c s o
r qf e e a d/ de
II. Assets
t n n h e e e e r
`
i a o r o r S Eo R G L C AP AG L S L P
u h ) ) ) u ) ) l ) u ) )
) C ) ) l
q S ( ( N ( C ( a
( t N ( ( ) ( ( ( a
( t
d
E
c
) ) ) )
i
. 1 2 3 o 1 2 o . .
I ( ( ( T ( ( T 1 2
) 0 re t ,
s :
h s a ad
2
7
0 0 0 0
8 5 3 0 3 a
l b n e t e t e
Que. 15 : Explain the conditions under Companies (Share Capital and
Que. 14 : Explain the meaning of equity shares with differential rights. Can
i e l i r nv
Debentures) Rules, 2014, to deal with equity shares with differential rights.
8 4 1 6 9 7 t m u w a a oo
lakhs
1 1 ( mo h
` in lakhs
d
` in
in n R d s e dpr
s
s n r ) e f s ep
i a e s i
l o s t
d c v e p e a s
i a
2 hes o r u p le
7 t G u m eb
S 2 i r l t o s
s n r
T wa a n c i o a l
l
H h r
t e e i
t a
G es n b y
l h u yh
r e i t l ns
EQUITY SHARES WITH DIFFERENTIAL RIGHTS
I
R a e e D r s o
2 hnc C o e s as
L se e d s
l z e pre
A
er h n . u i r ma
r
preference shares be also issued with differential rights?
I t s y
T he ,
) a t p o r oh
N t f
e l h m h a cs
E sr ( a g o t n ah
a ii
R np ) t
i i
r c u i c
E ae ( p l e a d fu ;
F eh 3 a a b y r o sot
F
I mt 4 C i
t n o sofll
D ; n e n o a n e a
H so
t o
i r e t p a: r eb
s a
3. Cash at bank after issue of bonus shares
T h N t
c a r
e n m yrs hua l
I ge
i . e h f o o be sss
W
Ris S S f
i i
t c dld i t
s
S r ( d i e ye o
E lw e s d h eo
z t
i
a
i r d e h n t i h u h p
qth
R i t r e
A t s t
n e n n i o f or ,
H n
e e
r eth u a w c o hha ee g
S m a r o d p s g n t engu
Y t
7
1 h e rs. e m e n
i o; u s ha o
T s 0 s f
f ot r r i
t s ae t r
I e 2 f i r
e o a w a t sth h h
t
U v , o Dgg h f C h o i h i ec
r
Q n
i l
i k ni n r s l
l c g sf e xrs
E R r c hti r o e y o oi e o hee
f R
o p
s a t
i o l c d t f sr
s r k d
&
e C
A t b wvi a r n i
u e a l
a a g wc l
K l t
s n y ,nt e u q h fti hin ttoho
C a o 1 e u sd w e t o n st a
THEORY QUESTIONS
s t e
A r
n e n m
t
b r ne
eer o 4
h
n sre fe
o
e hsr
t
e
B
o f o s r a d p e t w e da
Y s s e o hi f e l i o l
c e
f em eh
U t n
fi a v f sv f
i h u w d i f ul z
i s
Provided
B o a n
i
t
n ydi d t R l t
r i sa n e
r r e e t f a y a d s
i r gh
P T c
n
f
o i o h o d e a
l h e ot
:
: s a m u t t
i e e d s et en cy
d s l e
l y qs w s
i c e hi he eb
d e a a a
P Ea c n o
t l Tw Tg r
A L b S sed r
e u u
h : :
s t x o ,
4 r ) )
d
Ans. :
s
a d s h u e n 1 e ( (
b
e
Ans.
2.28
C A L gs
i s n n 0 h
r i I a 2 T
f s r lal dree s eneyga l t4,stg 0.efe
o e o a i eour co r nr s enn 20coh
2.29
uc m a 3 i 2
share capital is ` 60 Lakh. You are required to calculate their voting rights in
Que. 16 : E, F, G and H hold Equity Capital in Alpha Co. in the proportion of
40:30:10:20. If the paid up capital of the company is ` 120 Lakh and Preference
r
30:30:20:20. S, T, U and V hold preference share capital in the proportion of
t a f r s d nti o i
t t l 9rt ei :
0 : ntT
n s nn a t etu eu ot i n e1 ime 210 e h
e h t
fi na l
c i
s n r t cud
t e h, u esb : r g3.
c s an eo me e i e a eC t t c g 0 :e
0 i /
r y o d fi dpc o f
e t
s b t r gce e 33 fr
e t r b r n s s c e nASn ai :
0 :eg1
r
p i
u p ne adeee pli a nth i n 340 Pind
e ah d oi r a aa
x
i q l st f br na ht
oittlt
to uieMp
h ff dt n
S s e b t o d eo u dnd o onoa
T -
y g a
t
n
eng trev dnc a c
ead lI
t
, em nnav3
H t n u i n u ats nat h pef a 2 go oo se/
G n i
d b md et hsi en sd n nf9 nc i
t ihh2
I e i ee maa to d fike u uo9ah r t k t
R
w u r t c ymhp i nrrF bk1hc ora ne
L l
c ; t a e v c a on i n cs u po i b
A t
d n e s
i t
s r a te
pssd
i
d l h o
i B t y r
Tac
,
t x opL s
I i m d lp; t eb ii t rB Ec ro0t l
l
T e
e l i f a s efi e
r h hue d w r i
t o A i
h pr2hi
p e
ee1i
N a t o i y c g w b
E c t c l e ho u c t p l s o e tve agn
R x i
p f
o d nte r
a t t u fau e h t r i i h hh swe s l
l
n t r i
`
E e a r aa h nnte s o ddu u o ue d e w t ti r w
t t o ni i tme r os nr nnyed e
case of resolution of winding up of the company.
F c s n aP
F o
n e
n
i c
e fid h teboe
n
ero h r yd CeIoe r i in ls
v
gec
I l yl
D l r o r u m
yds t mfs con yRfFd baaioe
r
H l
a a p k nmu
i aa
f r e ynro na n beoen dpt
i
p
ml
t
a h
eld
h h y c l ms o r aao oa dhdhu l
T
I s s n a fiie e
dr
p
e s e po etn etrt, e aoerh
r a o
W s
t
y
t
a r
t nsu
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T
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I
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A
I
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N
E
R
E
F
F
I
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H
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H
= = = = = = = =
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Y
T
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A / / / / / / / /
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3 3 2 2 4 3 1 2
Y
U
X X X X X X X X
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B / / / / / / / /
2 2 2 2 1 1 1 1
= = = = = = = =
= = = = = = = =
2.30
E F G H S T U V
3 AMALGAMATION
CHAPTER
COMPUTATION OF PURCHASE CONSIDERATION
Que. 1 : N Ltd. and G Ltd. amalgamated to form a new company on 1.04.20X1.
Following is the Draft Balance Sheet of N Ltd. and G Ltd. as at 31.3.20X1:
Liabilities N Ltd. G Ltd. Assets N Ltd. G Ltd.
` ` ` `
Capital 7,75,000 8,55,000 Plant & 4,85,000 6,14,000
Machinery
Current 6,23,500 5,57,600 Building 7,50,000 6,40,000
liabilities
Current assets 1,63,500 1,58,600
13,98,500 14,12,600 13,98,500 14,12,600
Following are the additional information:
(i) The authorised capital of the new company will be ` 25,00,000 divided
into 1,00,000 equity shares of ` 25 each.
(ii) Liabilities of N Ltd. includes ` 50,000 due to G Ltd. for the purchases
made. G Ltd. made a profit of 20% on sale to N Ltd.
(iii) N Ltd. had purchased goods costing ` 10,000 from G Ltd. All these goods
are included in the current asset of N Ltd. as at 31st March, 20X1.
(iv) The assets of N Ltd. and G Ltd. are to be revalued as under:
N G
` `
Plant and machinery 5,25,000 6,75,000
Building 7,75,000 6,48,000
(v) The purchase consideration is to be discharged as under:
(a) Issue 24,000 equity shares of ` 25 each fully paid up in the pro-
portion of their profitability in the preceding 2 years.
(b) Profits for the preceding 2 years are given below:
3.1
A
M
A
L
G
A
M
A
T
I
O
N
3.2
N G
` `
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 N Ltd.
and G Ltd. respectively.
You are required to compute the
(i) equity and preference shares issued to N Ltd. and G Ltd.
(ii) Purchase consideration.
Ans.
(i) Computation of equity shares to be issued to N Ltd. and G Ltd.
Profits of N G
` `
I
y
e
a
r
2
,
6
2
,
8
0
0
2
,
7
5
,
1
2
5
I
I
y
e
a
r
2
,
1
2
,
2
0
0
2
,
4
9
,
8
7
5
T
o
t
a
l
4
,
7
5
,
0
0
0
5
,
2
5
,
0
0
0
No. of shares to be issued = 24,000 equity shares in the proportion of the
preceding 2 years’ profitability
N G
2
4
,
0
0
0
x
4
7
5
/
1
0
0
0
1
1
,
4
0
0
e
q
u
i
t
y
s
h
a
r
e
s
2
4
,
0
0
0
x
5
2
5
/
1
0
0
0
1
2
,
6
0
0
e
q
u
i
t
y
s
h
a
r
e
s
Computation of 12% Preference shares to be issued to N Ltd. and G Ltd.
N G
` `
N
e
t
a
s
s
e
t
s
(
R
e
f
e
r
w
o
r
k
i
n
g
n
o
t
e
b
e
l
o
w
)
8
,
4
0
,
0
0
0
9
,
2
4
,
0
0
0
8
%
r
e
t
u
r
n
o
n
N
e
t
a
s
s
e
t
s
6
7
,
2
0
0
7
3
,
9
2
0
1
2
%
P
r
e
f
e
r
e
n
c
e
s
h
a
r
e
s
t
o
b
e
i
s
s
u
e
d
5s
6
,
0a
0r
0e
100
h
s
=
5
,
6
0
,
0
0
0
@
1
0
e
a
c
h
67, 200 × 12 `
6s
1
,
6a
0r
0e
100
h
s
6
,
1
6
,
0
0
0
@
1
0
e
a
c
h
73,920 × 12 = `
A
M
A
L
G
A
M
A
T
I
O
N
3.3
(ii) Computation of Purchase Consideration
N G
` `
E
q
u
i
t
y
s
h
a
r
e
s
@
o
f
2
5
e
a
c
h
2
,
8
5
,
0
0
0
3
,
1
5
,
0
0
0
`
1
2
%
P
r
e
f
e
r
e
n
c
e
s
h
a
r
e
s
@
o
f
1
0
e
a
c
h
5
,
6
0
,
0
0
0
6
,
1
6
,
0
0
0
`
T
o
t
a
l
8
,
4
5
,
0
0
0
9
,
3
1
,
0
0
0
Working Note:
Calculation of Net assets as on 31.3.20X1
N G
` `
P
l
a
n
t
a
n
d
m
a
c
h
i
n
e
r
y
5
,
2
5
,
0
0
0
6
,
7
5
,
0
0
0
B
u
i
l
d
i
n
g
7
,
7
5
,
0
0
0
6
,
4
8
,
0
0
0
C
u
r
r
e
n
t
a
s
s
e
t
s
1
,
6
3
,
5
0
0
1
,
5
8
,
6
0
0
:
C
u
r
r
e
n
t
l
i
a
b
i
l
i
t
i
e
s
(
6
,
2
3
,
5
0
0
)
(
5
,
5
7
,
6
0
0
)
Less
8
,
4
0
,
0
0
0
9
,
2
4
,
0
0
0
Que. 2 : A Ltd. is absorbed by S Ltd.; the consideration being the takeover of
liabilities, the payment of cost of absorption not exceeding ` 10,000 (actual
cost ` 9,000); the payment of the 9% debentures of ` 50,000 at a premium of
20% in form of 8% debentures issued at a premium of 25% at face value and
the payment of ` 15 per share in cash and allotment of three 11% preference
share of ` 10 each at a discount of 10% and four equity share of ` 10 each at
a premium of 20% fully paid for every five shares in A Ltd. The number of
shares of the vendor company are 1,50,000 of ` 10 each fully paid.
Calculate purchase consideration as per Accounting Standard 14.
Ans.
Computation of Purchase Consideration
`
C
a
s
h
p
a
y
m
e
n
t
[
1
5
×
1
,
5
0
,
0
0
0
]
2
2
,
5
0
,
0
0
0
`
1
1
%
P
r
e
f
e
r
e
n
c
e
S
h
a
r
e
s
o
f
1
0
e
a
c
h
@
1
0
%
d
i
s
c
o
u
n
t
8
,
1
0
,
0
0
0
`
[
(
1
,
5
0
,
0
0
0
x
3
/
5
)
x
9
] e 2 d
`
E
q
u
i
t
y
s
h
a
r
e
s
o
f
1
0
a ] e
c
h
@
2
0
%
p
r
e
m
i
u
m
`
[
(
1
,
5
0
,
0
0
0
x
4
/
5
)
x
1
1
4
,
4
0
,
0
0
0
`
T
o
t
a
l
P
u
r
c
h
a
s
e
c
o
n
s
i
r
a
t
i
o
n
4
5
,
0
0
,
0
0
0
Que. 3 : On 1st April, 2018, Tina Ltd. takeover the business of Rina Ltd. and
discharged purchase consideration as follows:
(i) Issued 50,000 fully paid Equity shares of ` 10 each at a premium of
` 5 per share to the equity shareholders of Rina Ltd.
A
M
A
L
G
A
M
A
T
I
O
N
3.4
(ii) Cash payment of ` 50,000 was made to equity shareholders of Rina
Ltd.
(iii) Issued 2,000 fully paid 12% Preference shares of ` 100 each at par to
discharge the preference shareholders of Rina Ltd.
(iv) Debentures of Rina Ltd. 20,000 will he converted into equal number
and amount of 10% debentures of Tina Ltd.
Calculate the amount of Purchase consideration as per AS-14 and pass Journal
Entry relating to discharge of purchase consideration in the books of Tina
Ltd. (November 2018 - New Course) (5 Marks)
Ans.
Computation of Purchase Consideration
Particulars `
E
q
u
i
t
y
S
h
a
r
e
s
(
5
0
,
0
0
0
x
1
5
)
7
,
5
0
,
0
0
0
C
a
s
h
p
a
y
m
e
n
t
5
0
,
0
0
0
1
2
%
P
r
e
f
e
r
e
n
c
e
S
h
a
r
e
C
a
p
i
t
a
l
2
,
0
0
,
0
0
0
P
u
r
c
h
a
s
e
C
o
n
s
i
d
e
r
a
t
i
o
n
1
0
,
0
0
,
0
0
0
Journal Entry (in the books of Tina Ltd.)
` `
L
i
q
u
i
d
a
t
i
o
n
o
f
R
i
n
a
L
t
d
.
A
/
c
1
0
,
0
0
,
0
0
0
T
o
E
q
u
i
t
y
s
h
a
r
e
c
a
p
i
t
a
l
A
/
c
5
,
0
0
,
0
0
0
T
o
1
2
%
P
r
e
f
e
r
e
n
c
e
s
h
a
r
e
c
a
p
i
t
a
l
A
/
c
2
,
0
0
,
0
0
0
T
o
S
e
c
u
r
i
t
i
e
s
p
r
e
m
i
u
m
A
/
c
2
,
5
0
,
0
0
0
T
o
B
a
n
k
/
C
a
s
h
A
/
c
5
0
,
0
0
0
(
D
i
s
c
h
a
r
g
e
o
f
p
u
r
c
h
a
s
e
c
o
n
s
i
d
e
r
a
t
i
o
n
)
SIMPLE PROBLEMS - MERGER
Que. 4 : Super Express Ltd. and Fast Express Ltd. were in competing business.
They decided to form a new company named Super Fast Express Ltd. The
summarized balance sheets of both the companies were as under:
Super Express Ltd. Balance Sheet as at 31st December, 20X1
` `
20,000 Equity shares of 20,00,000 Buildings 10,00,000
` 100 each
Provident fund 1,00,000 Machinery 4,00,000
Trade Payables 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
A
M
A
L
G
A
M
A
T
I
O
N
3.5
Fast Express Ltd.
Balance Sheet as at 31st December, 20X1
` `
10,000 Equity shares of 10,00,000 Buildings 7,00,000
` 100 each
Trade Payables 40,000 Machinery 5,00,000
Reserve 1,00,000 Inventory 40,000
Surplus 1,60,000 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 the companies were taken over by the new
company at their book values. The companies were allotted equity shares of
` 100 each in lieu of purchase consideration amounting to ` 30,000 (20,000
for Super Fast Express Ltd. and 10,000 for Fast Express Ltd.).
Prepare opening balance sheet of Super Fast Express Ltd. considering pooling
method.
Ans.
Balance Sheet of Super Fast Express Ltd.
as at 1st Jan., 20X2
Particulars Notes `
Equity and Liabilities `
1. Shareholders’ funds
(
)
S
h
a
r
e
c
a
p
i
t
a
l
1 2
3
0
,
0
0
,
0
0
0
a
(
)
R
e
s
e
r
v
e
s
a
n
d
S
u
r
p
l
u
s
3
,
6
0
,
0
0
b 0
2. Non-current liabilities
(
)
L
o
n
g
-
t
e
r
m
p
r
o
v
i
s
i
o
n
s
1
,
0
0
,
0
0
0
a
3. Current liabilities
( t
) l
T
r
a
d
e
P
a
y
a
b
l
e
s
1
,
0
0
,
0
0
0
a
T
o
a
3
5
,
6
0
,
0
0
0
Assets
1. Non-current assets
(
)
P
r
o
p
e
r
t
y
,
p
l
a
n
t
s
E
q
u
i
p
m
e
n
t
a
T
a
n
g
i
b
l
e
a
s
s
e
t
s
2
6
,
0
0
,
0
0
0
2. Current assets
I
n
v
e
n
t
o
r
i
e
s
3
,
4
0
,
0
0
0
T
r
a
d
e
r
e
c
e
i
v
a
b
l
e
s
2
,
8
0
,
0
0
0
C
a
s
h
a
n
d
c
a
s
h
e
q
u
i
v
a
l
e
n
t
s
3
,
4
0
,
0
0
0
T
o
t
a
l
3
5
,
6
0
,
0
0
0
A
M
A
L
G
A
M
A
T
I
O
N
3.6
Notes to accounts
`
1. Share Capital
E
q
u
i
t
y
s
h
a
r
e
c
a
p
i
t
a
l
I
s
s
u
e
d
,
s
u
b
s
c
r
i
b
e
d
a
n
d
p
a
i
d
u
p
3
0
,
0
0
0
E
q
u
i
t
y
s
h
a
r
e
s
o
f
1
0
0
e
a
c
h
3
0
,
0
0
,
0
0
0
`
T
o
t
a
l
3
0
,
0
0
,
0
0
0
2. Reserves and Surplus
R
e
s
e
r
v
e
1
,
0
0
,
0
0
0
S
u
r
p
l
u
s
1
,
6
0
,
0
0
0
I
n
s
u
r
a
n
c
e
r
e
s
e
r
v
e
1
,
0
0
,
0
0
0
T
o
t
a
l
3
,
6
0
,
0
0
0
3. Long-term provisions
P
r
o
v
i
d
e
n
t
f
u
n
d
1
,
0
0
,
0
0
0
T
o
t
a
l
1
,
0
0
,
0
0
0
4. Tangible assets
B
u
i
l
d
i
n
g
s
1
7
,
0
0
,
0
0
0
M
a
c
h
i
n
e
r
y
9
,
0
0
,
0
0
0
T
o
t
a
l
2
6
,
0
0
,
0
0
0
5. Cash and cash equivalents
B
a
l
a
n
c
e
s
w
i
t
h
b
a
n
k
s
2
,
3
0
,
0
0
0
C
a
s
h
o
n
h
a
n
d
1
,
1
0
,
0
0
0
T
o
t
a
l
3
,
4
0
,
0
0
0
Que. 5 : The following were the summarized Balance Sheets of P Ltd. and V
Ltd. as at 31-3-20X1:
Liabilities P Ltd. V Ltd.
(` in lakhs) (` in lakhs)
Equity Share Capital (Fully paid shares of ` 10 15,000 6,000
each)
Securities Premium 3,000 -
Foreign Project Reserve - 310
General Reserve 9,500 3,200
Profit and Loss Account 2,870 825
12% Debentures - 1,000
Trade payables 1,200 463
Provisions 1,830 702
33,400 12,500
A
M
A
L
G
A
M
A
T
I
O
N
3.7
Assets P Ltd. V Ltd.
(` in lakhs) (` in lakhs)
Land and Buildings 6,000 -
Plant and Machinery 14,000 5,000
Furniture, Fixtures and Fittings 2,304 1,700
Inventory 7,862 4,041
Trade receivables 2,120 1,100
Cash at Bank 1,114 609
Cost of Issue of Debentures — 50
33,400 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 ` 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. V Ltd.
(` in lakhs) (` in lakhs)
Trade payables
Bills Payable 120 -
Creditors 1,080 463
1,200 463
Trade receivables
Debtors 2,120 1,020
Bills Receivable — 80
2,120 1,100
Expenses of amalgamation amounting to ` 1 lakh were borne by P Ltd. You
are required to:
(i) Pass journal entries in the books of P Ltd. and
(ii) 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.
0 0 0 5 0 3 2 0 0 1 0 0
0 1 0 7 0 6 0 0 0 0 8
Cr.
(` in lacs)
0
, 0 4 7 ,
3 2 7 , 0 0
, 0
,
9 1 9 9 1
0 0 0 1 0 9 0 0 1 0 0
0 0 0 4 2 0 8 0 0 8
Dr.
(` in lacs)
0
, 0
, 7
, 0
, 0 6
, 0
, 0
,
9 5 1 4 1 9 1
.
r . r
r . r
. r
. r
. r
. .
r .
r .
r .
r
D D D D D D D D D D D
N
Journal Entries
Books of P Ltd.
O
I
T m
A r f
o
f o
M V %
A e 3 t
n
G m h 1
L rt) o t f u
A on
f r n o o
) f i ) c
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i
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s e c i n p t A r A l
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/ V La t e
v
a
h t
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t s e s h e u
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s l
i . C a e b e c l t
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r b d e r s e r s
i b u
e o ftl e n j s r u a t r e n D u
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s o t n i o e L o i L a ds) e n c v
a r e i
h t e r R d f s P l h i c p % s / i
e f
h o
t ss
s t
i l P n y s n s & V s e / c x 2 e e A c o
c a e n c F b n l r o s f S nr A / e 1 b r e
r d ni a k a g a a i
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t i
s e s o y oa s A e u e n
u i i o M & n v i r l
t i i i n t
e t ch s n r D t )
s l R o
P s t a i e e fi d v i r i k o o n b i
u
q ura d e y B e r n b
o a e o s s
s o u es
s
o n
l i
t f % ere a s
l t
a
s i be n r r s c o e r i r r u a t q a y
t a a y 3 bu y l
i l
s
e L a u o r t e F G P L C P B a E i & B d t 1 et a B l
e
n gid t
i t o a R g d hu t o i i
l dn P c
i o ns t n n t h o o o o o o o n.) i o cq fi u i o e o n)
s T i n e b s T T T T T T T i u T r o T q b T %b s T s
Ans. u e n a r
u v e s
a l
l
i e d q ue r i a 2e l
l
i all
B Bo l n D C B Bt i Pof L i 1d B Ci
(c P F (L L P L (b
3.8
I ( ( (
0 4 0 3 2 9 4 3 0 2 9 0 0 0 0 0 4 4 0
3.9
0 5 0 8 3 6 0 0 4 2 6 0 0 0 0 1 4 5 0
(` in
lakhs)
`
0
, 6
, 0
, 5
, 5
, 7
, 0
, 9
, 1
, 7
, 7
, 0
, 0
, 7
, 0 3 ,
, 6 ,
6 0
,
4 6 1 1 2 5 9 1 3 1 5 4 4 9 3 3 6 1
2 1 4 2 1 4 2 2 1
Notes
1 2 3 4 )
h
s
Balance Sheet of P Ltd. as at 1st April, 20X1 (after merger)
a
c
n
9 a
, h
s
e t
r
a r
e
h h
s t
e o
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Non-current liabilities
v s
Equity and Liabilities
l o r f i
`
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, i i
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Shareholders’ funds
r w 1 s s s n e t
i q
Non-current assets
u o ( v e e b s e v n
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S r s o s l
b u e
r e r u
r e t h b e o
3. Long-term borrowings
l o l r a s a s
2. Reserves and Surplus
d p e s , m c
Current assets
a b b s v h e e
Equity share capital
t n a s
t s s i a d s v u R c
i
p a m y m e a e e c e a e i A
s a r s i c d u y h
t v m t s s
e
Notes to accounts
a e r
e P e s e
l r e n s i r c s r
c v t t a b o
t r a s
i u s e e
r e o u
e r - e -
t d i n e , e
q r s P j
o L t
1. Share Capital
r e g d r l g d h l d e a e
Assets
a s n o a e n e s a R s r d n
h e o a h t
o x a v a a t
o e
s s h e P e
R r i n r i e s l i n n d b
S L T S T F T I T C T r r a t
i a e e
s g
Particulars
o o e l r
e r i t r D
A B A A B A A B C h r r
c a u e fi u
t o t n c r o l c %
u 4 r o e e o r a e 3
A 2c T G S F P t S 1
o
T
1.
2.
3.
1.
2.
A
M
A
L
G
A
M
A
T
I
O
N
3.10
`
4. Tangible assets
L
a
n
d
&
B
u
i
l
d
i
n
g
s
6
,
0
0
0
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l
a u
n
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& t
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a &
c
h
i
n i
e
r
y n
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9
,
0
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r
n
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e
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t
t
i
g
s
4
,
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o
t
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l
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9
,
0
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4
Computation of purchase consideration :
To
hf
eP
pL
ut
r
cd
hf
a
s
ee
cv
oe
nr
s
i
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.
o
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a
r
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d
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a
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e
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o
n
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e
r
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t
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=
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,
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=
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.
3
` `
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o
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i
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t
P
&
L
A
c
c
o
u
n
t
o
f
V
L
t
d
.
ADVANCED PROBLEMS - MERGER
Que. 6 : The following are the Balance Sheets of M Ltd. and N Ltd. as at 31st
March, 2009:
(` in lakhs)
Liabilities M Ltd. N Ltd.
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 2,100 -
Profit and Loss Account 780 -
8% Redeemable debentures of ` 1,000 each - 300
Trade Creditors 2,421 369
Provisions 870 93
11,571 1,662
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 1,542 240
Preliminary Expenses - 33
Discount on Issue of Debentures - 6
11,571 1,662
A
M
A
L
G
A
M
A
T
I
O
N
3.11
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:
(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 ` 6
lakhs are to be borne by MN Ltd.
(iv) 8% redeemable debentures of N Ltd. to be converted into 8.5% redeem-
able debentures of MN Ltd.
(v) Expenses on incorporation of MN Ltd. were ` 15 lakhs. You are requested
to:
Pass necessary Journal Entries in the books of MN Ltd. to record above
transactions, and (Adapted Nov 2009) (16 Marks)
Ans.
Journal Entries
(In the books of MN Ltd.) (` in lakhs)
Dr. Cr.
B
u
s
i
n
e
s
s
P
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r
c
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a
s
e
A
c
c
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t
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r
.
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,
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0
0
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o
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i
q
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i
d
a
t
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f
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L
t
d
.
8
,
4 9
0 0
0 0
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o
L
i
q
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a
t
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r
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f
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L
t
d
.
(c
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e
i
np
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y
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s
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l
a
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y
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c
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t
(
4
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1
5
+
4
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8
)
D D D D D D D D D
. r
r
4
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r
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s
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t
(
2
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0
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+
1
8
3
)
. .
2
,
5
8 5 1
3 1 4
M
o
t
o
r
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(
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8
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(
1
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)
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1
,
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+
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. .
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8 3
2 3 6 0
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s
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r
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fi
t o
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n %
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9
)
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9
0
3 0 0 0 6 5 0
6 0 0 0 1 0
Que. 7 : The following was the Balance Sheet of V Ltd. as on 31st March, 2012:
(` in lakhs)
Cr.
9 3 1 2 3
Amount
(` in lakhs)
1,150
(87)
630
170
1,863
1,152
,
9 ,
8 ,
1
0 0 6 5 0
0 0 1 0
Dr.
4 9
, 3
8
Note
No.
1
2
4
. r
r . .
r .
r .
r %
D D D D D 5
.
8
dg f
o d
nin n
N ae e a o
O sb ) g .
d t
n
I e
i l 0 r
a t i
T t
i a
t 0 h L ) t
n .
A l
i i 9 t c .
d u t d
M b p + n s M t o n t
A aca 0 u i L u L
i 0 o d f c o
(In the books of MN Ltd.)
G l o c N
L de)
r 2
, c
c n
i s N A c
c f
A na s 7
( A e M . A o
M ahu s
e s f d s
) ssp l t l
a r n o t s e
A 3 t t e n t a e L e r
9 e hur u i p n r u
Particulars
n s
s t o p h x o N u t
+ u a r s c a s e t i f t n
0 o e d t c C d n n t
a o n e
7 c ev t e
(a) Long-term Borrowings
c ho n n n A e i
a o u r s b b
8
(b) Reserves and Surplus
( A t a u u l r p i
t o o e e e
t l
l ns o o a a a c p r D D
(2) Non-current Liabilities
n e a oe c c t
i h y) t d c r u
s i
tv c c p S l
l n n i A o t e %
(1) Shareholders’ Funds
u a fa r A a u o u c n l 8
o o A u s n e b
(1) Non-current Assets
h nrs e . C e fti q e f
(3) Current Liabilities
c o t i
Equity and Liabilities
c e d . c i s t b a o
(a) Share Capital
c r od e t d e n fa
o c n l n n n e m
A u i
t ir L t r e r
e c u f
o e u o D n
L
Tangible Assets
s a A o e
(2) Current Assets
s P a nst r td
n t p o s e o
n r M N h e i c
s c n x c e e
l d i
s
s oon S f es s c
Trade Parables
o
i s pci f f e mon o A e E A s b e r
e
s e rfa o o y r L k m n a R v )
i n oog r r t
i P tc y
r k e m s
v i
s csa u o
l d n y a n p % n e
r
o u nes o
t o
t q % l e n a a a x e 5 o
r i d a a 1 a s p) n
i e e . c u
P B gxc e
t d d E 1 gha a B gd. B g d 8 g t
n
o o ne s i i o o nc t o nt m o n e o n e
Assets
T T i u u u T T i fi i i
l i R i
o T T T
Total
e edj q q e r e L e e e b
Bu % e
3.12
Bha i i r B r B B
(t L L (p P (N P ( 8 ( D
A
M
A
L
G
A
M
A
T
I
O
N
3.13
Particulars Note Amount
No. (` in lakhs)
Inventories 380
Trade Receivables 256
Cash and Cash equivalents 5 75
Total 1,863
Notes:
(1) Share Capital
Authorised: ?
Issued, Subscribed and Paid up:
80 lakhs Equity Shares of ` 10 each, fully paid up 800
35 lakhs 12% Cumulative Preference Shares of ` 10 each, fully 350
paid
Total 1,150
(2) Reserves and Surplus
Profit & Loss Account (87)
Total (87)
(3) Long-term Borrowings
10% Secured Cumulative Debentures of ` 100 each, fully paid up 600
Outstanding Debenture Interest 30
Total 630
(4) Tangible Assets
Land and Buildings 445
Plant and Machinery 593
Furniture, Fixtures and Fittings 114
Total 1,152
(5) Cash and Cash Equivalents
Balance at Bank 69
Cash in hand 6
Total 75
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 ` 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 35 lakh 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.
A
M
A
L
G
A
M
A
T
I
O
N
3.14
Expenses of amalgamation would be borne by P Ltd. Expenses came to be
` 2 lakhs. P Ltd. discovered that its creditors included ` 7 lakhs due to V Ltd.
for goods purchased.
Also P Ltd.’s stock 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:
(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 amal-
gamation in the nature of merger. (Nov 2012) - (16 Marks)
Ans.
(i) In the books of V Ltd.
Realisation Account
` in ` in
lakhs lakhs
T
o
L
a
n
d
a
n
d
B
u
i
l
d
i
n
g
s
A
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c
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er
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r
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6
0
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3
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(ii) In the books of P Ltd.
Journal Entries
Dr. Cr.
` in lakhs ` in lakhs
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.
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3 .
4 .
5 .
6 .
7 .
8
A
M
A
L
G
A
M
A
T
I
O
N
3.16
Working Note:
Calculation of Purchase Consideration payable by P Ltd.
` in iakhs
Payment to preference shareholders:
1
3
%
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` `
Payment to equity shareholders:
(
8
0
l
a
k
h
s
s
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s
×
4
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)
=
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1
1
SIMPLE PROBLEMS - PURCHASE
Que. 8 : The financial position of two companies Hari Ltd. and Vayu Ltd. as
on 31st March, 20X1 was as under:
Assets H Ltd. (` ) V Ltd. (` )
Goodwill 50,000 25,000
Building 3,00,000 1,00,000
Machinery 5,00,000 1,50,000
Inventory 2,50,000 1,75,000
Trade receivables 2,00,000 1,00,000
Cash at Bank 50,000 20,000
13,50,000 5,70,000
Liabilities H Ltd. (` ) V Ltd. (` )
Share Capital:
Equity Shares of ` 10 each 10,00,000 3,00,000
9% Preference Shares of ` 100 each 1,00,000 -
10% Preference Shares of ` 100 each - 1,00,000
General Reserve 70,000 70,000
Retirement Gratuity fund 50,000 20,000
Trade payables 1,30,000 80,000
13,50,000 5,70,000
H Ltd. absorbs V Ltd. on the following terms:
(a) 10% Preference Shareholders are to be paid at 10% premium by issue
of 9% Preference Shares of H Ltd.
(b) Goodwill of V Ltd. is valued at ` 50,000, Buildings are valued at
` 1,50,000 and the Machinery at ` 1,60,000.
(c) Inventory to be taken over at 10% less value and Provision for Doubtful
Debts to be created @ 7.5%.
(d) Equity Shareholders of V Ltd. will be issued Equity Shares @ 5% pre-
mium.
0 0 0 0 0 0 0 0 0 0 0 0 0 0
3.17
0 0 0 0 0 0 0 0 0 0 0 0 0 0
Prepare necessary Ledger Accounts to close the books of V Ltd. and show the
acquisition entries in the books of H Ltd. Also draft the Balance Sheet after
`
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
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, 0
, 0
,
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l f
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e up a
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t
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r s a v ct a ces
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Preference Shareholders Account
G l h a e Ais S Aea r c e
b c) t s r
t r l nRh n
Equity Shareholders Account
n a uon i
p e na e e a
e y a R oe c onS r h
a Pi
( l i
t R n i
t oe e S
m p t C a a e a f
In the Books of V Ltd.
e .ra r s r s m c e y
Realisation Account
r e d e e i n e i n r t
r i
Hari Ltd. Account
N i d t e a n lo
a f lue
a P u
t
e a Ld e t
e fi e eie r q
O d r i
s h r m %
I
T Rn T Hn S G Ro P Re f 9 E
A yu y yo y y yPr y yPr e
r y y
M BF B BC B B B( B B( P B B
A 0 0 0 0 0 0
G 0 0 0 0 0 0
`
`
L 0 0 0 0 0 0 0 0
A 0 0 0 , , , , , ,
absorption as at 31st March, 20X1.
M 0 0 0 0 0 0 0 0 0 0
, 0 0 , 2
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Ans.
o oP oP o o o
T T( T( T TH T
0 0 0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0 0
Cr.
`
19,87,500
0
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, 5
, 0
, 0
, 0
, 0
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0 0 0 7 0 0 0 0 0 0 0 0 7
3
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Dr.
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, 0
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, 0
, 0
, 0
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0 0 0 0 7 0 0 0
3
, 5 5
, 6
, 5
, 0
, 2 3
,
Notes
5 1 1 1 1 5 1 2 3
Balance Sheet of H Ltd. (after absorption)
.
r . r
r . . . .
r r .
r r .
r
D D D D D D D D
as at 31st March, 20X1
d
In the Books of H Ltd.
e
N e
r
Journal Entries
O g
I a
T r
A e
M t
n p
A t u s
a .
G n o )
d
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A ) o c e / fi
M t r c A v A s
A n e c s o i
u v A t n l
a t
a
b
Particulars
o o d e e t
i s
c n n D k p c n
c e u t
n a
t a / c o
A k F l c C A / i s s
. a u u / s l A t
a u n n
d t t y o f
t A e
i e a r l
p o o
t . n t c b t c r t m e r i i
s
L d u i
u c u e i
l / a i u d u s
i i
c t o A s i h p v v
2. Non-current liabilities
/ V L c t o a b A S a i i
s S s o
a s h a . m o e r
1. Shareholders’ funds
A f V c r e D c i d e C n l d r l
Equity and Liabilities
o t
n t A G l r r L t c e e
r o a n p b p
e b t a
3. Current liabilities
s s f
o t t u n s t o u d L n r P C i a m y m
a r n n o u e n a f P n V e a e p s r
h o s u u c o l e y n r h s s a e r a e
c t s o o c c b t a o s a f e S e
i a c v e
t P t
r a e c c a n m p i s
e s o f t h e r - e t
u d n c c A v u e e s t e y i
r c r e g d r
i i
s A c y A i
e o r d i
v n
i e . s
r r t
i u r a s n o
P u u A r y c c i
t s s
s ) o P u c u h e o a
r h
s q l
l g e r e c e a o u n t % q e R
s i b i n o r R r r Ao a P S L T S
e L g w n i t A T P B gai
t d 9 E S g
n o n d i
d h n e k o o o o nu i o o o n A B A A B
i
s T i o l
i c e d n T T T T i u T T T i
Total
u e o u a v a a e l q e
3.18
B B G B M n r B Ba i B
( I T (v L (
0 0 0 0 0 0 0 0 0 0 0 0 0 0
3.19
0 0 0 0 0 0 0 0 0 0 0 0 0 0
`
19,87,500
16,10,000
90,000
70,000
7,500
11,10,000
1,00,000
0
, 0
, 5
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
0 0 7 0 0 0 0 0 0 0 0 0 0 0
1
, 0
, 0
, 0
, 7 0
, 1
, 2 7 7 5
, 6
, 0
, 0
,
1 1 4 3 4 2 4 6 1 3
1 1
Notes
4 5 6
er eer
ve vh
oh ot
bt bo
ao an
fn
o fo
o
i o i
tt
u tat
N a
r u r
O Oe Ode
I (d (i
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A i
a s hs
M pon cn
A ao
G
yc
l ec
L l
u n 0in
A fi 0d
M hd 1e
A ce u
au s
`
s es fis
Particulars
t
n 0is o s
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e
l e e b
a r r w e
v fe a D
`
i
u o w hes l
s q ss l Sr u
s e
l e e
r e a ea f
4. Short term Provisions
t t t
2. Reserves and Surplus
m
3. Long-term provisions
s
t e b h a r i ch b
e s a s l ha p nS u u
s v Sh a i
1. Non-current assets
s s a i a a c ee
r e o
s s yS)
7. Trade receivables
t c t c m v
Notes to accounts
e i e D
6. Intangible assets
e
s a e e
i c p t yh e f n ) e r d
l d i r h e
5. Tangible assets
s e b r e a u t e e r s n r
2. Current assets
l o r n i s a r r s P o
1. Share Capital
a b i
g t a c qu a h Pfe a e u f y
d i
g n n e e Eqc s c s R f n s r l
e e d h r %re e y g e l
x n a
t v a s a 0Eo r e
c 9P
r
o i
t l
a t o
i n n i
i a n n r a h 00f f i
r r i s i i w
F T I I T C s 00
, n 00n u e u i d h d
y 0 0an e 00a n t
a v l
i c o
Total
Total
Total
Total
A A B C t 40, r 1,1h c e r o u a o
i , h e , e r
Assets
u 1 4t f 2 1t S G G P B M G
Total
Total
q e
r
E P
A
M
A
L
G
A
M
A
T
I
O
N
3.20
Working Notes:
Computation of Purchase Consideration:
`
G
o
o
d
w
i
l
l
5
0
,
0
0
0
B
u
i
l
d
i
n
g
1
,
5
0
,
0
0
0
M
a
c
h
i
n
e
r
y
1
,
6
0
,
0
0
0
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n
v
e
n
t
o
r
y
1
,
5
7
,
5
0
0
T
r
a
d
e
r
e
c
e
i
v
a
b
l
e
s
9
2
,
5
0
0
C
a
s
h
a
t
B
a
n
k
2
0
,
0
0
0
6
,
3
0
,
0
0
0
:
L
i
a
b
i
l
i
t
i
e
s
:
Less
R
e
t
i
r
e
m
e
n
t
G
r
a
t
u
i
t
y
(
2
0
,
0
0
0
)
T
r
a
d
e
p
a
y
a
b
l
e
s
(
8
0
,
0
0
0
)
N
e
t
A
s
s
e
t
s
/
P
u
r
c
h
a
s
e
C
o
n
s
i
d
e
r
a
t
i
o
n
5
,
3
0
,
0
0
0
T 1
o 0
b %
e P
s
a
t
s e
i
fir
e n
d c
a
s S
u h
n a
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e
r
: o
r
e
f
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e
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h
l
d
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r
s
o
f
V
L
t
d
.
1
,
0
0
,
0
0
0
:
1
0
%
P
r
e
m
i
u
m
1
0
,
0
0
0
Add
1
,
1
0
0
9
%
P
r
e
f
e
r
e
n
c
e
S
h
a
r
e
s
o
f
H
L
t
d
.
1
,
1
0
,
0
0
0
E E
q q
u
i
y t
t
S S
h h
a
e r
r
h s
o
l
d f
e
r
s L
o
f d
V a
L t
t
d
. P
t
o r
b e
e m
s
a
t
i
s
fi
e
d
b
y
i
s
s
u
e
o
f
4
0
,
0
0
0
u
i
y
a
e
o
H
t
.
5
%
i
u
m
4
,
2
0
,
0
0
0
T
o
t
a
l
5
,
3
0
,
0
0
0
Que. 9 : A Limited was wound up on 31.3.2014 and its draft Balance Sheet
as on that date was given below:
Balance Sheet of A Limited as on 31.3.2014
Liabilities ` Assets ` `
Share capital: Fixed assets 4,82,000
60,000 Equity shares Current assets:
of
` 10 each 6,00,000 Inventory 3,87,500
Reserves and surplus: Trade receivables 91,000
Contingency reserve 1,56,000 Cash at bank 1,64,500 6,43,000
Profit and loss A/c 1,26,000
Current liabilities:
Trade payables 1,33,000
Provisions:
Provision for income 1,10,000
tax
11,25,000 11,25,000
A
M
A
L
G
A
M
A
T
I
O
N
3.21
Details of Trade receivables and Trade payables:
Trade Receivables
Sundry debtors 80,000
Less: Provision for bad and doubtful debts 4,000 76,000
Bills receivable 15,000 91,000
Trade payables
Sundry creditors 1,13,000
Bills payable 20,000 1,33,000
B Limited took over the following assets at values shown as under:
Fixed assets ` 6,40,000, Inventory ` 3,85,000 and Bills Receivable ` 15,000.
Purchase consideration was settled by B Limited: ` 2,55,000 of the consideration
was satisfied by the allotment of fully paid 10% Preference shares of ` 100
each. The balance was settled by issuing equity shares of ` 10 each at ` 8 per
share paid up.
Sundry debtors realised ` 75,000. Bills payable was settled for ` 19,000.
Income tax authorities fixed the taxation liability at ` 1,11,000.
Creditors were finally settled with the cash remaining after meeting liquidation
expenses amounting to ` 4,000.
You are required to:
(i) Calculate the number of equity shares and preference shares to be
allotted by B Limited in discharge of purchase consideration.
(ii) Prepare the Realisation account, Cash/Bank account, Equity share-
holders account and B Limited account in the books of A Limited.
(iii) Pass journal entries in the books of B Limited.
Ans.
(i) Computation of purchase consideration
`
F
i
x
e
d
a
s
s
e
t
s
6
,
4
0
,
0
0
0
I
n
v
e
n
t
o
r
y
3
,
8
5
,
0
0
0
B
i
l
l
s
r
e
c
e
i
v
a
b
l
e
1
5
,
0
0
0
P
u
r
c
h
a
s
e
c
o
n
s
i
d
e
r
a
t
i
o
n
1
0
,
4
0
,
0
0
0
Discharge of purchase consideration
A
m
o
u
n
t
d
i
s
c
h
a
r
g
e
d
b
y
i
s
s
u
e
o
f
p
r
e
f
e
r
e
n
c
e
s
h
a
r
e
s
= =
2
,
5 5
5
,
0 s
0 h
0 a
`
2
,
5
0
r
e
s
N
o
.
o
f
p
r
e
f
e
r
e
n
c
e
s
h
a
r
e
s
t
o
b
e
a
l
l
o
t
t
e
d
=
2,55,000
100
0 0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0
`
Cr.
`
Cr.
`
0 0 0 0 0 0 0 0 0 0 5 5
0
, ,
4 ,
3 ,
0 ,
0 ,
5 ,
2 ,
4 ,
9 ,
1 ,
5 ,
9 0 0 0
5 3 1 4 7 6 1 1 0 3 0 0 0
5
, ,
1 ,
1 ,
0 ,
3 ,
1 ,
1 ,
2 0 0 0
2 1 1 ,
0 ,
6 ,
6
s 0
, 5
, 2
,
- e 6 1 1
`
0 r
a
0 0 h
0 0 t
7,85,000
, 0 s d n ) y n
0 , 5 n r : e u
4
, 5 2 n o
i o d t l v o
8 a n n a
8
0 , 1 t
a i
t s t r c
1 7 8 ,
8 d x a u u e i
p e c
9 a a r S o s a s a
b e t t e : c n ) c e
r s
t
`
`
`
= = = = = r l r n d n c e sre s
os b o u i
s a p r e y o
u ou r c l
Equity Shareholders Account
f t a f o n o n x t g a
neb y n c o c o e e i
d fi h n d
od a o c c c i
t n l y eg s e n
i p i a a a o b t r g a
s s . e s a i y n
Cash/Bank Account
n
Realisation Account
i l e i d s ks i i
t y l
i c i t i t
N v u d v t a nr l
a a a b ync i
u t
n t
n fi
s otf a o L h ao e d p a r qu o o
O e
r rb r r c i i
l dla r
I
a Pu T P B r Bbt R u s x na Eo C P
T
h yo y y y u ye y q l
l uB ycc y y
A
s d P i i a
M e Bd B B B ( Bd B L B T S( Ba B B
A y
t u
G i s 0 0 0 0 0 0 0 0 0 0 0 0
u s 0 0 0 0 0 0 0 0 0 0 0 0
`
`
L q i 0 5 0 0 0 0 5 0 0 5 0 5
A e e ,
2 ,
7 ,
5 ,
4 ,
9 ,
1 ,
5 ,
8 ,
2 ,
4 ,
5 ,
9 0 0
M f b 8 8 9 1 1 0 5 6 6 7 3 0 0
A o o ,
4 ,
3 ,
1 ,
1 ,
1 ,
3 ,
1 ,
2 0 0
t t 1 ,
5 ,
5
n s
e 5
, 8
,
e r 2 7
(ii) In the books of Alia Ltd.
m e a
t r
a h
o
l h s .
l s y s
e d
a t s : r t
y y i
u e s
r t a L
b t
i s e n h B
u q s n d u s
d q e e
l e s
r l ) o n
e e f b : p o o d c e i
g f o a t x t h e c c s
r o r s v n e e i
d e r d a s n e
a e t i u n l y e r r / n r e r
h e b e y e o o b t r a e
f b o o r
e a
c u s r c c i a i
l c h s i t f h
s
i l m s o e
r c t y i
b s n e t b e s
d a u a t a a a a y y a c a e r y
t v n d n e k d
i p i r t r n s
i d Pd. t
n p , e e d n u s l d i
u t a l
a y i
u
u u e x v a q l x n t l e r %t
o c i n r
T
a
B i l
i a u q
E fi a
B R d 0L q
E
d
i n F I L B T S o n 1B
m e o o o o o r o o u on o
3.22
a H p
Dr.
Dr.
A P T T T T T ( T T S Ti T
0 0 0 0
3.23
0 0 0 0
Que. 10 : The Balance Sheet of Reckless Ltd. as on 31st March, 2008 is as
Cr.
`
Cr.
`
Amount (`)
2,20,000
1,77,000
0 0 0
, 0
, 0
, 0
,
0 0 0 0 0 0 0 5 5
0 0
, 0 0 0
, 4
, 4
, 5
, 8
,
0
, 0 0
, 0
, 0 0 0 2 7
8 4
, 5 5 4
, 1 1
5
, 0 5
, 8
, 0
1 1 2 7 1
. 0 0 0 0 0
s d 0 0 0 0 0
Amount (`)
e
r t 0
, 0
, 0
, 0
, 0
,
a L 0 0 5 5 0
h B 4
, 4
, 8
, 1 4
,
s n 0 6 3 0
e i 1 1
c s
) n e
t
n fi e
r r
oo e a . . r
. r
. .
i f h r r r
t r e s D D D D D
Journal Entries
a r
in the books of B Ltd.
s P
( Pd y
i
lnt . t
i
N a %t u
O eu 0L q
I
T Ro 1B E n
A ycc yn y ne
M Ba Bi B ok
i t 0or
A t a
t n 1f
G a
r u p t
s o
`
L e t ufn
`
0 0 0 dse c
A 0 0 0 i
ss
c
a doe)
i
M 0
, 0
, 0
, na a smn
e
A 0 0 0 t or l
a t pr eio
4 4 4 n t t n et
, , , u co n t i u yara
l h
0
1
0
1
0
1 o
c
e.
s
f u
o
n
u
p
a o
c
l
u sge
a r
c a d c o c c fty rid
t a ht c c e a %i e s
n . cL
r a c r l 0upo n
u d ufA e ) a a a 1qa s
o t t s r . h t
i e c
t c L po n a e d s p fd
n c A fr u h v t e a o pse
u a o t o c o L c c tnua
B Limited Account o f tao n c r n A n n a dh
c e o n t u t c u e e e e i
s
s o n r c
Freehold premises
c a r uid u a p k e r a mre ar
a h o ou c e a h e h ta pu
n c t c o l s t t f s o hp
o r a mq a c b s
e s f e
r lhcf
l
i u d ali s c a t o P y a s
t i t a v n
i e r t
i eao
a p u eo e y i s s u ec e e
Machinery
s ht s s o %
Particulars
i s q
i s r e u a t 0 q hn 8g
l
a s L t e a o c B a 1 E t e a r
l
follows:
e e gb t e
r g d gr
Assets:
n o ) d n o i o o ,h
`
R i na
i r e e s n
i u nf
i eh
s T e ye x v l T e q T T e ecs c
o u Bav i l
i i Brai
(iii)
n B
Dr.
Dr.
T B (po F I B ( L (ped
A
M
A
L
G
A
M
A
T
I
O
N
3.24
`
Furniture & fittings 90,800
Stock 3,87,400
Sundry debtors 80,000
Less: Provision for doubtful debts 4,000 76,000
Cash in hand 2,300
Cash at bank 1,56,500
Bills receivable 15,000
11,25,000
Liabilities:
60,000 Equity shares of ` 10 each 6,00,000
Pre-incorporation profit 21,000
Contingency reserve 1,35,000
Profit and loss appropriation account 1,26,000
Acceptances 20,000
Creditors 1,13,000
Provision for income-tax 1,10,000
11,25,000
Careful Ltd. decided to takeover Reckless Ltd. from 31st March, 2008 with
the following assets at value noted against them:
`
Bills receivable 15,000
Freehold premises 4,00,000
Furniture and fittings 80,000
Machinery 1,60,000
Stock 3,45,000
1
/4 of the consideration was satisfied by the allotment of fully paid preference
shares of ` 100 each at par which carried 13% dividend on cumulative basis.
The balance was paid in the form of Careful Ltd.’s equity shares of ` 10 each,
` 8 paid up.
Sundry Debtors realised ` 79,500. Acceptances were settled for ` 19,000.
Income-tax authorities fixed the taxation liability at ` 1,11,600. Creditors
were finally settled with the cash remaining after meeting liquidation expenses
amounting to ` 4,000.
You are required to:
(i) Calculate the number of equity shares and preference shares to be
allotted by Careful Ltd. in discharge of consideration.
(ii) Prepare the important ledger accounts in the books of Reckless Ltd.;
and
(iii) Pass journal entries in the books of Careful Ltd. with narration.
(May 2010)
0 0 0 0 0 0 0 0 0 0 0 0
3.25
0 0 0 0 0 0 0 0 0 0 0 0
`
`
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 5
,
5 0 0 0 5 0 3 0 0 4 0 9
1 0
, 8 6
, 4
, 0
, 1
, 2 1
, 0
, 7
4 1 3 0 1 1 0
1 1
l
u
f
t
s b
e x u
r a o s
a t d r
h h s r r . o
s c e o o d :
k t
b
e a hd c f f t n e
c e ce s
r n n n L a d
s a o o
(ii) Ledger accounts in the books of Reckless Ltd.
n 0 e at o t i i l
u B y
e 0 t t s s
Realisation Account
r 1 r eo i p
e i i f /
h
r
N e a 8ll d
e c v
o
v
o
e
r s
d
n
O f h a r c r rts a a
e f s 0 u
`
I r 0 s C A P Pb C C S
`
T
A p o y
t 0= e y y y ye y y
M s i ,
0 r
e a B B B Bd B B
% e u 5ar
A 3 r
a q , h 0 0 0 0 0 0 0 0
Discharge of purchase consideration:
G 1 e 7 h s 0 0 0 0 0 0 0 0
`
L f h f s y 0 0 8 4 0 0 0 6
Computation of purchase consideration:
A o s o t ,
0 ,
7 ,
0 ,
7 ,
0 ,
5 ,
9 ,
1
y i
`
M t e s t =t u 2 7 9 8 8 1 1 1
A : n c e n 0ui q ,
2 ,
1 ,
3 ,
1
r
e e n r e 0q e
v m e
r a m 0e s
o t e h t , f e
r
n o f s o 0
5ne o a
e l
l e
r e l
l , r
e h
k a p c a 2 o b s
a y n y f m y
1
4
t
b x % e b -o u t
`
s 3 r i s
t d 0 e d 0e n u s
e
s s i 0 01 f
e i 0lu q e
s g
n x
s s g a 0 0f a 0a e e i - a
` 2,50,000
r i r e
` 7,50, 000
a
f
e
s n
i p ,
0 0o
, p p ,
0 h
v t 0
m
e
t
t o l
b t
i t t r t fi t r
` 100
o e t 0 0 e 0 0p , 5 r b a : s o
l m n , n , k e
`8
e b e fi u 0 5b
, 0 u 0 e
u c 7 p y
r
s
e e v
i n c f
u a r & y o 1 2 m 5 o 1d n ,
3 d e r d e a n n
l
a v
i p ,
2 i e 9 l
o n u y c
e B a o
i
v e d e r
r e m u m a h i
h t
i k r r / t
p s
`
`
`
c l u n A = = N = = A = P H = = e c n c d s h e i
v
d e o r o n l s
Ans. (i)
e r h t
i i
h k e
r a u t u l
i a c o
e s e n c .
1 .
2 F M F S S B C c r
r l e r c o A P
g l
i r u a t o o o o o o o
A B F F M S T T T T T T T
0 0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0
`
`
5
, 0
, 6
, 0
, 7
, 3
, 0
, 0
, 0
, 0
, 0
, 0
, 0
6 9 1 4 3 8 0 1 5 6 8 0 0 0 0
2
, 1 1
, 0
, 3
, 0
, 2 3
, 2
, 1
, 0
, 0 0 0
,
3 1 1 2 6 1 1 1 0 0
, 0
, 0
1 1 0 0 0
,
5
, 5
, 0
2 7 1
t l
u
fi f
o e
l r e r
a p v a
t
i n r
e C
x ]
) p o s ein n
c a c c. a i
t e c c vs i
/ t / /g c a r / / i e s
A r A A fi e r y sA A t
a r e
o .
l r o c s l a r
Equity Shareholders Account
n f n na a p n oon n u h a
os
i n o
i ob
i h r e l o
i msd . h
i
Cash and Bank Account
t e o t ) t ( s o g &at t s
a c i a s a s y c n a uet y
Careful Ltd. Account
s
i
l
n
a
s
i s
i
l e
s
s
i
ltr
o t
i n
i i
t tr
fi
i s
i
l CcL
n t
i
N a t v a n a u -
e n oop a %reul u
O ep o ee edi q r o rr e 3e f q
I Rce r Rp Re E P C Pp R 1f e E.
T P x r ear d
A yc yE yC y y y yp y yr yt
M BA B( B[ B B B BA B Bp C BL
A 0 0 0 0 0 0 0 0 0 0 0
G 0 0 0 0 0 0 0 0 0 0 0
`
`
L 7 0 0 5 5 3 5 3 0 0 0 0 0
A ,
3 ,
4 ,
8 ,
6 ,
6 ,
2 ,
9 ,
8 ,
0 ,
0 ,
0 0 0
M 0 1 2 5 7 3 5 5 0 0 0
A ,
1 ,
1 ,
3 ,
1 ,
2 ,
2 ,
7 ,
0 ,
0 ,
0
1 1 0
, 0
,
0 0
1 1
l
u
t f
e
s
e a r
s h a
n s n C
e a ei n
p C c vs i c
x - / i
t e s /
: e d A a r e A
k n )
F / n l a r n
n o / b d o u h a o
s
r a i
t B e n i
t msd . h
s i
t
o B a ( c a a uet a
t
i /
h
d
i t
fi n h s
i
l
)
s
r CcL
n
y
t
i
s
i
l
d s u a
l n a o %reul u a
e a q o a i et f q e
r i r Bnk h Reb 3e e R
C C L P s 1ef r Ed.
o o oa a oD or a ot o
3.26
T T Tb C T( Tp C TL T
A
M
A
L
G
A
M
A
T
I
O
N
3.27
(iii) Journal Entries in the books of Careful Ltd.
` `
B
u
s
i
n
e
s
s
p
u
r
c
h
a
s
e
A
c
c
o
u
n
t
D
r
.
1
0
,
0
0
,
0
0
0
T
o
L
i
q
u
i
d
a
t
o
r
o
f
R
e
c
k
l
e
s
s
L
t
d
.
A
c
c
o
u
n
t
1
0
,
0
0
,
0
0
0
(L
Bt
e
i
n.
gf
ar
ma
os
ue
n
tt
pa
ak
ye
an
b
l
ev
t
o)
l
i
q
u
i
d
a
t
o
r
o
f
R
e
c
k
l
e
s
s
d
o
s
t
s
o
e
r
B
i
l
l
s
r
e
c
e
i
v
a
b
l
e
A
c
c
o
u
n
t
D D D D D
. r
r
1
5
,
0
0
0
F
r
e
e
h
o
l
d
p
r
e
m
i
s
e
s
A
c
c
o
u
n
t
. .
4
,
0
0
,
0
0
0
F M
u a
r c
n
i
t
u n
r
e r
& y
fi
t
t
i
n u
g
s n
A
c
c
o
u
n
t
r r
8
0
,
0
0
0
h
i
e
A
c
c
o
t
. .
1
,
6
0
,
0
0
0
S
t
o
c
k
A
c
c
o
u
n
t
3
,
4
5
,
0
0
0
T
o
B
u
s
i
n
e
s
s
p
u
r
c
h
a
s
e
A
c
c
o
u
n
t
1
0
,
0
0
,
0
0
0
(
B
e
i
n
g
a
s
s
e
t
s
t
a
k
e
n
o
v
e
r
f
r
o
m
R
e
c
k
l
e
s
s
L
t
d
.
)
L
i
q
u
i
d
a
t
o
r
o
f
R
e
c
k
l
e
s
s
L
t
d
.
D
r
.
1
0
,
0
0
,
0
0
0
TA
oc
1o
3u
%n
C
u
m
u
l
a
t
i
v
e
p
r
e
f
e
r
e
n
c
e
s
h
a
r
e
c
a
p
i
t
a
l
2
,
5
0
,
0
0
0
c
t
T
o
E
q
u
i
t
y
s
h
a
r
e
c
a
p
i
t
a
l
A
c
c
o
u
n
t
7
,
5
0
,
0
0
0
(so
Bhf
e
i
nr
ge
ao
l
l
o
t1h
m0
e0
n
ta
o
fh
1u
3l
%y
ca
ud
mu
u
l
a
tn
i
vd
ee
pq
r
e
f
e
r
eh
na
cr
ee
a
s1
fe
e
cp
fd
lp
p
i
p
a
u
i
t
y
s
`
0
a
c
,
8
a
i
u
)
` `
Que. 11 : The Balance Sheet of Mars Limited as on 31st March, 2011 was
as follow:
Liabilities ` Assets `
Share Capital: Fixed Assets:
1,00,000 Equity Land and building 7,64,000
shares of ` 10
each fully paid up 10,00,000 Current Assets 7,75,000
Reserve and surplus Stock
Capital reserve 42,000 Sundry debtors 1,60,000
Contingency reserve 2,70,000 Less: Provision for 1,52,000
Profit and loss A/c 2,52,000 doubtful debts 8,000
Current Liabilities & Bill receivable 30,000
Provisions
Bills payable 40,000 Cash at bank 3,29,000
Sundry creditors 2,26,000
Provisions for income 2,20,000
tax
20,50,000 20,50,000
A
M
A
L
G
A
M
A
T
I
O
N
3.28
On 1st April, 2011, Jupiter Limited agreed to absorb Mars Limited on the
following terms and conditions:
(1) Jupiter Limited will takeover the assets at the following values:
`
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 ` 100 will be issued and the
balance will be settled by issuing equity shares of ` 10 each at ` 8 paid
up.
(3) Liquidation expenses are to be reimbursed by Jupiter Ltd. to the extent
of ` 5,000.
(4) Sundry debtors realized ` 1,50,000. Bills payable were settled for
` 38,000. Income tax authorities fixed the taxation liability at ` 2,22,000
and the same was paid.
(5) Creditors were finally settled with cash remaining after meeting liqui-
dation expenses amounting to ` 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.
(May 2011) (16 Marks)
Ans.
(i) Computation of purchase consideration
Particulars Amount (`)
L
a
n
d
a
n
d
b
u
i
l
d
i
n
g
1
0
,
8
0
,
0
0
0
S
t
o
c
k
7
,
7
0
,
0
0
0
B
i
l
l
s
r
e
c
e
i
v
a
b
l
e
3
0
,
0
0
0
T
o
t
a
l
1
8
,
8
0
,
0
0
0
D
i
s
c
h
a
r
g
e
o
f
p
u
r
c
h
a
s
e
c
o
n
s
i
d
e
r
a
t
i
o
n
A
m
o
u
n
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(ii) Ledger Accounts in the books of Mars Limited
o y o i / t n y s r g n t
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Realization Account
p e s i e p m s
` Particulars
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i d i t r ks i
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s R i u i n fi
.
I
T Pb B S P J n Bbt u J B I S l E C C P R
A ye y y y y ye y q y y y y a y y y y y
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Particulars ` Particulars `
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Que. 12 : The summarized Balance Sheet of Srishti Ltd. as on 31st March,
2014 was as follows:
Liabilities Amount (`) Assets Amount (`)
Equity Shares of ` 10 fully 30,00,000 Goodwill 5,00,000
paid
Export Profit Reserves 8,50,000 Tangible Fixed Assets 30,00,000
General Reserves 50,000 Stock 10,40,000
Profit and loss Account 5,50,000 Debtors 1,80,000
9% Debentures 5,00,000 Cash & Bank 2,80,000
Trade Creditors 1,00,000 Preliminary Expenses 50,000
50,50,000 50,50,000
ANU Ltd. agreed to absorb the business of SRISHTI Ltd. with effect from
1st April, 2014.
(a) The purchase consideration settled by ANU Ltd. as agreed:
(i) 4,50,000 equity Shares of ` 10 each issued by ANU Ltd. by valuing
its share @ ` 15 per share.
(ii) Cash payment equivalent to ` 2.50 for every share in SRISHTI
Ltd.
(b) The issue of such an amount of fully paid 8% Debentures in ANU Ltd.
at 96% as is sufficient to discharge 9% Debentures in SRISHTI Ltd. at
a premium of 20%.
(c) ANU Ltd. will takeover the Tangible Fixed Assets at 100% more than
the book value, Stock at ` 7,10,000 and Debtors at their face value
subject to a provision of 5% for doubtful Debts.
(d) The actual cost of liquidation of SRISHTI Ltd. was ` 75,000. Liqui-
dation cost of SRISHTI Ltd. is to be reimbursed by ANU Ltd. to the
extent of ` 50,000.
(e) Statutory Reserves are to be maintained for 1 more year. You are re-
quired to:
(i) Close the books of SRISHTI Ltd. by preparing Realisation Ac-
count, ANU Ltd. Account, Shareholders Account and Debenture
Account, and
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
3.31
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
(ii) Pass Journal Entries in the books of ANU Ltd. regarding acqui-
(May 2014) - (16 Marks)
`
0 0 0 0
, 0
, 0
, 0
, 0
, 0
, 0
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0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
5 5 0 0
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r a e e
s e C R v c
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r i e t e
s A d a
u s r fi e t
i
t n a o c n / p
R
In the books of Srishti Ltd.
h r o b
REALISATION ACCOUNT
n s . o / i a c
Equity Shareholders A/c
e r d c S P l t /
9% Debentures Account
b o t t a A a e C A
e t L e y r r z c e
n D i
d s
a t
i o e L i
l n r k
N e u u p n a a
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t
a 9 C A r E E G P R B S B
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Anu Ltd.
A y y y P y y y y y y y y
M e 5
. B B B ( B B B B B B B B
A d
i 2
G s ) 0 0 0 0 0 0 0 0 0 0 0 0 0 0
n 5 0 0 0 0 0 0 0 0 0 0 0 0 0 0
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s 0 x 5 0 0 1 2 1 1 7 7 5 ,
0
5 5
, 3 1 3 8 6 7 7 7
sition of business.
a 0 0 0
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5
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a y e k k p l t
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Ans.
o o o o o 2 o R o r o ot o o o
( T T T T T ( T ( T t s T TL T T T
i
0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0
Que. 13 : L Ltd. and S Ltd. were amalgamated on and from 1st April, 2014.
A new company M Ltd. was formed to takeover the businesses of the existing
companies. The summarized balance sheets of L Ltd. and S Ltd. as on 31st
(` in lakhs)
`
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
0 9 0 0 0 0 0 0 0 0 5
0
, 0
, 0
, 0
, 5
, 5 0
, 5
, 5
, 2
,
5 6 1 5 8 5 2 7 6
7 7 4 2
0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0
`
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
0 0 0 0 5 4 0 0 0 0 5
0
, 0
, 1
, 8
, 5
, 6
, 5
, 5 0
, 0
, 2
5 0 7 1 2 0 8 5 6
7 6 1 7
.
r . r
r . r . r
. r . .
r .
r .
r .
r
D D D D D D D D D D
N
(ii) Journal Entries in the books of Anu Ltd.
O )
I ) d
T
A
r
e e
M v ) g
r
o r ) a x
A e r
e h 0 ’
s
G n v v ) c 0 r
L e s o o d s 0 e
A k t
b s t n e i ,
0 d
a e n e n s d s l
M .
d t e r u k c e r n 0
, e o
A t .
d d u o a / k u 5 r h
L t l t c t A s a b o
i ( u
L u n c t e t l t s t e
i f e a s n v s m a a e n r
March, 2014 are given below:
t
h i t b e
i e r i . t m r r e u
t
h b e e t e e e d i e u b t
c s
i u
) o D s i
l m s v r t p u
i d t e n
/ r s
i . a i t e r s L a i n d e
S r s g % h b s e
R s e C m s e s b
A
f S t
e fid 9 c a
i u e
t R s i
t e n b f
o e e
e o f s r
. o
l r l j fi n s
i e r o e r )
6 d
s o s c a r u d d e r r
a P c D e u f
a r A / f
B n o P n A o y p h s e u t 9 o
h o s A ( o f s s r r c x S h e c s % s n /
c t
a s
e d y r s a n P o / e S i / a s e 0 y
r e k c s
i t
i o e s o t t A f y t
i A h 9 i b 0 t
i
u d
i n
i x
i n / i l t
i n t i
t r u n o t r c r n e 1 l
i )
P u s F a A v i
b d i e a o t k o r i u k r o o D x b d
q u B o
l r a e s s
s m a
p t l n i
t o u c n u f ) t age
s
s i b e s l
i i r u a x s l
i a a t q e a p y0 n % 0 i
l
e L l
b r & w P L C B a E g w B d a E S B t 0 u 8 0 r
n g i k o g g
l i d g i
l 1 o 0
, ga
i o n g c t h d o o o o n a o n d o u i
u o o o n i
b / o 0 nh
s T i
e n o b s o T T T T i
e i
T e o T q T T T i
e 0 c
s T 0 i
e c
u a t e a o m o i q
i a2
i i , s
B B T S D C G B A B G L L B L D 6 Bi
( ( ( ( ( 1 ( (d
3.32
1 2 3 4 5 6
A
M
A
L
G
A
M
A
T
I
O
N
3.33
Equity and Liabilities L. Ltd. S. Ltd. Assets L. Ltd. S. Ltd.
Share Capital:
Equity shares of ` 100 1,700 1,450 Fixed Assets:
each
14% Preference Shares Land & Building 920 550
of ` 100 each 640 350 Plant & Machinery 650 420
Reserves and Surplus: Investments 150 100
Revaluation reserve 250 160 Current Assets:
Capital Reserve 600 400
Investment Allowance 100 60 Inventory 650 538
Reserve Trade receivables 660 540
P & L Account 30 24 Cash and Bank 770 502
Secured Loans:
13% Debentures (` 100 100 56
each)
Unsecured Loan:
Public deposits 50 —
Current Liabilities and
Provisions:
Trade payables 330 150
3,800 2,650 3,800 2,650
Other information
(i) 13% Debenture holders of L Ltd. and S Ltd. are discharged by M Ltd.
by issuing such number of its 15% Debentures of ` 100 each so as to
maintain the same amount of interest.
(ii) Preference Shareholders of the two companies are issued equivalent
number of 15% preference shares of M Ltd. at a price of ` 125 per share
(face value ` 100)
(iii) M Ltd. will issue 4 equity shares for each equity share of L Ltd. and 3
equity shares for each equity share of S Ltd. The shares are to be issued
@ ` 35 each, having a face value of ` 10 per share.
(iv) Investment allowance reserve is to be maintained for two more years.
Prepare the balance sheet of M Ltd. as on 1st April, 2014 after the amalgamation
has been carried out if amalgamation is in the nature of purchase.
Ans.
Computation of Purchase consideration (Payment Net Method)
(` in lakhs)
L Ltd. S Ltd.
(
1
)
P
r
e
f
e
r
e
n
c
e
S
h
a
r
e
h
o
l
d
e
r
s
:
6
,
4
0
,
0
0
0
s
h
a
r
e
s
@
1
2
5
e
a
c
h
8
0
0
.
0
0
`
0 5
. 0 0 0 0 0 0 0 0 0 0 0 0 0 5 8
5
. 2 6 0 8 2 0 0 0 0 0 0 0 0 0 0 .
9
9 . . . . . . . . . . . .
(` in lakhs)
7 2 , 5 9 5 0 0 0 0 0 8 0 2 0 1
, 3
S Ltd.
lakhs)
3 5 1 0 3 8 8 1 4 5 6 8 0 7 1 2 8
(` in
4 ,
1 1 8 1 4 6 5 2 1 1 2 2 6 3
,
2 ,
3 ,
6 ,
2 ,
1 ,
1 ,
1 ,
6
0 0
0
. 0
. 0 0 8
. 5 0
Note
0 0 1 2 3 4 5 6 7 0 0 4 3 0
No.
. . .
(` in lakhs)
0
L Ltd.
8 8 5 0 4 , 0
3
, 1
, 1 9 6 3 6
2 3 1 9 1
l
a l
a 1
t
o t
o
h h T T
c c
a a
e e
Balance Sheet of M Ltd.
5 5
3 3 h
As on 1st April, 2014
) ) c
N 0 2 a )
`
`
O @ @ 0 0 e 0
I 1 5 0 6
s s
T + h 0
Amalgamation in the nature of Purchase:
e e + +
A
M
r
a r
a 0 0 c 1 0
h h 5 7 a 0
A e f
`
s s 1 7 1
G
L y y (
s ( 0 o (
t
i t
i t s
t s 1 s e
A
u u n e ) t e
r v
M q q e s 8 n f a r
s
`
A h e e u m s 3 e
l o h e
s
c l a 5 a s e
a 0 0 p t
s t s v s R
e 0 0 r e n + e i e e )
5 0 0 u v e 0 l u r
a c 1 e
2 ,
0 ,
0 S s s s n r 5 b q h n c
g N
(2) Non-Current Liabilities
:
1 s 0 5 l e t I r 6 a e S e
r m n
r , , a d n
i l
b e t u ( v
i h e W a
8 3 s s c
(1) Shareholder’s Funds
e 6 4 t
i n w a t s n - s e s y f ( u w
i
Reserves and surplus
a
`
@ d p y e a e n e c a t e
(1) Non-current assets
o i e o
Current Liabilities
l = = a s r a s e r o i
r e C u r v m l
o s r P
I. Equity and Liabilities
s C e r p a l u n o R q r e l
A
e h )
0 )
0 v o b t & E % e r
r e e r e i c r n e P
Current assets
a r 0 0 r e b d d g - e d h 5 s
e t
n
e 0
Notes to Accounts
h a 0 0 a s a e n n h a s 1 s
Share Capital
s h ,
0 ,
0 h e m r x
i a o t v r a 0 R e e
S S R r T F T N O n T C 0
, 0 l i
t m
0 0
, 5
, e I 0 0 a i
r t
0 y 7 4 ) ) t
- ) ) ) ) ) ) ) 5 0
, t
i u s
0
, t
i 1 1 g 1 0 p c e
0 u x x ( ( n ( ( ( ( ( ( ( ,
1 9 a e v
a
b
b
c
a
b
c
5 q o , n
Particulars
, 4 3 1 9 C S I
3 E L
II. Assets
( (
)
(3)
(2)
3.34
2
1.
2.
(
2 0 0 0 0 0 0 0 8 0 2 0 )
4 6 )
0 6
3.35
. 0 0 0 0 5 2 0 3 4 0 5 4 4
The Summarized Balance Sheets of P Ltd. and Q Ltd. as on 31st March, 2017
Que. 14 : P Ltd. and Q Ltd. agreed to amalgamate their business. The scheme
envisaged a share capital, equal to the combined capital of P Ltd. and Q Ltd.
for the purpose of acquiring the assets, liabilities and undertakings of the two
(` in lakhs)
5 . . . . 5 . 6 .
(` in lakhs)
8 0 0 0 0 6
5 4 1 5 5 5 , . 1 9 1
8
S Ltd.
1 8 4 6 0 2 9 5 ,
1 9
4 5
, 1 2
, 1 4
, ( 4
2 1 ( 2
4 0
2 0 0 0 0 0 0 0 5 — 5
.
.
5 0 3 5 0 0 6 4 8 1
. . .
(` in lakhs)
3 0 3 1 0 0 6 5 4
1 5 7 7
4
, 0
,
1 1
0 0 0 0 0 0 0 )
6 4 )
0 4
2 5 5 5 6 7 0 6 3
. 8 3
.
8
9 6 1 6 6 7 , . 3 1 3
6
L Ltd.
3 6 3 ,
3 5
) 4 3
, ( 1
0 ( 3
6
N +
O 0 6 0 0
6 5 3
(the date of amalgamation) are given below:
I 0
companies in exchange for share in PQ Ltd.
T 1 .
6 3
A ( 8
M t
n
A u
G o
L c
A c
M A
A t
n
e
m
t
Other Non-Current assets
s n
u
j : o
i
Long Term Borrowings
y
r d r t
e A e a
s g n s v r
e t n
i i n e o e
r i
s d h o l y n r d
i
u
t o l
i c i b r e e s
p u a t a e k v n
Trade payables
n a
Tangible assets
e M v :
r g n s a o o
e B m i
e e n i e t n c s
b i
Working Note 1:
D & & a c v d h l s s
e s s e e
e c . . g e . . o l c b k e r t e k e v
D i d d d t l R d d i
u a a n i u i
s l s r
l
b t t n a t t n s v a t
i t o b a
t a e
% L L n a m e L L e B M t i
e B l
i n p a h s
5 u a l d k d d n y c b e e y s
t c e
1 P L S L P A a L S a n n e r e d a b D a e r R
r t m o r n i e p s u l
T s a a t t e a L c e s P a
t d t s n h : D i
l A : t
i
e n n e e d s s % b d t s p
s
s a a v v a a s
e u a e s
e a
l n n r 3 r N
A L P T C L 1 P T L C
3.
4.
5.
7.
I I
6
A
M
A
L
G
A
M
A
T
I
O
N
3.36
Summarized balance sheets as at 31-3-2017
Liabilities P Ltd. Q Ltd. Assets P Ltd. Q Ltd.
` ` ` `
Equity & Assets:
liabilities:
Shareholders Non-current
Fund Assets:
a. Share Capital 6,00,000 8,40,000 Fixed Assets 7,20,000 10,80,000
(excluding
Goodwill)
b. Reserves 10,20,000 6,00,000 Current Assets
Current a. Inventories 3,60,000 6,60,000
Liabilities
Bank Overdraft - 5,40,000 b. Trade 4,80,000 7,80,000
receivables
Trade payables 2,40,000 5,40,000 c. Cash at Bank 3,00,000 -
18,60,000 25,20,000 18,60,000 25,20,000
The consideration was to be based on the net assets of the companies as shown
in the above Balance Sheets, but subject to an additional payment to P Ltd.
for its goodwill to be calculated as its weighted average of net profits for the
three years ended 31st March, 2017. The weights for this purpose for the
years 2014-15, 2015-16 and 2016-17 were agreed as 1, 2 and 3 respectively.
The profit had been:
2014-15 ` 3,00,000; 2015-16 ` 5,25,000 and 2016-17 ` 6,30,000.
The shares of PQ Ltd. were to be issued to P Ltd. and Q Ltd. at a premium
and in proportion to the agreed net assets value of these companies.
In order to raise working capital, PQ Ltd. proceeded to issue 72,000 shares
of ` 10 each at the same rate of premium as issued for discharging purchase
consideration to P Ltd. and Q. Ltd.
You are required to:
(i) Calculate the number of shares issued to P Ltd. and Q Ltd; and
(ii) Give required journal entries in the books of PQ Ltd.; and
(iii) Prepare the Balance Sheet of PQ Ltd. as per Schedule III after recording
the necessary journal entries.
Ans.
(i) Calculation of number of shares issued to P Ltd. and Q Ltd.:
A
m
o
u
n
t
o
f
S
h
a
r
e
C
a
p
i
t
a
l
a
s
p
e
r
b
a
l
a
n
c
e
s
h
e
e
t
`
P
L
t
d
.
6
,
0
0
,
0
0
0
Q
L
t
d
.
8
,
4
0
,
0
0
0
1
4
,
4
0
,
0
0
0
0 0 0 0 0 0 0 0 0
3.37
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
Amount (`)
,
0 ,
0 ,
0 ,
0 ,
0 ,
0 ,
0 ,
4 ,
6
6
, 4
, 4
, 6
, 4
, 4
, 4
, 6
, 9
,
1 4 2 1 5 5 4 8 2
Cr.
2 1 2 1 1
]
) ]
)
0 0
0 0
0
, 0
, 0 0 0 0 0 0 0 0 0 0 0
0 e 0 e 0 0 0 0 0 0 0 0 0 0 0
4 4 0 0 0 0 0 0 0 0 0 0 0
Amount (`)
,
4 r
a ,
4 r
a ,
0 ,
0 ,
0 ,
0 ,
0 ,
0 ,
0 ,
0 ,
0 ,
0 ,
0
1 h 1 h 0
, 4
, 2
, 6
, 8
, 0
, 8
, 6
, 8
, 6
, 4
,
s s 6 5 7 3 4 3 0 6 7 1 4
Dr.
+ 0 r + r 3 1 2 1
0 0 e 0 0 e
0 0
, p 0 0 p
0 6 0 0
,
, 9
, 5 , 4 5
0 2 1 0 6 1
6 6 , . . r
. r . r
. r . . r .
. r . .
In the books of PQ Ltd.
,
1 1 ,
1 8 r r r r r
5 f
5 f
`
2 s 1 o 2 s D D D D D D D D D D D
( e ( e 1 o
`
N / r = m / r = m
O 0 a 0 0 a 0 r ) ) ) t
`
I 0 h = u 0 h u no r r 0 n
0 0
`
T 0 s 0 0 i 0 s 0 = i of
i e e 1 e
A ,
0 0 , 0 m ,
0 0 , 0 m t . v v m
M 6 0 4 4 e 4 0 6 0 e a
r d o o
6 7 x e
`
A ,
1 4
, , ,
6 r ,
4 6
, , 6 r e t n n e)
G 2 6 8 8 p 1 7 5 ,
7 p dL e e 0 ) r
L [ 8 a [ 5 5 a i
s k k 0 5 g n
A x r - t x r - t nQ a a 4
, 1 aio
`
/ a a t t 6 t
`
M 0 o 0 0 0 o 0 / od . . 8 ra
`
cn d d e
`
A 0 0 0 0 h 0 0 0 0 h t t t t ( x per
0
, 0 0
, 0
, c 0
, 0 0
, 0 c n n ea t L t L t
n 0
0 0
, 0 6 a 0 0
, 0 0
, a u u s . n n 0 si
a d
4 4 6 9 e 4 6 4 4 e o o a d u P u Q u 4 s
,
4 6 ,
1 ,
2 0 ,
4 7 ,
4 6 0 c c ht t o f t t o f o ,
6 sn
1 ,
8 2 1 1 1 ,
5 1 ,
8 1 c c cL n c o n n c o t c 8 e
r o t
t a a r u c u u c n c ( a c n
n . . uP t o a s
e t o o a s u a u
d n n e o l m hse o
`
`
u d pf c i c c i
`
`
`
`
`
`
`
`
= = = = @ = = = = @ o t t u c e t u c c e t c a
t u sa c
c L L fo
o o a s
a
i
l
i o a a s
a i
l
i c i
p i fh
o c
c P Q r t c s h b t c t s h b A a m c a
s s a o c e a c f e a . tr .
(ii) Journal Entries
m e e m e e f f tt n a l c
r i n a a l c
r i d c e n u d
r r r r e o o n a) u t s b u l u t s r b u l t e r ep t
u
i a a u
i a a s r r ud r o n e a d o n e d a d L r p mf L
h h . h h a o o oie c u l y p n c u l r y p n a s
.
d m s s d m s s h t t mqu v c o b a s a c o b e a s a P h e to
o Q
t e r 0 t e r 0 c a a io a c a p s a c a v p s f s i
t l e f
L r e 0 L r e 0 r d d al n s c v k e s
t s c v o e s
t o y i
r l g o
p p 4 p p 6 u i i t a i n e n e t a i k e n e t a r
P s , Q s , p u u e e
o e y e a d i
s s e y e d i
s s r i u ea r
6 7 htk l s c b a s s c n a s o u c o
Particulars
f e m 8 f e m 5 s q
i q
i t a l s r e r u a s r e a r u a t q e hh t
o i
t u o i
t u s L L e t i a o r t T B a o r b T B a E S t c a
i
r i d i
r i d e gbl s w t e a g t e g d gis d
e
r u m e e
r u m e n o o na t d d n h o o n d n o o o n i o o nd i
a u a u i
s T T i e o e e d s T T i e e d T T T i u T T i u
h c e s h c e s u e ys o x v a a e x v a e q e r q
e r s e r s Bas G i n r B i n r B i Bo i
S S P I S S P I B (pa F I T C ( F I T ( L (f L
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
`
`
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Amount (`)
, , , , , , , , , , , , , , , ,
(iii) Balance Sheet of PQ Ltd. on 31st March, 2017 after amalgamation
6 4 0 0 0 0 0 0 0 0 0 0 0 0 0 0
7
, 6
, 2
, 8
, 6
, 4
, 8
, 8
, 0
, 4
, 2
, 6
, 6
, 8
, 6
, 4
,
5 8 7 0 1 2 7 1 8 5 0 2 5 1 1 2
Cr.
1 2 3 6 1 1 1 1 6 2 3
0
0
Notes
0 1 2 4 3
Amount (`)
,
0
0
,
8
Dr.
1
h
s
a
c
-
N n )
o n
O ) t g l n o
I
T 0 n n )
0 a r i
A 1 e i ) 0 t o t
a
m k )
0 0 0 i
p f
M
x e r 0 , a d m
`
A e) o 0 0
, 0 c e a
G 0 ) r w 0
, 0 ) 8 u g
L 0 5 g n 0 8 0 ,
7 e s l
A 6
, 1 aio e 4 ,
0 0 r s a
7 t s ,
5 1 0 + a h i m
M 5 ra
e i
a ) ,
0 h c s a
0 s a
`
A ( x per t r + + l
l 6 0 s e e f
t 0 n i , 0 t p r
a o
n 0 sid u o 0 0 w 6 , n u 0
u 6 a s o t 0 0 d + 0 e
l 1 h e
o , sn c s 0
, 0 o 8 a d s m )
s
c 7 e o c d u 0 ,
0 o 0 ,
4 v i
a 0 e
Equity and Liabilities
c 5 r e l i f e
`
( a c a p 4 2 g 0 ( u p 0 h r
Shareholders’ funds
a l u r ,
2 ,
7 ( 0 s o 0 a
hse s , q d , c
Non-current assets
l
a m sa a m s u ( ( s 0 e e s 4 s h
t
Current liabilities
t u i u i S s s t
e 6 l
b n e 4 s
i i fh p i e t , h a r , r 0
2. Reserves and Surplus
p m o c a m l
a l d l e s
s 3 a s d a 1 e m 0
(
Current assets
a tr c t a
t n b s s a v
i a e h e d u 0
c e
r n u e
r i i a a t s s e c b s v n i ,
e ep e p p y e a e e c y o u m 6
Notes to accounts
i i
Particulars
r p mf r p a a s a s
s e l
b r e d r t b e 1
a s a s c c e p a l i o r n c i a n r ,
2
h e to h e v b g t a s u o
1. Share Capital
s i o s i e e r e l d i n n e l b q e i
t p r
t l e t r e d g d h
Assets
y i
r l
a g y i
r r a s a e n a e s a u E h a s o
f
t r t
i a h e a t
o x t v a a t
o s 0 t r e
i
i u ea u u h r i a n n r , f e t 5
u c c c s S R T T F T I I T C T d 0 d i
Particulars
q e hh / q e 0 o i r 1
E S t c A E S y)l e , t s u
gis t a u 6 u n c
`
o o nd k o o i
u t s
s 1
, O o e @
b
a
c
T T i
e n T T qpi I 2 ( c S (
r a
3.38
Bo B Ea
(f (c
2
A
M
A
L
G
A
M
A
T
I
O
N
3.39
`
3. Cash and cash equivalents
C
a
s
h
a
t
B
a
n
k
[
3
l
a
c
+
(
7
2
,
0
0
0
s
h
a
r
e
s
×
2
5
)
-
5
.
4
l
a
c
]
1
5
,
6
0
,
0
0
0
4. Intangible Assets
G
o
o
d
w
i
l
l
5
,
4
0
,
0
0
0
Working Notes:
1. Calculation of goodwill of P Ltd.
Particulars Amount Weight Weighted
amount
` `
2
0
1
4
-
1
5
3
,
0
0
,
0
0
0
1 2 3 6
3
,
0
0
,
0
0
0
2
0
1
5
-
1
6
5
,
2
5
,
0
0
0
1
0
,
5
0
,
0
0
0
2
0
1
6
-
1
7
6
,
3
0
,
0
0
0
1
8
,
9
0
,
0
0
0
T
o
t
a
l
(
a
+
b
+
c
)
1
4
,
5
5
,
0
0
0
3
2
,
4
0
,
0
0
0
W
e
i
g
h
t
e
d
A
v
e
r
a
g
e
=
[
3
2
,
4
0
,
0
0
0
/
6
]
`
G
o
o
d
w
i
l
l
5
,
4
0
,
0
0
0
2. Computation of purchase Consideration
P Ltd. ` Q Ltd. `
A
s
s
e
t
s
G
o
o
d
w
i
l
l
5
,
4
0
,
0
0
0
F
i
x
e
d
a
s
s
e
t
s
7
,
2
0
,
0
0
0
1
0
,
8
0
,
0
0
0
I
n
v
e
n
t
o
r
y
3
,
6
0
,
0
0
0
6
,
6
0
,
0
0
0
T
r
a
d
e
r
e
c
e
i
v
a
b
l
e
4
,
8
0
,
0
0
0
7
,
8
0
,
0
0
0
C
a
s
h
a
t
b
a
n
k
3
,
0
0
,
0
0
0
L
e
s
s
:
L
i
a
b
i
l
i
t
i
e
s
B
a
n
k
o
v
e
r
d
r
a
f
t
5
,
4
0
,
0
0
0
T
r
a
d
e
p
a
y
a
b
l
e
s
2
,
4
0
,
0
0
0
5
,
4
0
,
0
0
0
P
u
r
c
h
a
s
e
c
o
n
s
i
d
e
r
a
t
i
o
n
2
1
,
6
0
,
0
0
0
1
4
,
4
0
,
0
0
0
Que. 15 : The financial position of two companies A Ltd. and B Ltd. as on
31st March, 2017 was as under:
Assets A Ltd. (` ) B Ltd.(` )
Goodwill 1,40,000 70,000
Building 8,40,000 2,80,000
Machinery 14,00,000 4,20,000
Inventory 7,00,000 4,90,000
Trade receivables 5,60,000 2,80,000
Cash at Bank 1,40,000 56,000
37,80,000 15,96,000
A
M
A
L
G
A
M
A
T
I
O
N
3.40
Liabilities A Ltd. (` ) B Ltd.(` )
Share Capital:
Equity Shares of ` 10 each 28,00,000 8,40,000
8% Preference Shares of ` 100 each 2,80,000 -
10% Preference Shares of ` 100 each - 2,80,000
General Reserve 1,96,000 1,96,000
Retirement Gratuity fund 1,40,000 56,000
Trade payables 3,64,000 2,24,000
37,80,000 15,96,000
B Ltd. is absorbed by A Ltd. on the following terms:
(a) 10% Preference Shareholders are to be paid at 10% premium by issue
of 8% Preference Shares of A Ltd.
(b) Goodwill of B Ltd. is valued at ` 1,40,000, Buildings are valued at
` 4,20,000 and the Machinery at ` 4,48,000.
(c) Inventory to be taken over at 10% less value and Provision for Doubtful
Debts to be created @ 7.5%.
(d) Equity Shareholders of B Ltd. will be issued Equity Shares of A Ltd.
@ 5% premium.
You are required to:
(a) Prepare necessary Ledger Accounts to close the books of B Ltd.
(b) Show the acquisition entries in the books of A Ltd.
(c) Also draft the Balance Sheet after absorption as at 31st March, 2017.
Ans. (a) In the Books of B Ltd.
Realisation Account
` `
T
o
S
u
n
d
r
y
A
s
s
e
t
s
1
5
,
9
6
,
0
0
0
BF
yu
Rn
e
t
i
r
e
m
e
n
t
G
r
a
t
u
i
t
y
5
6
,
0
0
0
d
TSR
ohe
Pa
r
e
f
e
r
ed
ne
csn
e()
2
8
,
0
0
0
B
y
T
r
a
d
e
p
a
y
a
b
l
e
s
2
,
2
4
,
0
0
0
r
ee
hm
lp
o
r
P
r
e
m
i
u
m
o
n
d
t
i
o
T(
oP
Eo
q fi
u
io
t
yn
SR
he
a
r
ei
ha
o
l
do
e
r
s
1
,
4
0
,
0
0
0
B(
yP
Ar
Lh
t
d
.s
1
4
,
8
4
,
0
0
0
r
t
a
l
s
t
i
n
)
u
c
a
e
C
o
n
s
i
d
e
r
a
t
i
o
n
)
1
7
,
6
4
,
0
0
0
1
7
,
6
4
,
0
0
0
Equity Shareholders Account
` `
T
o
E
q
u
i
t
y
S
h
a
r
e
s
o
f
A
L
t
d
.
1
1
,
7
6
,
0
0
0
B
y
S
h
a
r
e
C
a
p
i
t
a
l
8
,
4
0
,
0
0
0
B
y
G
e
n
e
r
a
l
R
e
s
e
r
v
e
1
,
9
6
,
0
0
0
B
y
R
e
a
l
i
s
a
t
i
o
n
A
c
c
o
u
n
t
1
,
4
0
,
0
0
0
(
P
r
o
fi
t
o
n
R
e
a
l
i
s
a
t
i
o
n
)
1
1
,
7
6
,
0
0
0
1
1
,
7
6
,
0
0
0
0 0 0 0 0 0 0 0
3.41
0 0 0 0 0 0 0 0
`
Cr.
`
0 0 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
0 0 0 0 0 4 6 4 1 4 8 0 6
0 0 0 0 0
, 0
, 8
, 5 2
, 2 8
, 0
, 2
, 5
0
, 0 0
, 0
, 6 4 4 2 4 3 1
0 0
, 8 8 7
, 8
, 1 1 1
8
, 8 0
, 0
, 1 4
2 2 3 3 1 1
f
o 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0
Dr.
`
n s 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
t o
i e 4 0 0 8 1 0 6 4
n t r
a 8 4 2 4 4 8 5 8
e u p ,
4 ,
1 ,
4 ,
4 ,
4 ,
2 ,
4
r o m) h 1 1
a c ees S
h c dr e s
Preference Shareholders Account
S A ea c e
r
e n Rh n a
c o e
r h
nS
(b) In the Books of A Ltd.
n i
t oe e S . . r
. r
. r
. r
. r
. .
e a f r r r
r s mnc e
r y
t D D D D D D D D
e
f i
l ue P i
N e l
a a i r u Journal Entries
A Ltd. Account
O r t e me % q
I
T Ppi R eef 8 E
A ya y r r y y r
e
M BC B PP
( B B t p
n s
A t u s
a a
G n o
`
L u c r c d
A 0 0 o c e / e
M 0 0 0 0 )
r c A v A fi
0 0 0
, 0
, t e c s o s
i
A 0
, 0
, 4 4 n v A t n l t
8 8 8 8 u o b e a
t a
0 0 ,
4 ,
4 o d e k i s
,
3 ,
3 1 1 c n n t D a p c c n
c e u n c t a / / o
A k F u l
u / s C A i
t
f . a t o f e e l A a
o d t n y c t A i r a r
s t . u t
i c b e t
i c a t
i m e
e t L d
t u u s l
i / h p u d
r n c L o t A o a b A a i i
a u / B c a s h a . S m s
h A f B c r e D c i d e C e n
S o o t
n t A G l r r L t c e r o
c e
s s f t t n s b o u .
) L n r P C
e c a r o n n u u e t
n a f P dn e a
c A h o s u o o l e y no B r h s e
s
n t s o u c b t a n s ai f e S e a
e n c a e c o c c a n m p o s sat o f i
t
r o r d n c c A c v u e i
s e t e y i h
e i
t u i i c A i r e i n e u s r t r c
f a P u s A A y e o i d v i
s s l r P i
u u r
e
r s s q u l r y c c t
e a o u s a o c u
i
l s i b l
i g e r e c r r Av t
a % q e P.
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t r A R T P B d 8 E S )
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h n e ge d
i ge
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l c e d k o o o o ne u o o o nv
s T i
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e r T T T i
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v
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i Bb
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0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
`
`
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
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8 2 6 8 1 5 8 0 1 0 6 5 0 8 8 6 6 2 0 8 8
0
, 5
, 9
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, 2 6
, 0
, 8
, 4
. 4
, 9
, 6
, 2
, 8
, 0
, 5 9
, 5
, 6
, 4
, 0
,
5 2 1 5 5 1 2 1 8 1 5 9 5 5 1 2 2 8 1
(c) Balance Sheet of A Ltd. (after absorption) as at 31st March, 2017
4 5 3 1 5 3 4 1 1 3
0 e
0 c
Notes
0
, n
1 2 3 2 ) e
r
1sh e
,
1 a f
e
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oo 0h)
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u n o s
Non-current liabilities
n v d
Equity and Liabilities
l o o i fe sn
`
p i u e
Shareholders’ funds
r i
s s s o u l
a r o
q c
Non-current assets
u i i
v s e e sss t a
Current liabilities
S v s o s t
e l
b e i
p hn
o e r t s h l r i Si
r l a a
2. Reserves and Surplus
l d p e s s a a e eed m
Current assets
a
t n p b s s a v
i a t her c cu u
i a a m t s s e c i
p Sw e i
p m y e a e e
i c a r ns e
s a r s l d ys es m v
Notes to accounts
a e r
e P e s e
l b r e n c t a r e r
c t a i o r i h e i e
3. Tangible assets
e v
r t
- e b g t e a e u e s f e r s
t i n r P
1. Share Capital
r e g d r l d g n d h r qa e e r e
Assets
a s n a o a
t e n a e a s a Eh c r e s R y
r
h e o r h o x a t v r a h n Pw e s e
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t l
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q 9q
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E 3E P 5S T S G T B M T
3.42
2
A
M
A
L
G
A
M
A
T
I
O
N
3.43
Working Notes:
Computation of Purchase Consideration: `
G
o
o
d
w
i
l
l
1
,
4
0
,
0
0
0
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u
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Que. 16 : Following is the Balance Sheet of Y Ltd., as at 31st March, 2010:
Liabilities ` Assets `
Share Capital: Fixed Assets:
Issued & paid up: Goodwill 8,00,000
2,50,000 Equity shares of 20,00,000 Building 7,00,000
` 10 each, ` 8 per share
paid up
1,00,000 (10%) Preference 10,00,000 Plant and machinery 13,00,000
shares of ` 10 each fully
paid up
Reserves & Surplus: Current Assets:
General reserve 6,00,000 Stock 7,00,000
Profit & Loss A/c 8,00,000 Sundry debtors 9,00,000
Current Liabilities: Bank balance 6,60,000
Creditors 4,00,000 Miscellaneous expenditure
Workmen’s profit sharing 3,00,000 Preliminary expense 40,000
fund
51,00,000 51,00,000
X Ltd. decided to absorb the business of Y Ltd., at the respective book value
of assets and trade liabilities except building which was valued at ` 12,00,000
and plant & machinery at ` 1,00,000.
0 0 0 s
i
the books of Y Ltd., and opening journal entries in the books of X Ltd.
0 0 0
Calculate the purchase consideration, show the necessary ledger accounts in
(i) Payment of liquidation expenses ` 5,000 and workmen’s profit sharing
preference share and every equity share of Y Ltd., and a payment of
(ii) Issue of equity share of ` 10 each fully paid at ` 11 per share for every
t
(Nov 2010) (16 Marks)
` in lakhs
`
0
, 0
, 0
, i 0 0 0 0 0
5
3
0
5
5
8 e
s
0
0
0
0
0
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,
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t
o
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d
0 0 0 0 0 C
` in lakhs
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0 , , , , P L
,
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3
, 0
, 0
, 5
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The purchase consideration was payable as follows:
a o h
t
i .
d s
s
a d t y
e L k t
i
N t r n u
O i C X a q
I r y y B E
X Ltd. A/c
T e B B
(ii) In the books of Y Ltd. Realisation A/c
A d y y
M i B B
A s 0 0 0 0 0 0 0 0 0 0 0
) n 0 0 0 0 0 0 0 0 0 0 0
`
(i) Computation of purchase consideration
G 4 o 0 0 0 0 0 0 0 ,
0 0 0 0
, , , , , , , , , ,
`
L x )
1 c 0 0 0 0 0 0 0 0 5 0 5 0 0
A
0 1 0 0 0 0 0 6 3 ,
1 9 8 0 0
M o , , , , , , , ,
` 4 per equity share in cash.
0 x ) t 8 7 3 7 9 6 3 5 0
, 0
,
A 0 1 1 5 5 5
,
0 0 1 y
l 8 8
5 0 t ,
1 ,
1
d2, 0
, x i
c 5 5
fund at 10% premium;
n( o 0 0 i
l
us t 0
, 0 p g s
fer 1 0 x n
i r
gd s ( ,
0 r e
nl
e
r s 5 e a d
i o a r
e ,
2 n d h l
o
r
a h h d ( o e y s h
s e s l s i
t t r t e
e
s hr y o r a a e fi r )
:
r n sa t h e r t . n s
r o a s c
o e th i e d e s C i
h o r h e /
f p fis u r l d sP. c t p s s A
t x oy q a o i
s a a b s n
n rt E h h n f e ’ e e n
e e pi
y s e o ho l m d n c p o
i
n squ e r c nt l
i g e n x t
m o ’
n b c a w n & y m e E a
y i
t ee t n h e or
i d i
d t k r k r
e ( t s
i
a a o n e s s
a t a o l n c d
n
k
n r f k
n fi l
a
p d mt e r y h s p o i
u a o u a o e a o e
h i
u kh m e t
i c e a G B l
P t
S S B Wd r
P B r
P R
s q
rs
oa y f
e u r ut n
a q u Qo
Ans.
o o o o o o ou o o o o
3.44
i WC a r
C L P P E P *n T T T T T T Tf T T T T
0 0 0
3.45
0 0 0
`
Cr. (` )
0 0 0 0 0 0 0 0 0
, 0
, 0
,
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 5
0
, 0
, 0
, 0
, 0
, 0 0
, 0
, 0 0 0 0
, 0
, 5
, 0 0 0 8
,
5 0 5 5 0 0
, 0 0 0
, 0
, 0
, 0 1 8 0
, 0 0
, 1
3
, 5
, 8
, 3
, 0
, 0 0
, 0
, 0 0 0 9
, 1 3 0 0
, 0 5
3 8 1 3 0 0
, 1 0 0
, 0
, 9
, 7 0
, 0 3
,
1 3 5 1 1 1 1 2 6 8 3 3 3 3 3
s
r 0 0
0 0
Dr. (` )
)
s e 0 0
e .
l d
l )
. ,
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0
s s
r a l
a n o s
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n e s B t o h e i
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e t d e ( i
p i
c t e d 1 2
p fi l r c a e / a r l .
l 5 1
Workmen’s Profit Sharing Fund A/c
x o o a / c v A i
z a o a
E r h h r l
s a h h B
( p e s A e e s s e d (
n s r n r s o e r / n
Preference Shareholders A/c
’ a e a e e a
L r
Equity shares in X Ltd. A/c
o
i n d h c o
i h r c h b o
i .
r .
r
Equity Shareholders A/c
t
a
en
mu
s
y
n
e t
a s l
a & n
o
n
e s e
c
t
a D D
s r s y r t fi
t. r y s
i
l kf t
i e
f i
l t
i e fi ) e
f
t
i n
a i
l
N a rg u l a u n g
o o fi u l a
Journal Entries
O e on q e
r a e q e r r. e
r q a e
I R Wri E Ppt
i R) E G P Pl P E B R
T a a
Bank A/c
A y yh y ya yg. y y y yB y y y y
M B Bs B Bc B fi B B B B( B B B B
A 0 0 )
.
G 0 0 d
`
`
L 0 0 0 0 0 0 0 0 0 t
A 0 0 0 0 0 0 0 , , 0 0 L
M 0 0 Y
0
, 0
, 0
, 0
, 0 0
, 0
, 0
, 5
, 5
, 0 0
A 5 5 0 0 0 0 0 0 8 8 0
, 0
, f
3
, 3
, 0
, 0
, 0
, 0
, 5
, 9
, 3 3 0 0 o
3 3 1 1 0 0 7 7 3
, 3
, d
1 1 1 1 4 1 2 3 3 3 . e
d s
a
c
(iii) In the books of X Ltd.
. / t h
d .
d A L c
t s t Y r
L e L e u
X s s f
o p
n Y a s
n e n h s s
i p i c
r r e
s x s u o n c
e e e t
a i
s /
r y r p d u A
a r a s i b g
h a h s
e u n
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i s n q g i
. y y . i i
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l
d t m k t d k s i
e i
t i
u i
l n i
u t n u o B u
L q e a q L a B T ( B
X r B X B
E P E
o o o o o o o
T T T T T T T 1 2
A
M
A
L
G
A
M
A
T
I
O
N
3.46
Dr. (` ) Cr. (` )
P
l
a
n
t
&
m
a
c
h
i
n
e
r
y
A
/
c
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. r
r
1
0
,
0
0
,
0
0
0
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t
o
c
k
A
/
c
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7
,
0
0
,
0
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e
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s
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9
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o
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s
h
a
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c
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p
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l
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5
,
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0
,
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0
0
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o
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e
c
u
r
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t
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s
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e
m
i
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m
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,
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0
,
0
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(
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e
i
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g
d
i
s
c
h
a
r
g
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f
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t
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n
)
Que. 17 : Given below balance sheet of Vasudha Ltd. Vaishali Ltd. as at 31st
March, 2012.
(Amount in ` )
Liabilities Vasudha Vaishali Assets Vasudha Vaishali
Ltd. Ltd. Ltd. Ltd.
Issued Share Capital: Factory Building 2,10,000 1,60,000
Equity Shares of ` 10 5,40,000 4,03,300 Debtors 2,86,900 1,72,900
each
General Reserves 1,01,000 65,000 Stock 91,500 82,500
Profit & Loss A/c 66,000 43,500 Goodwill 50,000 35,000
Sundry Creditors 44,400 58,200 Cash at Bank 98,000 1,09,590
Preliminary Expenses 15,000 10,010
Total 7,51,400 5,70,000 Total 7,51,400 5,70,000
Goodwill of the Companies Vasudha Ltd. and Vaishali Ltd. is to be valued
at ` 75,000 and ` 50,000 respectively. Factory Building of Vasudha Ltd. is
worth ` 1,95,000 and of Vaishali Ltd. ` 1,75,000. Stock of Vaishali Ltd. has
been shown at 10% above of its cost.
It is decided that Vasudha Ltd. will absorb Vaishali Ltd. without liquidating
later, by taking over its entire business by issue of shares at the Intrinsic Value
You are required to draft the balance sheet of the two companies after putting
through the scheme. (May 2012) (16 Marks)
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ) 0 0 3 o
=0 0 3 1 t
3.47
0 9 0 9 0 0 0 0 9 9 0 0 0 9 9 9
Amount
Vaishali Ltd.
3 9 6 8 0 0 8 5 5 8 0 ` 0 9 )0 5 4 0 2 3 h
,
3 ,
2 ,
2 ,
8 ,
0 ,
5 ,
9 ,
6 ,
7 ,
8 ,
0 ,
5 ,
2 %, , , 2
, , , c
05 9 2 4 0
`
4 7 0 1 0 8 5 6 0 1 5 7 7 17 0 8 8 2 4 a
,
9 ,
2 ,
1 ,
3 ,
1 ,
3 ,
4 ,
1 ,
2 ,
3 ,
1 ,
1 1 ,
1 ,
5 5
( ,
5 e
1 1 / 3
0 1
0
5
,
) 2
`
0 0 0 0 8 @
9 0 0
`
9 0 0 0 (
,
0 ,
1 ,
6 0
, h
2 0 6 5 c
,
1 ,
1 1
( a
1. Computation of shares issued on the basis of intrinsic values
e
0 3 0
Balance Sheet of Vasudha Ltd. as on 31st March, 2012
0 0 0 0 0 0 ) 0
0 0 0 0 0 0 0 0 0 1 1
Vasudha Ltd.
`
0 0 9 5 0 4 0 0 0
, , , , , , 4 , ,
`
5 5 6 1 8 6 , 2 4 f
`
7 9 8 9 9 4 4 0 5 o
,
1 ,
2 ,
7 4
( ,
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e
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a
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T
A s
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G 3
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i
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)
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s 2 T 0 2 ) 0
e
r ,
8 E , 7
, 0 9 s
r .
d
a 5 S 0 1 0 5 o t
h S 5 ) S 0 ,
9 t L
s s + A + 0 T + ,
5 0 i
u
l m 0 7 , d s a
) p u e . 0 T 0 g 0
, E 0 1 g e e
0
3 r i v p
x 0 N 0 n 5 S 0
9 + + n r r
a h
3 u m r E 4
, 0 i
d 7 S , i C h e d
,
0 s e e
s 4 E ,
0 l ,
1 A 6 0 0 d
l k y s u ud.
R i 8 0 i n r l st
Working Note:
4 & r e y 4 5 u , 5 0 u f a
P R r
a
[ R ( B + T 2 , 0
, b
a d s o v a L
+ s y c n s
r U l
l 0 N ( 1 8 l
l B n t r Vi
l 9 e c
Liabilities
0 e t a / i o i y 0 E s
r ( 9 i y s
r t u s e i ,al
v i
r r A m t C w r 0 R o ( w r o a S s b s e
0 r
e u e i i - d o , t k k d o t k h : a n csh
C 0
, s n L l d N o t 0 R b c n o t b c s s t m i
r ni
S 4 e c e & e e O o c 1
, U e o a o c e o a s e u t
Ans.
E 5 R
e
S G P
r
P
r
C N G
a
F 2 C D t
S B G
a
F D t
S C
e
L N N n ea
( ( I HV
A
M
A
L
G
A
M
A
T
I
O
N
3.48
Discharge of Purchase consideration
Share Capital Securities Premium
` `
4
0
,
3
3
0
S
h
a
r
e
s
@
1
0
e
a
c
h
4
,
0
3
,
3
0
0
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4
0
,
3
3
0
s
h
a
r
e
s
@
3
e
a
c
h
1
,
2
0
,
9
9
0
`
Que. 18 : The summarized Balance Sheet of M/s. A Ltd. and M/s. B Ltd. as
on 31.03.2014 were is as under:
Liabilities A Ltd. B Ltd. Assets A Ltd. B Ltd.
` ` ` `
Share Capital: Freehold 3,00,000 2,40,000
Property
40,000 Equity Plant & 60,000 40,000
Share Machinery
of ` 10 each, 4,00,000 - Motor Vehicle 30,000 20,000
Fully paid
30,000 Equity Trade 2,00,000 80,000
Shares Receivables
of ` 10 each, - 3,00,000 Inventory 2,30,000 1,80,000
Fully paid
General Reserve 2,40,000 - Cash at Bank 80,000 40,000
Profit & Loss 50,000 50,000
Account
Trade Payables 2,10,000 1,30,000
6% Debentures - 1,20,000
9,00,000 6,00,000 9,00,000 6,00,000
M/s. A Ltd. and M/s. B Ltd. carry on business of similar nature and they
agreed to amalgamate. A new Company, M/s. AB Ltd. is formed to take over
the Assets and Liabilities of M/s. A Ltd. and M/s. B Ltd. on the following basis:
Assets and Liabilities are to be taken at Book Value, with the following
exceptions:
(a) Goodwill of M/s. A Ltd. and M/s. B Ltd. is to be valued at ` 1,40,000
and ` 40,000 respectively.
(b) Plant & Machinery of M/s. A Ltd. are to be valued at ` 1,00,000.
(c) The Debentures of M/s. B Ltd. are to be discharged, by the issue of 6%
Debentures of M/s. AB Ltd., at a premium of 5%.
You are required to:
(i) Compute the basis on which shares in M/s. AB Ltd. will be issued to
Shareholders of the existing Companies assuming nominal value of
each share of M/s. AB Ltd. is ` 10.
0 0 0 0 0 0 0 0 )
0 )
0 0 0 0 0 0 0 0 0 0 0
3.49
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
(iii) Pass Journal entries in the Books of M/s. AB Ltd. for acquisition of
(May 2015) (16 Marks)
(ii) Draw up a Balance Sheet of M/s. AB Ltd. as on 1st April, 2014, when
B Ltd.
`
Amount
`
0 0 0 0 0 0 0 0 0 0 0 4 0 0 0 0 0 0 0 0
,
0 ,
0 ,
0 ,
0 ,
0 ,
0 ,
0 ,
0 0
, 0
, ,
4 ,
8 ,
4 ,
6 ,
0 ,
0 ,
0 ,
0 ,
0 ,
0
4 4 4 2 8 8 4 4 6 0 8 3 5 2 4 2 3 8 1 8
,
2 ,
1 ,
6 2
, 3
, ,
3 ,
2 ,
1 ,
3 ,
7 ,
7 ,
1 ,
4 ,
2
1
( 1
( 1 1
0 0 0 0 0 0 0 0 - 0
) 0 0
0 0 0 0 0 0 0 0 0 0
A Ltd.
`
Note No.
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0 0
, 0
,
0 0 0 0 0 0 0 0 ,
0 0 7 1 2 3 4
Balance Sheet AB Ltd. as at 1st April, 2014
4
, 0
, 0
, 3 3
, 0
, 8 8
, 1 7
, 8
1 3 1 2 2 0 , 8
Computation of Purchase consideration
1 2
(
l
a
t
o
T
N
O )
I
T 0 )
0
A 0 0
M 0
, 0
A 0 ) ,
0
G 3
, 0 8
L 1 0
0
, +
EQUITY AND LIABILITIES
A
M/s. A Ltd. and M/s. B Ltd.
. + 0
Amalgamation is completed.
M d 8 0
A t 0 , 0
L 0 1 0
,
) B s 0
, + 0
% A s
e g 0 0
,
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Purchase Consideration:
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, o o o a r r t a r s e b t r e
n s 1 N c e p a l i o r
ASSETS
t
r i e ( n h u t n u b g n t
e h l :
s s e y e e c
- -
g e e c
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e e k b r r n r d n e g a r e d
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w o a r t e a L e e s i ) ) ) ) ) ) ) )
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ii
b
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Ans.
r l M n r % r o
G F P I T C L 6 T N T 1 2 3 1 2
0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0
Amount
`
Amount (`)
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
0 0 4 6 0 0 0 0 0 0 4
2
, 2
, 5
, 2
, 4
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, 5 3
, 8
, 7
, 8
,
1 7 2 1 5 1 7 1 8 3
1 1
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0
`
Note No.
0 0 0 0 0 0 0 0 0
Amount (`)
,
0 ,
0 ,
0 ,
0 ,
0 ,
0 ,
0 ,
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,
0 4 0 4 3 2 4 4 4
,
3 ,
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,
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l
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r
In the books of AB Ltd.
o
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Journal Entries
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c a s ss r s s e h t a o r
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Particulars
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c s s n a )
r
a0 t
i r a on u s r M i a a r r uide
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a h s ah n d . . d . . e . . l l . . c t t
s,
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Particulars
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s T T i
e yse
u
3.50
. . . . B Bas
1 2 3 4 (pa
0 0 0 0 0 0 0 e
u
3.51
0 0 0 0 0 0 0
Que. 19 : Sun and Neptune had been carrying on business independently.
` 5 each. On 31st March, 2018 the respective Summarised Balance Sheets of
authorised share capital of ` 4,00,000 divided into 80,000 equity shares of
They agreed to amalgamate and form a new company Jupiter Ltd. with an
Amount (`)
0 0 0 0 0 0 0 s
s
,
0 ,
0 ,
0 ,
6 ,
4 ,
6 ,
4 i
1
, 7
, 3
, 2
, 8
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2 8 1 1 3 1 2 b
1 %
5
f
o
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 m
Amount (`)
0
, 0
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, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, u
0 0 0 0 0 0 0 0 0 0 0 0 0 0 6 0 4 . i
4
, 0
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L a a n o r s .B
A t t e a e d
M . . b sh
e r t A
d d e u Ls
Sun and Neptune were as follow:
A t t t r c
t L t L d n a s
i t
n B/
n n o t t u hd
u A . u B t n n o sr e sM
o f d o f s u u c yo b /
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c s L c s u c a u t d
a e a e t c l qn f fes
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s t
i f s t
i d . . t
i r
a l
i o a l
i t e
b d d
t p fmn
o e su
s h b s h b L t L a e o
i u e t
y e c a y e s c a s e L c tret l r n
r l r i r l e
r r i B e d A B n a a ue
y e s b u l y e s b u u l r e ege r v t
t n e a d t n e a t d f
o u %.) e e r mad n b
r i
h l y p n r i
h l y n p n t 6d h h a ei l ee
e s b a s a e s b a s a s n fLt t t h th a
p c
a e a k p s p c
a e a k p e
b s e e o f f s o
l tn
s n bD
s s e%
Assumptions:
o l
c v n e t o l
c v n e e t r b eB o o y l
a rco i
r M i i e n e r M i i e n e u e t
i m D6
p h e
c y a d i
s s p h e
c y a d D i
s s t d uf r r u eee
l d B a s l d B a s n so o o hps o %f
Particulars
l
i d n e e r r u a l
i d n e e r r % u a e % s t t q
w l
o a v r o t
a T B w l
o a v r o t
a T 6 B b 6 i s a a E t s
a a N 6o
h r e t
n g h r e t
n g e ger d d g, h
d e t o d h o o n d e t o d h o o o n D o nd i
u i
u o nh c ) )
o e n t a e s T T i
e o e n t a e s T T T i
e T i
e l T i
e cr 1 2
o r a
l o r v
n a B o r a
l o r v
n a B % Bo
q
i q
i Bau ( (
G F P M T I C ( G F P M T I C ( 6 (h L L (ep
A
M
A
L
G
A
M
A
T
I
O
N
3.52
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 (` ) Neptune (` )
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.
(i) 60,000 equity shares of Jupiter Ltd. to Sun and Neptune in the propor-
tion 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
(ii) 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) A Balance sheet of Jupiter Ltd. showing the position immediately after
amalgamation. (May 2018) (16 Marks)
Ans.
(1) Computation of Amount of Debentures and Shares to be issued:
Sun Neptune
` `
(i) Average Net Profit
(
4
,
4
9
,
5
7
6
-
2
,
5
0
0
+
3
,
7
7
,
9
2
4
)
/
3
=
2
,
7
5
,
0
0
0
(
2
,
7
3
,
9
0
0
+
3
,
4
2
,
1
0
0
+
3
,
5
9
,
0
0
0
)
/
3
=
3
,
2
5
,
0
0
0
(ii) Equity Shares Issued
(
)
R
a
t
i
o
o
f
d
i
s
t
r
i
b
u
t
i
o
n
a
5 0 0 0 0 )
0 0 0 0 0 0 0 0 0
(2) Balance Sheet of Jupiter Ltd. As at 31st March 2018 (after amalgamation)
3.53
2 0 0 5 5 0 0 0 0 0 0 0 0
Neptune
`
Neptune
`
3 5 0 7 7 5 5 4 0 0 0 9 9 0
,
2 ,
0 ,
7 ,
7 2
, ,
7 ,
9 ,
0 ,
4 ,
6 ,
3 ,
3 ,
0
6 9 5 4 0 6 2 0 6 1 3 1 0
,
1 ,
3 ,
1 ,
5 8
, ,
3 ,
3 ,
4 ,
7 ,
5 ,
1
1
( 1 1
=
Note
5 0 0 0 0 0 0 0 ) 0 0 0 1 2 3
No
7 0 0 0 0 0 0 0 0 0 0 0
Sun
`
Sun
2 5 5 0 5 0 5 5 0 5 0 0
,
7 ,
2 ,
0 ,
7 ,
0 ,
9 ,
9 0
, ,
2 ,
3 0 ,
6
2 3 6 3 1 9 0 7 1 3 0 9
, , , , 9 , 0
, ,
1 7 2 0 ,
5 4 0 1
= 1 ( 2 =
,
2
=
100
15
e
d
Capital Employed (after revaluation of assets)
N i
v
×
100
0
15
O o 0
I r 4
T p ,
9
×
A 0
M o 0 2
A t 0 :
e
G
,
3 n
L d d 3 u
A e e : t
y u n p
M o s
s u e
A l
p i S N
h h s m e
c c e b
a a i e s s
e e t
i l o s g e
i
5 5 l
i a
t t : u n t
b i e l i i
l
a p s p w i
Debentures Issued
(2) Non-Current Liabilities
f f i a em r b
`
`
o o s L c ro u o a
i
r
(1) Shareholders’ Funds
t uc S l
I. Equity and Liabilities
s s e t n tn l r t
e e s n o
(1) Non-current assets
s o d
(3) Current Liabilities
r t r r t s e ni a
t n b n s
e : n a a e A r n ent i e
r t
b e u h h s
s r r be p a m r e
m n o s s A t u u el a s r u s
s
u u m 0 0 n C t
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r : v v t
-
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( S N ( 2 3 F C L 8 1e h o t i
Particulars
b
c
S R L O F
II. Assets
) ) ) ) l )
( ( ( a
( t (
a
b
a
(iv)
o
(iii)
T
0 0 0 0 0 0 0 0 0 0 0 0 )
0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
`
Total `
9 9 0 0 0 0 0 0 0 0 9 9 0 0 0 0
,
3 ,
3 ,
0 ,
0 ,
4 ,
6 ,
0 ,
6 ,
6 ,
0 ,
3 ,
3 9
, ,
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4
1 1 0 0 6 1 0 1 1 0 1 1 3 8 1 6
,
4 ,
5 ,
4 ,
3 ,
4 ,
3 ,
4 ,
7 ,
1 ,
4 ,
5 3
, ,
7 ,
7
1 1 1 7
(
0 0 0 0 *
0 0 )
0 0 0 0
0 0 0 0 0 5 0 5
Neptune `
5
Note
5 0 5 0 0 4 1 5 3
No
a , , , , 4 , 2
, , , ,
o 2 6 8 0 ,
4 4 0 4 8 4
t 6
, 9
, 5
, 9
, 1 0
, 8 2
, 5
, 3
t 1 1 3 3 ,
1 5 ,
1 3 3
n (
a
u
s
r
u 0 0 0 0 0 0 )
* 0 0 0
p ) 0 0 0 0 0 0 * 5 0 5
Sun `
p h 5
, 0
, 5
, 0
, 5
, 5
, 0 8
, 5
, 3
,
u s
a 7 0 7 0 9 9 5 5 7 8
6
Notes to Accounts
N -
d c 3
, 2
, 5
, 1
, 9
, 0
, , 5
, 5
, 9
O i n 1 2 3 7 2 0 3 4 3
I a i 1 5
,
T p d 5
(
A y e
M l
l v
A u i
e
G f c
L s
a e
A r
M h h d g
A c c e
t n ]
)
a a t i
e n s n
e e o b o d e o ( l
i
b
5 5 l
l i
t d e r t i
t - a
a t a e u e i
l a ) n
e n r u s v i r i
f f e s o b ( ] F
`
s r e s I e ) 0
a
t o o a m d s s n a
i d [ [ 0 5
e i I e L i e ( e 0
Issued and Subscribed
s s y e e
a
Long-term borrowings
s e e s a s s r v k s s v - v)] 4 6
,
s e n r t t n r r , 3
Reserve and Surplus
a r
a r
a r p o e u e a s e n o e ) e 4 5
a r t s t t s e s s ( 1 ,
d
t h h t C a n s C (
b
n h u e s h e e s
t e
s A r e [ e - ,
1 5
e S S s o v s e e R e s r e R l
l R) =
r y y e h r n r s S b s A t u s i ( =
r a u a e l n C a l w l
c
t t v t e y a s a are 0
Share Capital
(2) Current assets
u i
u i
u o i s o t
n h t D t A d e : h t d t 0 5
c b w e L c i
u i e r
r s c i o i u 5 3
q q e r p t r p p
Authorized
r a t R % e x s o g 3 ,
Working Notes:
e E E c d b u q 5 a i u e u a ai ,
3 3
h 0 0 e a l
a e e P E 1 C N F C L P C G CF 4 4
-
t 0 0 h r t r D - 0
Particulars
O 0 0 t t i
p u 0 0
, , l
l n c % ) ) ) ) ) 5 0
) l 0 0 a o a e 5 ( ( ( ( ( 7 ,
C S , 7
d
8 6 c 1
e
a
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3.54
T 1
( 2
( 1 *
3
* *
A
M
A
L
G
A
M
A
T
I
O
N
3.55
Que. 20 : The financial position of two companies A Ltd. and B Ltd. as on
31st March, 2017 was as under:
Assets A Ltd. (` ) B Ltd. (` )
Goodwill 1,40,000 70,000
Building 8,40,000 2,80,000
Machinery 14,00,000 4,20,000
Inventory 7,00,000 4,90,000
Trade receivables 5,60,000 2,80,000
Cash at Bank 1,40,000 56,000
37,80,000 15,96,000
Liabilities A Ltd.(` ) B Ltd.(` )
Share Capital:
Equity Shares of ` 10 each 28,00,000 8,40,000
8% Preference Shares of ` 100 each 2,80,000 -
10% Preference Shares of ` 100 each - 2,80,000
General Reserve 1,96,000 1,96,000
Retirement Gratuity fund 1,40,000 56,000
Trade payables 3,64,000 2,24,000
37,80,000 15,96,000
B Ltd. is absorbed by A Ltd. on the following terms:
(a) 10% Preference Shareholders are to be paid at 10% premium by issue
of 8% Preference Shares of A Ltd.
(b) Goodwill of B Ltd. is valued at ` 1,40,000, Buildings are valued at
` 4,20,000 and the Machinery at ` 4,48,000.
(c) Inventory to be taken over at 10% less value and Provision for Doubtful
Debts to be created @ 7.5%.
(d) Equity Shareholders of B Ltd. will be issued Equity Shares of A Ltd.
@ 5% premium.
You are required to:
(a) Prepare necessary Ledger Accounts to close the books of B Ltd.
(b) Prepare the acquisition entries in the books of A Ltd.
(c) Also prepare the Balance Sheet after absorption as at 31st March, 2017.
Internal Reconstruction of a Company
0 0 0 0
0 0 0 0
`
Cr.
`
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 ,
0 ,
8 ,
8 0 0 0 ,
4
0 0 0
, 0
. 0 0 0 0 8 2 0 0 0 0 8
0 0
, 4 4 0 0 0 , , , 0 , , ,
0 4 8 6 , , , 6 2 3 , 6 4 4
,
6 2 ,
4 ,
7 0 6 0 7
, 8 7
, 8
, 1
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, 9
, 4
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, 1 4
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tn
no 0 0 0
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i
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,
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l d l e c a h nRh e s
b i
s a s A s
i S o S c e
t t l n r
Equity Shareholders Account
n a n i
p e n a e i
tne e a
y o R o e c r h
Preference Share Account
e a C a l i
t n aoc e S
m p C a a R e s n
i f
e e . r s r l mre e y
Realisation Account
r e s d e e i n e a r t .
r . r
r .
i d a t r n l
a o f l eiufe P i
u D D D
N t a
Journal Entries
a h L t e a
A Ltd. Account
O e d r c h e e fi r t Rmr e % q
I
T R n T r A S G R o Ppi eP 8 E
A y u y u y y y y r ya yPr y y
B F B P B B B B P BC B( f
o B B
M ( (
A 0 0
G 0 0 0 0
`
`
L 0 0 0 0 0 0 0 0 0
A 0
, 0 0 0
, 0 0 ,
8 ,
8 0 0 )
M 6 0 0
, 4 0 0 0 0 0 0 t r
A 9
, 0
, 0 6
, ,
6 ,
6 ,
3 ,
3 ,
4 ,
4 n e
5 8 4
, 7 7 7 8 8 u v
1 2 1 1 , , , , o o
1 1 4 4 c n
1 1 1 1 c e
s A k
r ) f . a
(a) In the Books of B Ltd.
(b) In the Books of A Ltd.
e n d o d t
d o t s t .
d
l i
t s L e t L t
o p r ) r n c B L
h e n A a u /
e
r m d
l o f h o A f B
a e o i o S c e o f
s h d h t
a s e c s s o t t
t e e s e c A a r n n
e S R r i r n h o s u u
s e a l
a a e n c t s o o
s c n h e h r o r a e c c
A n o S R S e i u d
i n
i c c
y e f t
a P u s A A
r r m y
t n y
t e
r s s q u l
d e u i o i P i
l s i b l
i g
n f
e i u t u a e L w n
u r m q fi q %d. e n g d i
S P E E 8t R i o n d
l
e o s T i o
Ans. : o o r o r o oL o u e o i
u
3.56
T T P T P T TA T B B G B
( ( (
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
3.57
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Cr.
`
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
6 4 1 4 8 0 6 8 2 6 8 1 5 8 0 1 0 6 5
5 2
, 2 8
, 0
, 2
, 5 0
, 5
, 9
, 8
, 2 6
, 0
, 8
, 4
, 4
, 9
, 6
,
2 4 3 1 5 2 1 5 5 1 2 1 8 1 5
(c) Balance Sheet of A Ltd. (after absorption) as at 31st March, 2017
1 1 4 5 3 1 5
0 0 0 0 0
0 0 0 0 0
Notes
Dr.
`
0 0 0 0 0 1 2 3
,
8 ,
1 ,
0 ,
6 ,
4
4
, 4
, 8
, 5 8
,
4 4 2 4
1
. r
r . r
. r
. .
r
N D D D D D .
)
O e
I v
T r o
A e b
M t
n p a
A t u s s
a
G n o a
L u c r c d
A o c e / e
M c A v A fi
c s o s
i
A A t n l t s
t
b e a
t a n
d e k i s e
n t D a p c c n s l
u n c t a / / o u s n a
l
Non-current liabilities
C A i n v
Equity and Liabilities
F u u / s A t l
p o o i
e l a i u
Shareholders’ funds
t
n y o f
t A i e a r r i
s s s
r q
Non-current assets
u t
i c b e t
i c a t m e u i i
v s e e
c i
Current liabilities
o u u s l
i / h p u d S v s o s t
e l
b
t A o a b A S a i i o e r t s a h
c a s h a . m s l d r l p e s s
Current assets
c r e D c i d e C e n a
t n p b s s a v
i a
t
n t A G l r r L t c e r o i a a m t s s e c
n s b o u .
) L n r P C p m y e
s a e e
i c
u u e t a f P dn e a a s r a r s e l
b r e d
o l n y no B r h s e c e e P e
t a l i o r n
c o b t e a n s ai f e S e s
a e v t
- e b g t e a
c c a n m p o s sat o f i
t r r
e g t
r l d i
g n n h l
c i h d d
Assets
A v u e e s e t e y i
r c a s n a o a
t e n a e a s a
t
y A i
e o r d i
v n
i e u
l s
r r t
i u r h e o r h o x a t v r a o
r y c c i
t s s
s a o P u c u S R L T S T i
F T n n T C T
a o I I
Particulars
e r e c e r r u Av t % q e P
n o
t r A R T P B d a 8 E S
i
h n e ge d
i g A B A A B A A B C
c e d k o o o o ne u o o o n
a v a n T T T T i
e r q T T T i
e
n r a Bg i B
M I T B (a L (
1.
2.
3.
1.
2.
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 )
0 )
0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
`
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
,
0 ,
8 ,
8 ,
6 ,
6 ,
2 ,
0 ,
8 ,
8 ,
0 ,
0 ,
8 ,
1 ,
9 ,
6 0
, 0
, ,
4 ,
0 ,
8 ,
8 ,
6 ,
4
2 8 0 5 9 5 6 4 0 4 2 4 4 5 5 6 4 8 8 2 0 7 8
,
9 ,
5 ,
5 ,
1 ,
2 ,
2 ,
8 ,
1 ,
1 ,
4 ,
4 ,
4 ,
2 5
( 2
, ,
4 ,
2 ,
3 ,
1 ,
4
3 4 1 1 3 2
( 1 1 1
y
t e
i c
u n
q e
r
E e
0 f
e
0 r .
0 P d
Computation of: Purchase Consideration:
,
2 t
1 0 L
, 8 A
1 0
,
e) 3 ) f
o
vh esh f
os va s o
ba oc e
r e
ac br a u
N
fr
o ao s
h s
o ff S i
O tf
u o
I
T n tan e y m
A Oa u c b u
(h h n i
M dt
i
Ot
(r e d m
r e
A a r
e e e
fir
G ph he f s
L yt ch e i
t P
A l o at r a
M l
u eo P s %
fon 0n 5
% e t
Discharge of purchase consideration
A 0io .
hti 1t d 8 b a
ca a t o d
f t .
ar r L o
ee fe t
. L
`
0d o B . d
o
1si d
i f t
ss o N L A
n e
r n 0 f
fo l o s 8 B o
`
o c a a n r
t hc y e f
0 o s
2. Reserves and Surplus
sn i Sin t
i o
i d ,
3 e
l e
r i p u t l r
s a
a a d a ed m t a
r o f r
o
c ce h e h
Notes to accounts:
t
i he nu u s a
r s e m
p Ssu e i e e e d e u e d S
r es G l r u l y
3. Tangible assets
l : i i
a ys a r s m v b s b s a m s o t
1. Share Capital
c t i h e i e r y a e
i t
n a n h s h i
e i
u e s f
e e r e
s s r v k t y o S e i e u
r r r r P e g e i n i
l e a C r r
y a q
a qe e Pe s n n y e a i m p e P b h
h Ew c e R i i l r y c B b e e c E
s 0s n
e %w i
t l
a d
l
h
c
l
i g
n
e
n
r
o e
r t a
i r
i
e
d s
a
n
e
%
0 d S 0
e
y 0e r 8es i
r r i a l w i i t e a L t a h r 1 0
fiy 0
t
i 0r
, e 0r l u e l u d d h n d h : e r c e : t
i
s u , l
u 2 a f 8a a
t c n a
t B a
M t o l
i c e a s s
s R T r f d i
t 2 a
t
q 9h e 8h o e e o o o u a v a e u e d a 1
q , o
3.58
, r , G G B M n r r
E 3 S P 5 S T S T T I T C L P P A S E 1 T
A
M
A
L
G
A
M
A
T
I
O
N
3.59
Que. 21 : P Ltd. and Q Ltd. decided to amalgamate as on 01.04.2016. Their
summarized Balance Sheets as on 31.03.2016 were as follows:
(` in ’000)
Particulars P Ltd. Q Ltd.
Source of Funds:
Equity share capital (` 10 each) 300 280
9% preference share Capital (` 100 each) 60 40
Investment allowance Reserve 70 60
Profit and Loss Account 8 12
10% Debentures 100 60
Trade Payables 50 30
Tax provision 14 8
Total 602 490
Application of Funds:
Building 120 100
Plant and Machinery 160 140
Investments 80 50
Trade receivables 90 70
Inventories 72 80
Cash and Bank 80 50
Total 602 490
From the following information, you are required to prepare the Balance Sheet
as on 01.04.2016 of a new company, R Ltd., which was formed to takeover
the business of both the companies and took over all the assets and liabilities:
(i) 50% Debenture are to be converted into Equity Shares of the New
Company.
(ii) Investments are non-current in nature.
(iii) Fixed Assets of P Ltd. were valued at 10% above cost and that of Q
Ltd. at 5% above cost.
(iv) 10% of trade receivables were doubtful for both the companies. Inven-
tories to be carried at cost.
(v) Preference shareholders were discharged by issuing equal number of
9% preference shares at par.
(vi) Equity shareholders of both the transferor companies are to be dis-
charged by issuing Equity shares of ` 10 each of the new company at
a premium of ` 5 per share.
Give your answer on the basis that amalgamation is in the nature of purchase.
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 )
0 0 0
8 9 0 0 0 7 0 0 0 0 7 7 8 0 8 9 0 9 0
` in’000
` in’000
9 9 0 0 0 9 0 0 0 0 9 9 9 0 9 9 0 0 9 0
,
5 ,
7 ,
0 ,
0 ,
2 ,
5 ,
0 ,
0 ,
2 ,
4 ,
9 ,
5 ,
5 ,
0 ,
5 ,
7 ,
0 0
, ,
7 ,
0
5 7 8 8 2 1 6 3 5 4 2 1 5 0 5 7 3 0 7 8
,
6 ,
2 ,
1 ,
5 ,
1 ,
1 ,
1 ,
1 ,
1 ,
5 ,
1 ,
6 ,
2 ,
1 3
, ,
2
1 1 1
(
Notes
1 2 3 4 5 6 7 0
8 9 1
)
2
) .
N
2
. .
Total
Total
N W
.
Balance Sheet as at 1.4.2016
W (
)
h
(
p c
u a
N
e
d
i 0
O a 0
I 1
M/s R Ltd.
T p
A y
M l f
`
l
u o
A f
G , e e )
0
L h r
a v 0
A c h r
e 0
M a S s ,
0
A s e ( e e 6
t 0 l ) v
r r ,
s
t n 1 a 2 e t 1
s n e
l t
i .
N s n
s g e a l p e e f
`
f a . r
`
u n
Non-current liabilities n m v t a W m o
Equity and Liabilities
l
p i o t i o i c e t
i u p (
Shareholders’ funds
w %
Long-term borrowings
r s s s l s e c ) s
Reserves and Surplus
e q a
Non-current assets
u o i
v e e a e
r c r m n 0 u
j 0
v 5
Current liabilities
S r
r s o s n l
b t
i a a u a 0 d (
o e
l r t i a h p h e
r h i w 0 a s
l d p e t s a s s m o ,
0
Current assets
a
t n b b s s n v
i a c a e l n e
r
i a a m t s e c y h c e l
a 6 o u
e a e
Particulars
p m y y c e t s r i
Share Capital
Notes to accounts
a s r a r s
s e r
r r e d r i
u e n p t t t
n
e e a e a
`
c v e P t a l u o r n h q c r s n + e
e r t
- e t b
i c t e a s E n e e e 0 m d b
r e g d r d g - n d h e f i
t m 0 a e
Assets
a s n a o e n n e a s y 8 r e i
r t 0 g e
r
h e o r h x a o v r a t
i 9 e r u s ,
0 l u D
S R L T S i
F T N n T C u 5 f P e a %
I q , e c v 7 m c
5 r % e n e 0
E 5 P 9 S I ( A S 1
`
b.
b.
b.
b.
a.
a.
a.
a.
a.
c.
Ans.
3.60
1.
2.
3.
1.
2.
1.
2.
3.
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 6es
3.61
0 0 0 0 0 0 0 0 7 0 0 0 0 0 0 0 0 0 0 0 6r
` in’000
Q Ltd.
(` )
Total
0 0 0 0 0 0 0 0 9 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 2a
,
0 ,
2 ,
7 ,
3 ,
0 ,
0 ,
2 ,
4 ,
9 5 7 0 0 3 0 5 8 7 0 7 ,
0
8 2 3 2 6 3 5 4 2 0
, 4
, 5 8 6 5 9
, 9 9
, 4 5
, 5sh
,
2 ,
3 ,
5 ,
1 ,
1 ,
1 ,
1 1 1 4 3 3
0 0 0
0 0 0 0es
0
, 0
, 0
, 0r
Q Ltd.
0 0 8 8a
6 3 ,
3 h
2s
0
0 0 0 0 0 0 0 0 0 0 0 1
P Ltd. 0 0 0 0 0 0 0 0 0 0 0
(` )
0 0 0 0 0 0 0 0 0 0 0
`
,
2 ,
6 ,
0 ,
2 ,
1 ,
0 ,
1 ,
4 ,
7 ,
0 ,
7 6s1 =
3 7 8 7 8 8 2 6 5 6 9 6e 0
P Ltd.
,
1 ,
1 ,
6 ,
1 ,
4 ,
3 4r 9
,
6 a 9
,
) ) 2sh 6
9
) 0 0 ,
N 0 0 0 3
O 0 0
, 0 )
0
0
0
0
0
0
I 0 0 , 0 s
`
T , 0 0 0 0
A 7 5 7 3 ,
0 ,
0 ,
4 s
e
M 4
, 0
, 5 1 l
) 1 1 0
`
`
A )
0 0 + + ` 0
G 0 0 0 0 0 0
1. Computation of purchase consideration
L 0 + 0 0 ,
7
`
A 0
, , 0 0 0 0 e 9
0 8 )
0 , 0
, ,
0 r ,
0
2. Discharge of purchase consideration
M 3 0 0 3
A 0 0 8 9 5 a
0 , h
`
+ , 6
`
5 7 ( s =
`
+ ) (
`
0
`
0 , + r s
`
0 0 , 1 s 0 f e
Cash and cash equivalents
1 t 0 0 e
0 0
, n 0 o 0 p r
a
0
, 4 ( e , % 0 5 h
`
0 1 + y m 0 , l 1 s
`
8 0 0 a
Short term provisions
5 0 r
e t 9 8 t
i f
o
( 0 n s s p )
`
`
( 0 e a @m n
`
x i + e (
Trade Payables `
, v
Trade receivables
l C
`
a 2 h 0 u o
t 3 c n
I b k e di i
t
0 a n
Tangible assets
r , a r em c
o 1 m t 0
, v a y a ue a
f n 2 i
e B r
e s s h sr r
f
( d e
r 7 c :
r n s e
r e S s p r
n
`
g r e d e i e u l n e i o
Inventory
o
i n n u ( r n v h l
b :
s t b o c s5 5 f
a
Working Notes:
a o c a i e
`
s i c e a a e
i n y s n r 1 d
i
v d t - k d h n s v k t
i e a i
v e a / i
l n c m i n b r a
`
o i a n o a s e t
n s
e e a l
i e p o e hng 0 p
r u l o t r a k
a d e i
r c
e B b
a D e r
P
f
e si 0 h
P B P N S T C t g
n n m o r i d r yud 0
, s
s i a t t e & L % a x P t 7 a
t
e d t s n d h : 0 r
T
a
T : i
u l 9 C
s l
i n
a
e
v
e
v a s 1
qnc ,
3
u
Less
Less
s l n n r a i .
10.
A B P I I T C E( 1
4.
5.
6.
7.
8.
9.
`
A
M
A
L
G
A
M
A
T
I
O
N
3.62
3
,
5 P Ltd. Q Ltd. Total
7
,
0
0
0
/
1
5
2
,
6
4
,
6
6
0
2
,
3
8
,
0
0
0
5
,
0
2
,
6
6
0
` ` ` `
E
q
u
i
t
y
s
h
a
r
e
c
a
p
i
t
a
l
@
1 5
0
1
,
3
2
,
3
3
0
1
,
1
9
,
0
0
0
2
,
5
1
,
3
3
0
` ` ` `
S
e
c
u
r
i
t
i
e
s
p
r
e
m
i
u
m
@
3
,
9
6
,
9
9
0
3
,
5
7
,
0
0
0
7
,
5
3
,
9
9
0
` ` ` `
50% of Debentures are converted into equity shares @ ` 15 per share
1
,
0
0
,
0
0
0
/
2
=
5
0
,
0
0
0
/
1
5
3
,
3r
3e
2s
s
h
a
2
6
0
,
0
0
0
/
2
=
3
0
,
0
0
0
/
1
5
2
,
0a
0r
0e
5
,
3a
3r
2e
s
h
s
h
s
E
q
u
i
t
y
s
h
a
r
e
c
a
p
i
t
a
l
@
1
0
3
3
,
3
2
0
2
0
,
0
0
0
5
3
,
3
2
0
` ` ` `
S
e
c
u
r
i
t
y
p
r
e
m
i
u
m
@
5
1
6
,
6
6
0
1
0
,
0
0
0
2
6
,
6
6
0
` ` ` `
4
9
,
9
8
0
3
0
,
0
0
0
7
9
,
9
8
0
` ` `
9
%
P
r
e
f
e
r
e
n
c
e
s
h
a
r
e
c
a
p
i
t
a
l
i
s
s
u
e
d
6
0
,
0
0
0
4
0
,
0
0
0
1
,
0
0
,
0
0
0
` ` `
ADVANCED PROBLEMS - PURCHASE
Que. 22 : 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 ` 100 each 8,00,000 3,00,000 Plant & Machinery 6,20,000 5,00,000
7% Preference Share 4,00,000 3,00,000 Furniture and Fittings 60,000 20,000
of ` 100 each
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:
(A)(1) The assumption of liabilities of both the Companies.
(2) Issue of 5 Preference shares of ` 20 each in LK Ltd. @ ` 18 paid up at
premium of ` 4 per share for each preference share held in both the
Companies.
(3) Issue of 6 Equity shares of ` 20 each in LK Ltd. @ ` 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
2
.
C
a
s
h
p
a
i
d
f
o
r
f
r
a
c
t
i
o
n
o
f
s
h
a
r
e
s
=
5
0
,
0
0
0
l
e
s
s
4
9
,
9
8
0
=
2
0
` ` `
A
M
A
L
G
A
M
A
T
I
O
N
3.63
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 LK 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 for which provisions at 2% and 2 ½ % respectively to
be raised.
(2) The trade receivables of K Ltd. include ` 20,000 due from L Ltd.
(C) The LK Ltd. is to issue 15,000 new equity shares of ` 20 each, ` 18 paid
up at premium of ` 4 per share so as to have sufficient working capital. Pre-
pare ledger accounts in the books of K Ltd. and L Ltd. to close their books.
Ans.
Books of K Ltd. Realisation Account
` `
T
o
G
o
o
d
w
i
l
l
8
0
,
0
0
0
B
y
5
%
D
e
b
e
n
t
u
r
e
s
2
,
0
0
,
0
0
0
T
o
L
a
n
d
&
B
u
i
l
d
i
n
g
4
,
5
0
,
0
0
0
B
y
T
r
a
d
e
p
a
y
a
b
l
e
s
1
,
0
0
,
0
0
0
T
o
P
l
a
n
t
&
M
a
c
h
i
n
e
r
y
6
,
2
0
,
0
0
0
B
y
L
K
L
t
d
.
1
5
,
6
0
,
0
0
0
T
o
F
u
r
n
i
t
u
r
e
&
F
i
t
t
i
n
g
6
0
,
0
0
0
(
P
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r
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h
a
s
e
c
o
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s
i
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r
a
t
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n
)
T
o
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r
a
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e
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v
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2
7 ,
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0 0
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BA
y
E(
ql
u
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y)
s
h
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/
c
o
s
s
T
o
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t
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s
&
i
n
v
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t
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y
2
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5
0
T
o
C
a
s
h
a
t
B
a
n
k
1
,
2
0
,
0
0
0
T
o
C
a
s
h
i
n
h
a
n
d
4
1
,
3
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5
T(
oe
Pc
r
e
f
e
r
ea
ny
cm
e
sn
ht
a
r
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h
o
l
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r
s
4
0
,
0
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e
s
s
p
e
)
1
9
,
1
1
,
3
7
5
1
9
,
1
1
,
3
7
5
Equity Shareholders Account
` `
T T
o
R E
e q
a
l
i
s
a
i S
t
o
n a
A e
/ s
c i
(
l
o L
s
s
) L
5
1
,
3
7
5
B
y
S
h
a
r
e
c
a
p
i
t
a
l
8
,
0
0
,
0
0
0
o
u
i
t
y
h
r
n
K
t
d
.
1
0
,
5 6
6
0 ,
,
0 0
0 0
B
y
P
r
o
fi
t
&
L
o
s
s
A
/
c
3
,
7
1
,
3
7
5
T
o
C
a
s
h
4
0
1
1
,
7
1
,
3
7
5
1
1
,
7
1
,
3
7
5
7% Preference Shareholders Account
` `
TL
ot
Pd
r
e
f
e
r
e
n
c
e
S
h
a
r
e
s
i
n
L
K
4
,
4
0
,
0
0
0
B
y
S
h
a
r
e
c
a
p
i
t
a
l
4
,
0
0
,
0
0
0
.
B
y
R
e
a
l
i
s
a
t
i
o
n
A
/
c
4
0
,
0
0
0
4
,
4
0
,
0
0
0
4
,
4
0
,
0
0
0
0 0 0 0 5 0 5 0 0 0 0 0 0
0 0 0 0 7 0 7 0 0 0 0 0 0
`
`
0
, 0
, 0
, 5 0
, 1
, 0
, 1
, 0
, 0
, 0
, 0
, 0
, 0
,
6 4 0 0 0 0 7 0 7 0 7 0 0 0 6 4 0
9
, 6 6
, 0 0 0 5 1
, 0
, 9 0
, 9
, 0
, 3 3
, 2
, 6 9
,
4 5 0
, 0
, 0
, 7 7 3 1 4 3 3 7 7
1 1 0 0 0 1
, 3
,
1
, 0
, 9
, 7 2
2 2 7 3 1 0 0
0 0
`
c 0 0
/ , ,
`
0 A 6 0
0 0 s 9
, 3
,
0
, 0 r 3 3
6 0
, e
s e c
5 0 a d
l /
,
7% Preference Shareholders Account
4 s o c
Books of L Ltd. Realisation Account
0 , e h A /
1 4 l n c h l
a s l A K
b a r e
r t s a L
u t
Equity Shareholders Account
a o )
n a i
p o i n
n y l P
( h a L p o n
i
i a d . o
i s e a i
t
s p e d t C & v c a s
e
e e r t a y
t e r
t e e s r
r d u L r i r fi r i
l a
a e u a
LK Ltd. Account
LK Ltd. Account
N h a c K d a o s a h
O S r e i
s
q h r e h e s y e
I
T y T S L n Ess S P R S R y t c
A y
t t
i y y y o yo y y y y y t
i i
u n h
M i
u . u h B B B c BL B B B B B u q e
r s
d q s q E e a
A qt E a
. C 0 0 0 0 0 0 5 0 5 0 5 0 5 0 0 E. f C
G EL f 0 0 0 0 0 0 7 0 7 0 7 0 7 0 0 d r e
`
`
L yK r e y 0 0 0 0 0 0 1 0 1 0 1 ,
0 1 0 0 yt o r y
A o r , , , , , , , , , , , , , , BL F P B
M BL F P B 0 0 0 5 0 5 7 0 7 6 7 4 7 0 0
A
0
, 0
, 2 7
, 4
, 5 1 3 3
, 9
, 3 6 9
, 3
, 3
, 0 0
3 5 1 1 2 3 4 3 3 0 0
`
1 0 0
`
0 0 ,
0 ,
0
0 0 9 9
0
, 0
, ,
7 ,
7
0 0 .
d K
6
, 6
, t L
5 5 L n
1 1 s i
y g s K s
r n s e s
r L e
g e i
t e r e r
c n n
i t l
b o d n
i a c
/ d i i
F t
s l h /
A l h a k d o s
e S A
i c & v
i f
o n n h r
n u a e a a e a n e n
o B M e c y b h r h o c o
i
t & & r e r t n a s i
t n i
t
a u r o
t a h y a e a
s d t t
i e n i s t s r s
i
l n n n d e h h .
f i i
l h e
f i
l
a r a v s s
a e u a s e a
e a l
a u r a r q e a r e
R L P F T n
I C C P E R C Pd. R
o o
o o o o o
o o o o o ot o
3.64
T T T T T T T T T T T T TL T
0 0 0 0 0 0 0 5 0 0 5 0 )
0 0 0 0
3.65
0 0 0 0 0 0 0 2 0 0 7 0 0 0 0
Que. 23 : The financial position of two companies M/s. Abhay Ltd. and M/s.
L Ltd. `
L Ltd.
`
L Ltd. `
0 0 0 0 0 0 0 6 2 0 1 0 0 0 0 0
Asha Ltd. `
10,00,000
1,25,000
,
0 ,
6 ,
4 ,
0 ,
0 ,
0 ,
0 ,
0 ,
7 ,
5 ,
7 ,
0 0
, ,
0 ,
6 ,
4
3 9 6 9 0 0 2 7 3 5 1 0 0 9 2 6
,
3 ,
3 ,
7 ,
3 ,
5 ,
1 ,
1 ,
2 1
, ,
7 ,
7
1 4
(
- 0 0
0 0 0 0 0 0 0 0 5 0 0 5 0 0 0
0 0 0 0 0 0 0 0 2 0 0 7 0 0
, 0
,
K Ltd. `
K Ltd.
`
15,00,000
2,75,000
0 0 0 0 0 0 0 0 1 5 0 3 0 0 0
Abhay Ltd. `
,
0 ,
6 ,
4 ,
0 ,
0 ,
0 ,
0 ,
0 ,
8 ,
0 ,
0 ,
1 ,
0 1 0
4 5 6 6 8 5 2 6 6 2 2 4 6 ,
2 ,
2
,
4 ,
0 ,
5 ,
4 ,
6 ,
2 ,
2 ,
1 ,
8
1 1 1
Computation and discharge of purchase consideration
Balance Sheet as on 31-3-2015
)
0 0 0 0
0 0 0
K Ltd. `
0 0 0 0
0
, ,
0 ,
6 ,
4
0 6 9 6
Value of Net Assets
0
, ,
5 ,
4
N 3 1 1
O (
I
T
A
M 0 0
0 0
Asha Ltd. as on 31-3-2015 is as follows:
A 0 0
G ,
0 ,
0
L
15,000 equity shares @ ` 700, fully paid
10,000 equity shares @ ` 700, fully paid
A 0
, 0
,
Share Capital - Issued and Subscribed
M 2 1
A e
r
Payable to preference shareholders:
a
h e
s r
Payable to equity shareholders
r
e a
p h
s %
2 r
e 5
.
2 p ] 2
2 w s
s
t
`
a 2 o s
g e
l y l
s
e e r n
i s % s s
t b e e
`
g e e
Sources of Funds
r a n t
t l 2 r r h
General Reserve
a .
N n
i i i b u s s a s
h s . d h F a s k t e
l n a
s e
r W l c v s
e d n b a h c
e a i a & i l n n e a o s
c u e a a b y L n n
h e l B M e c y B h e a i i
n S e l
i r e r p d e e
e y S w & & u r o
t t
a n D e l l
r t [ t
i e n i : e r b b
e
f i h d d t
n n d e h h d u a a
e u s o n a r a v s s a c y y
o
Less
r q a a l u r n a a r e a a
P E C G L P F T I C C T S P P
A
M
A
L
G
A
M
A
T
I
O
N
3.66
Abhay Ltd. ` Asha Ltd. `
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
1-4-2015 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 com-
panies 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 value of ` 100) at a premium of 10%.
(4) Sundry creditor to be taken over at book value. There is an unrecorded
liability of ` 15,500 of M/s. Asha Ltd. as on 1-4-2015.
(5) The bank balance of both companies to be taken over by M/s. Abhila-
sha 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.
(ii) Draw Balance Sheet of M/s. Abhilasha Ltd. as on 1-4-2015 after the
amalgamation. (May 2015) (16 Marks)
0 0 0 0 0 0 0 0 0 0 )
0 )
0 0 0 0 - 0 0 0 0 0 0 0 0
3.67
(ii) Balance Sheet of Abhilasha Ltd. (After Amalgamation) as on 1-4-2015
0 0 0 0 0 0 0 0 0 0 0 5 0 0 0 0 0 0 0 0 0
Asha Ltd.
0 5 5 0 5 5 0 5 0 5 0 0 0 2 0 5 5 5 0 0 0 0 5
,
5 ,
2 ,
2 ,
5 ,
2 ,
7 ,
4 ,
6 ,
5 ,
0 5
, 0
, ,
5 ,
2 ,
1 ,
5 ,
6 ,
4 ,
0 ,
6 ,
1 ,
5 ,
6
7 1 6 2 3 4 6 5 2 5 0 5 2 1 3 0 3 9 2 2 3 6 3
,
1 ,
1 ,
1 ,
6 ,
2 ,
2 ,
2 ,
5 5
( 7
, ,
2 ,
8 ,
1 ,
9 ,
1 ,
3 ,
7 ,
5 ,
1 ,
9
1 2
( 1 3 3 2 3
0 0 0 0 0 0 0 0 0 0 ) -
0 0 0 Notes 1 2 3 4 5
0 0 0 0 0 0 0 0 0 0 0 1
Abhay Ltd.
0 5 5 0 0 5 0 5 0 0 0 0 3
,
5 ,
7 ,
7 ,
5 ,
5 ,
9 ,
2 ,
4 ,
0 ,
6 0
, ,
1 ,
3
7 7 9 9 3 7 6 7 4 8 5 3 2
,
2 ,
1 ,
1 ,
9 ,
3 ,
4 ,
2 ,
1 ,
3 5
( ,
3
2 2
N ) a
O ) s h
e s
(i) Computation of Purchase consideration
I
T 0 r a
A 0 a l
i
0
, h h
M 0 s b
A 2 f
o A
G :
0 f
L 0 e o
A 0 u e
M , s
s r
A 0 i a s
4 r h t
o s n
f y e
`
) s
e s t l
e s i i
u s a
s s u v
Equity and Liabilities
a n a q l s
t i
u
Shareholders’ funds
h e B e p s e s
p r q
Non-current assets
c ( f u t s
s e e
x e
Current liabilities
r e n o s s s a l
b
u o e e e s a h
p n n i u u l d l a e s
Current assets
s s y o o t s l a
t n b s l
b v
i a
t r r
e i
s i a s i a a t e i s e c
fi a g i t r i a p y e
s l
b g e
i c
n a e d
Particulars
o e n i v y v a s
e a s i n r e
r
s p y i
d h o d
i d
i b e c P a g a o r n
t l c r u s s c e v
r e n t t e a
fil 2 i a p q r n d a r e d l d a n n d h l
Assets
o a t a
t u s i o
t o e f a s a e T I e s a
r fi B M s l i s c fi0 h e a t x ) v a a t
p m o l
r r
( d d y e
l s
s d
e
e
r e s 0
i
t S R r
T
o
T i
F )
( ( n
I
r
T C
o
T
ii
e o P l n n r e u s 1
i
g N r i o s
r l r t a a
w a a t ( C n s
a : d
e o d t n o
t k : e h e @
b.
r c
a.
a.
a.
e s p
s n n e b n s
s b r .
b d
Ans. v e u o a a
l v e a e e u o t
A L S G L P n
I D B L D P T L
1.
2.
1.
2.
A
M
A
L
G
A
M
A
T
I
O
N
3.68
Notes to accounts
` `
1. Share Capital
E
q
u
i
t
y
s
h
a
r
e
c
a
p
i
t
a
l
3
5
,
5
6
0
e
q
u
i
t
y
s
h
a
r
e
s
o
f
1
0
0
e
a
c
h 1
3
5
,
5
6
,
0
0
0
3
8
,
3
1
,
0
0
0
`
2
,
7
5
0
1
2
%
P
r
e
f
e
r
e
n
c
e
s
h
a
r
e
s
@
0
0
e
a
c
h
2
,
7
5
,
0
0
0
`
(
To
hh
ee
ar
bt
oh
va
en
sc
ha
a
r
e
s)
h
a
v
e
b
e
e
n
i
s
s
u
e
d
f
o
r
c
o
n
s
i
d
e
r
a
t
i
o
n
t
s
h
1
5
,
6
7
,
5
0
0
2. Tangible assets
F
i
x
e
d
A
s
s
e
t
s
L
a
n
d
a
n
d
B
u
i
l
d
i
n
g
(
9
,
3
5
,
0
0
0
+
6
,
3
2
,
5
0
0
)
` `
P
l
a
n
t
a
n
d
M
a
c
h
i
n
e
r
y
(
3
,
7
9
,
5
0
0
+
2
,
4
7
,
5
0
0
)
6
,
2
7
,
0
0
0
2
1
,
9
4
,
5
0
0
` `
I
n
t
a
n
g
i
b
l
e
a
s
s
e
t
s
3
,
2
0
,
0
0
0
3.
G
o
o
d
w
i
l
l
(
1
,
9
5
,
0
0
0
+
1
,
2
5
,
0
0
0
)
` `
Current Assets
T
r
a
d
e
R
e
c
e
i
v
a
b
l
e
s
(
3
,
0
5
,
0
0
0
+
2
,
8
5
,
0
0
0
)
5
,
9
0
,
0
0
0
4. `
L
e
s
s
:
P
r
o
v
i
s
i
o
n
f
o
r
d
o
u
b
t
f
u
l
d
e
b
t
s
(
5
9
,
0
0
0
)
5
,
3
1
,
0
0
0
C
a
s
h
a
n
d
c
a
s
h
e
q
u
i
v
a
l
e
n
t
s
(
B
a
n
k
)
1
,
6
5
,
0
0
0
5.
Que. 24 : Given below are the Balance Sheet of two companies as on 31st
December, 2015.
A Limited
Liabilities ` Assets `
Share Capital: Patent 1,00,000
Issued and fully paid up Building 5,40,000
50,000 8% Cumulative Plant and Machinery 15,10,000
Preference Shares of ` 10 5,00,000 Furniture 75,000
each
1,50,000 Equity shares of 15,00,000 Investment 1,55,000
` 10 each
General Reserve 7,65,000 Stock 3,58,000
Profit and Loss account 1,25,000 Sundry Debtors 72,000
Sundry Creditors 60,000 Cash and Bank 1,40,000
29,50,000 29,50,000
B Limited
Liabilities ` Assets `
Share Capital: Goodwill 62,000
Issued and fully paid Motor Car 1,26,000
50,000 Shares of ` 10 each 5,00,000 Furniture 58,000
A
M
A
L
G
A
M
A
T
I
O
N
3.69
Liabilities ` Assets `
Profit and Loss Account 45,000 Stock 2,40,000
Sundry Creditors 31,000 Sundry Debtors 70,000
Cash and Bank 20,000
5,76,000 5,76,000
It has been agreed that both these companies should be wound up and a new
company AB Ltd. should be formed to acquire the assets of both the companies
on the following terms and conditions:
(i) AB Ltd. is to have an authorized capital of ` 36,00,000 divided into
60,000, 8% cumulative preference shares of ` 10 each and 3,00,000
equity shares of ` 10 each.
(ii) AB Ltd. to purchase the whole of the assets of A Ltd. (except cash and
Bank balances) for ` 28,25,000 to be settled as to ` 5,75,000 in cash
and as to the balance by issue of 1,80,000 equity shares, credited as
fully paid, to be treated as valued at ` 12.50 each.
(iii) AB Ltd. is to purchase the whole of the assets of B Ltd. (except cash
and bank balances) for ` 4,91,000 to be settled as to ` 16,000 in cash
and as to the balance by issue of 38,000 equity shares, credited as fully
paid, to be treated as valued at ` 12.50 each.
(iv) A Ltd. and B Ltd. both are to be wound up, the two liquidators distrib-
uting the shares in AB Ltd. in kind among the equity shareholders of
the respective companies.
(v) The liquidator of A Ltd. is to pay the preference shareholders 12 in cash
for every share held in full satisfaction of their claims.
(vi) AB Ltd. is to make a public issue of 60,000, 8% cumulative preference
shares at a premium of 10% and 30,000 equity shares at the issue price
of ` 12.50 per share, all amount payable in full on application.
It is estimated that the cost of liquidation (including the liquidators’
remuneration) will be ` 10,000 in case of A Ltd. and ` 5,000 in case of B Ltd.
and that the preliminary expenses of AB Ltd. will amount to ` 24,000- exclusive
of the underwriting commission of ` 38,900 payable on the public issue.
You are required to prepare the initial Balance Sheet of AB Ltd. on the basis
that all assets other than goodwill are taken over at the book value.
(May 2016) (16 Marks)
Ans.
Balance Sheet of AB Ltd.
Particulars Notes `
Equity and Liabilities
1
.
S
h
a
r
e
h
o
l
d
e
r
s
’
f
u
n
d
s
.
S
h
a
r
e
c
a
p
i
t
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l
1 2
3
0
,
8
0
,
0
0
0
a
.
R
e
s
e
r
v
e
s
a
n
d
S
u
r
p
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u
s
6
,
1
7
,
1
0
0
b
0 0 0 0 0 0 0 0 0 0 0 0 0 )
0 0 0
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
`
9 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1
,
8 ,
6 ,
9 ,
2 ,
5 ,
8 ,
2 ,
0 ,
6 ,
0 ,
0 ,
0 ,
0 9
, ,
0 ,
7
3 3 0 1 5 9 4 2 3 0 8 0 8 2 8 1
,
7 ,
3 ,
1 ,
1 ,
5 ,
1 ,
4 ,
7 ,
6 ,
4 ,
6 ,
0 6
( ,
6 ,
6
3 2 3 3 2 3
Notes
0 0 0 0 0 0 0
0 0 0 0 0 0 0
0
, 0
, 9
, 0
, 0
, 0
, 0
,
3 4 0 0 8 4 0 0 0
0
, 0
, 3 2 2
, 6 4
,
l 0 6 6 5
a
t 3
o
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n l
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`
0 + s e 0ot f o . x
4
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s 2 n 1 e f 8 r o e
`
t
n 0 e f o 1n P d i x r
e + 0
, l e ,
2 o s
n s s a
l f r s i e
`
2 a a o P e ,at l
a v a i s c e h
m 0 7 v
i t r s t i t m e / r s
t 0 ( u i s e a e r i t fi s A a e
s 0
, s q p e v l h r e p a
l o m n h c
e
Reserves and Surplus
s v 8 e e a r i
t a s a d a u r o e m s n
s s t 5 l
b c a a t hsi c P c p y e
e s t e
s n
i , h e h l i
p y sn e m x u
i t r
i
t t e s 3
( a s r s u t
i eo r u f g e i
u e
s i e s s a t
n v
i a a y m a u vc a c o n y m f
e
i l
i s t s s e c h t c q or h i
e t e q e
Tangible assets
r
Notes to accounts
t
i b s
a e a e e
r s e
i c s i u e e bo s %h i
c r a r e r
s l d u
Share Capital
l
i a
i s e b r t
e r e n d q c r 0 af e 8c n w n P 0 P g
b l t
n a l
b i u s o r e e % a 0 ed c ,a a r i s 0 0 n
a r i g c s t e a z h 0 l m e 0 0 i
i
l e e
r d
e g n -
n a n
e d h i
r 0 8
, s 0
, he
t
n
e 0e a e
b d i
l i
t ,
8 0 d
l
t h r x n a
t t v a s o 0 0 y 8 fsu r 00
, e i
r 4 ,
0 i
n t u i a o n r a 0 0h t 4 e 0 1 t n r , u
Particulars
e O c F T n
I N e n
I T C h ,
0 0c i
u ,
2 Os f 6 i
b U P u 2 6 B
r - r t
u 0 , (i e e c ( (
q r e
`
r . n . . r . . . A , 0 a E D
u o u l 3 6e P S
Assets
a
a
b
c
C N C t
o
3.70
.
2 .
1 .
2 T
1.
2.
3.
0 0 0 0 0 0 0 0 0 0 0 0 0 0 )
0
3.71
0 0 0 0 0 0 0 0 0 0 0 0 0 0
`
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
,
9 ,
2 ,
5 ,
0 ,
5 ,
6 ,
5 ,
1 ,
5 ,
6 ,
4 ,
0 ,
5 ,
1 0
,
0 1 7 5 2 1 7 9 7 1 2 2 3 9 6
,
3 ,
1 ,
5 ,
2 ,
8 ,
4 ,
4 ,
5 ,
4 ,
0 ,
4 5
,
2 2 2 1 5
(
B Ltd.
0 - - - 0 0 - 0 0
0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 s 0
, 0
, 0
, 0
, 0
,
0
, 0
, 0
, 0
, 0
, e 2 6 8 0 0
6 0 3 2 0 . . s 6 2
, 5 4
, 7
2 1 3 1 0 d d n 1 2
, , , , 3. Cash at bank balance in the initial balance sheet of AB Ltd. t t e
1 5 1 1 L L p
1 x
4. Calculation of goodwill/capital reserve of A Ltd. & B Ltd.
A B e
o o y d 0 )
t t r / 0
t t a c 0 0
n n n e 0
, 0
e i 5 ,
Cash and Bank Account
m e m c 2 0
2. Computation of Purchase Consideration of B Ltd.
n
1. Computation of Purchase Consideration of A Ltd.
) y m i
l a ,
8 1
,
N 0 a y e l 2 8
O 0 P a r a 2
I
T 0
, P P B (
y y
A Ltd.
A 5 y y
M 6 B B B B 0 0 0 - 0 0 0 0
A - 0 0 0 0 0 0 0
G 0 0 0 0 0
, 0
, 0
, 0
, 0
, 0
, 0
,
0 0 0 0 0 0 0 5 5 8 2
`
L 0 )
5 0 0 0 0 4 1 7 5 5 7
A ,
2 . ) ,
0 ,
5 ,
5 , , , , ,
M 6 2 5 6 7 3 1 5 5 1 3
A 1 .
2 , , , 1
+ 1 6 3 0
1
`
0 x
0 s
`
0 e n x n
,
Particulars
5 r
a o s
e o
y 1
( h i
t r i
t
r ) S a
r a a
r
e 4 e h e c
n . 0 d s d e /
i
h N 0 i 0 i c c
. 0
, s 0 s n A /
c
Intangible assets
a W 0 n 0
, n e ) e A c
r ( 8
, o 8 o r s 0 s . c c /
a m e
r l 1 c 3 c e
f e 5 a h / / A
c l
i ( e ( e e )
1 r .
2 h l c c A c
& u
t w s
t t s s t s s r a c l
i c / a A t c /
r i n a n a 1 1 r A r n
Working Notes:
o t n d n e e e e p h u w / M a e e / A
t n r o e m r h m r h f x s x d A g c r A s
o a u o t
a a c a c o 0 y 0 P o n & u m s r
M l y h r y h r 0 t 0 s t
n i r t
i t k o
P F G P a s u a s u e 0 i 0 s o d t o n s t
p y P p y P us , u , e G e
t l
i n t r e c b
t l t l se 0 q 0 n : a u a o u v o
t e
h i a h i a s
Iar 6 E 3 i s P B l
P M F n S D
s u t s u t ( ( s s I
a q o a q o oh o u e
C E T C E T Ts T B L
4.
A
M
A
L
G
A
M
A
T
I
O
N
3.72
Particulars A Ltd. B Ltd.
G fi
og
o
d
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l
/
C
a
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i
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a
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e
s
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.
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+
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,
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=
1
2
,
0
0
0
6
0
Notes:
1
.
ABbn
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.
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r
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s
Que. 25 : P Ltd. and Q Ltd. agreed to amalgamate and form a new company
called PQ Ltd. The summarized balance sheets of both the companies on the
date of amalgamation stood as below:
Liabilities P. Ltd. ` Q. Ltd. ` Assets P. Ltd. ` Q. Ltd. `
Equity Shares 8,20,000 3,20,000 Goodwill 1,00,000 80,000
(` 100 each)
9% Pref. Shares 3,80,000 2,80,000 Land & Building 4,50,000 3,40,000
(` 100 each)
8% Debentures 2,00,000 1,00,000 Furniture & 1,00,000 50,000
Fittings
General Reserve 1,50,000 50,000 Plant & 6,20,000 4,50,000
Machinery
Profit & Loss A/c 3,52,000 2,05,000 Debtors 3,25,000 1,50,000
Unsecured Loan - 1,75,000 Stock 2,33,000 1,05,000
Creditors 88,000 1,60,000 Cash at bank 1,08,000 95,000
Cash in hand 54,000 20,000
19,90,000 12,90,000 19,90,000 12,90,000
PQ Ltd. took over the assets and liabilities of both the companies at book
value after creating provision @ 5% on Stock and Debtors respectively and
depreciating Furniture & Fittings by @ 10%, Plant and Machinery by @ 10%.
The debtors of P Ltd. include ` 25,000 due from Q Ltd.
A
M
A
L
G
A
M
A
T
I
O
N
3.73
PQ Ltd. will issue:
(i) 5 Pref. shares of ` 20 each @ ` 18 paid up at a premium of ` 4 per share
for each pref. share held in both the companies.
(ii) 6 Equity shares of ` 20 each @ ` 18 paid up a premium of ` 4 per share
for each equity share held in both the companies.
(iii) 6% Debentures to discharge the 8% debentures of both the companies.
(iv) 20,000 new equity shares of ` 20 each for cash @ ` 18 paid up at a
premium of ` 4 per share.
PQ Ltd. will pay cash to equity shareholders of both the companies in order to
adjust their rights as per the intrinsic value of the shares of both the companies.
Prepare ledger accounts in the books of P Ltd. and Q Ltd. to close their books.
(May 2017) (16 Marks)
Ans.
Books of P Ltd. Realization Account
` `
T
o
G
o
o
d
w
i
l
l
1
,
0
0
,
0
0
0
B
y
8
%
D
e
b
e
n
t
u
r
e
s
2
,
0
0
,
0
0
0
T
o
L
a
n
d
&
B
u
i
l
d
i
n
g
4
,
5
0
,
0
0
0
BC
yr
Te
r
ai
do
er
P
a
y
a
b
l
e
s
/
8
8
,
0
0
0
d
t
s
T
o
P
l
a
n
t
s
M
a
c
h
i
n
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r
y
6
,
2
0
,
0
0
0
B
y
P
Q
L
t
d
.
1
6
,
0
2
,
1
0
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o
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t
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&
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t
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g
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0
0
,
0
0
0
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P
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0
2
0
,
2
8
,
0
0
0
2
0
,
2
8
,
0
0
0
Equity Shareholders Account
` `
T
o
R
e
a
l
i
z
a
t
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n
A
/
c
(
l
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7
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9
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,
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,
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0 0
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t e
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0
.
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0
0
1
3
,
2
2
,
0
0
0
1
3
,
2
2
,
0
0
0
9% Preference Shareholders Account
` `
TL
ot
Pd
r
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f
e
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n
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e
S
h
a
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s
i
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8
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.
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.
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a
l
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t
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/
c
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,
1
8
,
0
0
0
4
,
1
8
,
0
0
0
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 5 5 0 0 0 0 0 0 0 0
`
`
4
, 7
, 1
, 0
, 0
, 0
, 0
, 2
, 7
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
0 1 2 0 0 0 5 2 0 8 0 5 0 5 0 8 8
0
, 0
, 0
, 0
, 0
, 6
, 7
, 9
, 9 1
, 2
, 0
, 5 7
, 8
, 2 0
,
5 1 6 2 1 1 1 7 3 3 2 5 2 3
1 1 1
0 0
0 0
4
, 0
,
2 8
8
, 1
, s
0 4 r
e
1 e
s d c e
/ n a l / v
9% Preference Shareholders Account
s s s h o A r c
e e e
l a c h) l l /
r r o eF a e
s s A
8% Debentures holders Account
. u u b l r r / t s a
t
u
Equity Shareholders Account
d t t a d P
)
n a B i
p o e i n
t n n y e ( h( a L R p o
L e e a r o
i Ss l a i
t
Q b b p u .
d t s C & a c a
a yo r z
Realization Account
P e e ers c t r t e t e e i
D D do e
s L e i L r fi r l
u o n a
PQ Ltd. Account
N n ai a a
Books of Q Ltd.
O i % % r t n Q d
i q— h r e h e
I s y
t 8 8 Ted U P s Ec S P G S R
T
A e i y y yr y y n y/ y y y y y
r
a u h B B BC B B o BA B B B B B
M q s
a c
A h E . C
G S r f 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
e 0 0 0 0 0 0 0 0 0 0 0 0 5 5 0 0 0
`
`
L y o r y 0 0 0 0 0 0 0 0 0 0 0 4 7 ,
8 0 0 0
A B F P B ,
0 ,
0 ,
0 ,
0 ,
0 ,
0 ,
5 ,
5 ,
0 ,
8 ,
8 ,
2 ,
0 1 ,
5 ,
8 ,
8
M 0 8 4 5 5 5 0 9 2 2 1 2 9 6 7 0 0
A 0 0 ,
2 ,
3 ,
4 ,
1 ,
1 ,
3 ,
4 ,
5 ,
3 ,
3
0 0
`
1
, 1
, 1
2 2
0
, 0
,
6 6 .
1 1 d Q
t P
L n
s
g Q i
n /
s s P s
g y i e k r e
r
c n r
e t
t l c e n a
/ s i n i b o d
l i h
A e
r d i F a t k d o s
u l
i h & v S h e S
n t u c i
e / n n e r n e
o n a e c y a a r a o c
i e l
l B r e r b h a h i n
t
a i M u r o t n h s t
a e
z b w & s t t a i s y z r
i e d d t i es n . t i e
l
a D o n n dr e h h f i
u l
a h f
e o n a r ao v s s e e s e
% a l u r t n a a r q a r
R 6 G L P F Tb I C C P E R C Pd.
o o o o o o oe o o o o o o o ot
3.74
T T T T T T TD T T T T T T T TL
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ) 0 0 ) r
0 0 o
3.75
0 5 5 0 0 0 5 5 0 0 0 0 0 5 0 0 5 5 0 f
`
Q Ltd. `
Q Ltd. `
4 8 2 0 0 4 8 2 0 0 0 0 5 7 0 0 2 0 2 4 5
,
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1 ,
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0 0 0 0 0 mes
Computation and discharge of Purchase consideration
0 0 0 0 0 i
4 0 0 0 0 0 0
, 0
, 0
, on
, , 0 0 0 0 0 0 5 ca
P Ltd. `
2 8 0 4 7 1 0 6 7
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, 0
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,
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t
s 0 0 0 0 5 5 0 0 0 0 0 0
P Ltd. `
Q e 0 0 0 0 7 3 0 0 1 0
0 1 4 7 o h
t
r , , , , , , , , , , , , bo
8% Debentures holders Account
P u 0 0 8 0 8 1 8 4 0 ,
8 2 0 1
0 5 5 9 0 2 0 5 9 0 0 0
W. Note : Value of Net Assets
n
i
t
n ,
1 ,
4 ,
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PQ Ltd. Account
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n
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i e t n h e l
l B M e
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l D e e s S i & u r o t n e p d e e Tm
a l
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b t
e % e t
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s r s s
Note:
y e q a o a a v a a s a c y y j
o o a r a l u r n e r e a a d
T T P P E C G L P F T I C C L T S P P a
A
M
A
L
G
A
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A
T
I
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N
3.76
Que. 26 : Following are the Balance Sheet of companies as at 31.12.2003:
Liabilities D Ltd. V Ltd. Assets D Ltd. V Ltd.
` ` ` `
Equity share 8,00,000 6,00,000 Goodwill Fixed 6,00,000 8,00,000
capital (` 100) Assets 5,00,000
General Reserve 4,00,000 3,00,000 Investments 2,00,000 4,00,000
Investment Current Assets 4,00,000 3,00,000
Allowance
Reserve — 4,00,000
Sundry Creditors 5,00,000 2,00,000
17,00,000 15,00,000 17,00,000 15,00,000
D Ltd. took over V Ltd. on the basis of the respective shares value, adjusting
wherever necessary, the book values of assets and liabilities on the basis of
the following information:
(i) Investment Allowance Reserve was in respect of addition made to fixed
assets by V Ltd. in the year 1997-2002 on which income tax relief has
been obtained. In terms of the Income Tax Act, 1961, the company has
to carry forward till 2006 reserve of ` 2,00,000 for utilization.
(ii) Investments of V Ltd. included 1,000 shares in D Ltd. acquired at cost
of ` 150 per share. The other investments of V Ltd. have a market value
of ` 1,92,500.
(iii) The market value of investments of D Ltd. are to be taken at ` 1,00,000.
(iv) Goodwill of D Ltd. and V Ltd. are to be taken at ` 5,00,000 and ` 1,00,000
respectively.
(v) Fixed assets of D Ltd. and V Ltd. are valued at ` 6,00,000 and ` 8,50,000
respectively.
(vi) Current assets of D Ltd. included ` 80,000 of stock in trade received
from V Ltd. at cost plus 25%.
The above scheme has been duty adopted. Pass necessary Journal Entries in
the books of D Ltd. and prepare Balance Sheet of D Ltd. after taking over the
business of V Ltd. Fractional share to be settled in cash, rest in shares of D
Ltd. Calculation shall be made to the nearest multiple of a rupee.
(May 2004) (16 Marks)
Ans.
Journal Entries in the Books of D Ltd.
Dr. Cr.
Amount ` Amount `
B
u
s
i
n
e
s
s
P
u
r
c
h
a
s
e
A
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c
o
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t
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r
.
1
2
,
4
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.
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c
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s
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e
)
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
3.77
0 0 0 5 5 0 0 0 5 0 5 0 0 0 0 5 5
Cr.
Amount `
0
, 5
, 6
, 8
, 0
, 0
, 6
, 8
, 0
, 4
, 0
, 0
, 5
, 0
, 9
, 4
,
0 2 3 8 6 0 3 8 0 2 0 6 2 0 3 2
0
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, 0
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, 4
, 5
, 1
, 9
, 0
, 8
, 4
,
2 2 9 3 2 7 9 7 3 3 7 3 2 6 3
1 1 3 1 3
0 0 0 0 0 0 0
Balance Sheet of D Ltd. as on 31st December, 2003
0 0 0 0 0 0 0
Dr.
Amount `
5 0 0 0 5 0 0
Notes
,
2 ,
0 ,
0 ,
0 ,
2 ,
6 ,
0 1 2 3 4
9
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,
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`
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u t n u n s o p u e r 5
, 5 c -
g t n e o u i
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2 A
fi n u k c o c d c e p 9 t 0
u o a c c n A e
z c R r + , n 5
g o c t A c o ) i A o 0 1 e -
n c c s A i
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a e c 0 + m 0
i
c c A e l a c e t
n c n
i 0 t 0
A i a
t m r o r n s , 0 s 0
n e t i e t e a e u 0 0 ,
Equity and Liabilities
a t s s i
l p u d S n m w v l 0 0 u
j 0
l n i i u p
Shareholders’ funds
a t u r a b a m i
s ( t o r
e r ,
5 ,
0 d 0
,
t o
Non-current assets
n B n t h a . C n s f s l s u ( s 0 A 7
o l
Current liabilities
( u c i c
r i
l d e e t o t o u A e S s s t
e , (
u t o d t r r n c t e n j
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s o t l d l e s ( o
Current assets
c c
u c A r P n h s o e u A i A n y a
t n b s s a s i
t
c s C s a V e c s t n e r i a a t s t a
A o A t s s S i c a o t a m o
t p y e a e n
y f t s l m
Particulars
s c s e r e t o y i A h c n n o
i u a s a s e b e
t c t s d n e t r c c e i t t
s t c e P a l i m a
n A e s i s r i u h r A r m a e a e v
r e b g t g
e s
l s A n s s o u c s u l r i
l m v t r e l d i
g n s l l
d a
Assets
l
i t u u a t q e a p l
i u e n s a s a e n a e a
m w A n S B a E S C C a a t x t v m t
t
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l
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e
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e
n o i u Ba i B o Bto m B
I G F C (v L ( G (s A ( a b a a b c
2
0 0 0 0 0 0 0 *
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
0 0 5 0 0 0 0 0 0 0 0 0 3 0 0 0 0 0 0 0 0
V Ltd. `
`
6 6 8 0 0 0 0 0 0 0 0 0 0 2 5 5 0 0 5 0 5 0
,
3 ,
3 ,
8 ,
0 ,
6 ,
0 ,
0 0
, ,
0 ,
0 ,
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7 ,
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0 ,
0 ,
7 ,
0 ,
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0
0 0 3 0 1 0 5 0 0 8 0 8 3 9 3 0 5 0 4 8
,
7 ,
7 ,
9 ,
7 ,
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1 ,
8 3
, ,
3 ,
5 ,
2 ,
3 ,
1 ,
1 ,
3 ,
5 ,
2 ,
2 ,
3
1 1 3 1 1 1 1 1
0 0 0 0 0 0 0 0 0 0 0 0
0 5 0 0 0 0 0 0 0 0 0 5
D Ltd. `
0 8 0 0 0 0 0 0 0 0 0 .
7
,
0 ,
8 ,
0 ,
0 ,
0 ,
0 ,
0 ,
0 ,
0 ,
0 ,
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0
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, 0
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, 0
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4 3 2 5 6 1 4 6 5 1
1 1
Discharge of Purchase Consideration
se
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o v 0
wo 0 i ,
2. Computation of Purchase Consideration
A c 0 f g 0
1. Calculation of net asset value of shares
G fr 0 s ( 5
L o , a s ,
2
A o 6 d t
n
tf
u 1 e e
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a 1u Reserves and Surplus
m n + x i
n d n
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d 0 i t s
i o u 0 r r t 0 a L n r
v w
`
p fa e i 0 o a L 0 m o o
a o v m o t , V t .
Intangible assets
, i h e i
c sf r e l
l 0 d s s V 1 e f d d
Notes to accounts
Trade payables
e e n e r a 0 e e ( r o n
i e L
s , y f .
Share Capital
r r i e P t 6 r r t o d f s l
c r
a a d ) R s n ( s C a i t o t e C V
h he h e e s l t
e y h u s L e e d y
l t f
Working Notes:
s su s l i
t m r i s s s r s q n u s r o
y 6ssca a i o
t w t
e t s d f e e D l s e d
t l r
e r t
s i d s n A n s o r a A u n s
i 3i n a u e d l
l s e t
e r e m n
i v f l t
e
u 0e
, a t n c v e o i A m t u s e p t t o a u s
q 7 rh o e e n r o w t n S s b s s e V S s
E 1a t T G S I C G d d s e : a e e e
r k e : : a
o e e r
r s m u v a r u s s
o x v u s t
e u l
a n a l
a s s t
e
e h e e
3.78
G i n C N N V I M V N
F I L * S L L
1.
2.
3.
4.
A
M
A
L
G
A
M
A
T
I
O
N
3.79
`
V
a
l
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d
.
1
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.
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.
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.
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e
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:
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e
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.
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1
2
,
4
2
,
5
Que. 27 : The following is the summarized Balance Sheet of A Ltd. as at 31st
March, 2006:
Liabilities ` Assets `
8,000 equity shares of 8,00,000 Building 3,40,000
` 100 each
10% debentures 4,00,000 Machinery 6,40,000
Loan from A 1,60,000 Stock 2,20,000
Creditors 3,20,000 Debtors 2,60,000
General Reserve 80,000 Bank 1,36,000
Goodwill 1,30,000
Misc. Expenses 34,000
(Share issue Expenses)
17,60,000 17,60,000
B Ltd. agreed to absorb A Ltd. on the following terms and conditions:
(1) B Ltd. would takeover alt 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 takeover creditors at book value.
(3) The purchase consideration is to be paid in cash to the extent of ` 6,00,000
and the balance in fully paid equity shares of ` 100 each at ` 125 per
share.
(4) The average profit is ` 1,24,400. The liquidation expenses amounted to
` 16,000. B Ltd. sold prior to 31st March, 2006 goods costing ` 1,20,000
to A Ltd. for ` 1,60,000. ` 1,00,000 worth of goods are still in stock of
A Ltd. on 31st March, 2006. Creditors of A Ltd. include ` 40,000 stilt
due to B Ltd.
(5) Show the necessary Ledger Accounts to close the books of A Ltd. and
prepare the Balance Sheet of B Ltd. as at 1st April, 2006 after the
takeover. (November 2006) (20 Marks)
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
`
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
0 0 6 6 6 0 0 0 6 0 0 0 0 4 4 0 0 0 0
2
, 1
, 7 0
, 1 0
, 6
, 6
, 3
, 0
, 0
, 6
, 6
, 3 3 8 0
, 1
, 1
,
3 2 6 4 1 1 7 4 4 1 1 6 6 2
1 1 1
.)
d
t h
Lac
s s s
r
e r
e r
e Be
d )
. d d 5
l p s l l n12
o x e o o i
h E r h h e
e ( u A e e r t
`
r
a n t r d d r d a a
h o n m a i
b i
b a i
b hs
s i e h h se
General Reserve Account
10% Debentures Account
r S t o s s
Misc. Expenses Account
o a b r e e e yar
e f c c c
Loan from A Account
t . y s y y t
Realisation Account
i d t i d t n n t n i
Books of A Limited
d t i l n i a a i a k u h
N e L u a % a u l l u l n q0s
B Ltd. Account
qs) e o q a a q a a
Bank Account
O r 0 E8
I
T C B Es R 1 L E B B E B B
A y y yLo y y y y y y y y y y48
,
M B B B( B B B B B B B B B B(
A 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
G 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
`
L 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
A ,
0 ,
0 ,
0 ,
0 ,
0 ,
6 ,
6 ,
6 ,
0 ,
6 ,
0 ,
0 ,
0 ,
0 ,
4 ,
4 ,
0 ,
0
M 4 4 2 6 3 1 0 3 0 3 0 0 6 6 3 3 0 0 1 1
A ,
3 ,
6 ,
2 ,
2 ,
1 ,
6 ,
1 ,
6 ,
7 ,
4 ,
4 ,
1 ,
1 0 0 ,
2 ,
2
1 0
, 0
, 1 1
0 0
8 8
s
r
e
d
l
o c
h /
e A
)
. d
i d
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y
r p b b a o
g e l
l x h i
n n s i E e e s t
a
i i r w ( c . c y s
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t d k n d k k n t i
l c c b o n a t n n a i
u l
a
i
u a o e o a l
a L a a l
a e
t q
B M S D G B B B B B B E R
Ans. o o o o o o o o o o o o o
3.80
T T T T T T T T T T T T T
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
3.81
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
`
`
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
0 0 0 0 0 8 7 0 0 5 2 6 3 4 5 8 8 2
1
, 1
, 0
, 8 8
, 8
, 0
, 8
, 0
, 7
, 8
, 1
, 8
, 9
, 7
, 8
, 8
, 2
,
6 6 8 8 4 1 2 6 4 8 2 1 1 4 4 4 1
1 1
Notes
1 2 3 4 5 6 7
Balance Sheet as on 1st April, 2006 (extract)*
s
r l
a
e t
i
d
l p
o a e
h c v
r
Equity Shares in B Ltd. Account
e e e
Equity Share Holders Account
r
a r
a s n l
e
r a a
t
h h h o
s s l
a t T
y
t y
t r r
i i e e
N u u n h
t
O q q e o
I E E G
T
A y y y n
B B B o
i
B Ltd.
M t
A a
r
G 0 0 0 0 0 0 0 e
L 0 0 0 0 0 0 0 d
A 0
, 0
, 0
, 0
, 0
, 0
, 0
, i
0 0 6 4 0 0 0 h s
2 Reserves and Surplus (an extract)
M 1 1 7 3 1 6 8 c n
A ,
6 ,
6 ,
6 ,
1 ,
8 a o
e c
0 r
s 0 o
f
u 1 d
Equity and Liabilities
l
p e
Shareholders’ funds
. f u
`
r s
Non-current assets
d
t u s e o s
Current liabilities
L S s t s t
e l
b l
a s s
i m
e f
a t s a t e
B l d l r e s i r n u
Current assets
a
t n b d s s a v
i p a e i
n i a a r t
e s
a s
e e a h e m
s i p y e c c s b e
Notes to accounts
e s l i
Particulars
e s a s
e a v s e b r e e e r
s y
1 Share Capital
n e c v P o a l
b i o r r t v P
n r e r e i g t
n e a i a s
e a r e d k l d g n d h u h
Assets
o
i p h a s n a e n a e s q e
i
t x s h e a a t
o x a t v a E s t
a E y R r i n n r y e i
r
.
d s t S T B T F T I I T t
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t i
l .
c i k u 8 a h c
L a s u n q 8 has e
e i q a E ,
4 Sc S
B R M E B (
b
a
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3.82
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A L S V G B S D T L P N O =
`
A
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A
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3.83
3. Unrealised Profit on Stock
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Que. 28 : P Ltd. and Q Ltd. decided to amalgamate as on 01.04.2018 Their
summarized Balance Sheets as on 31.03.2018 were as follows:
(` in ‘000)
Particulars P Ltd. Q Ltd.
Source of Funds:
Equity share capital (` 10 each) 300 280
9% preference share Capital (` 100 each) 60 40
Investment allowance Reserve 10 4
Profit and Loss Account 68 68
10% Debentures 100 60
Trade Payables 50 30
Tax provision 14 8
Total 602 490
Application of Funds:
Building 120 100
Plant and Machinery 160 140
Investments 80 50
Trade receivables 90 70
Inventories 72 80
Cash and Bank 80 50
Total 602 490
From the following information, you are required to prepare the Balance Sheet
as on 01.04.2018 of a new company, R Ltd., which was formed to takeover
the business of both the companies and took over all the assets and liabilities:
(i) 50% Debenture are to be converted into Equity Shares of the New
Company.
(ii) Investments are non- current in nature.
(iii) Fixed Assets of P Ltd. were valued at 10% above cost and that of Q
Ltd. at 5% above cost.
(iv) 10 % of trade receivables were doubtful for both the companies. Inven-
tories to be carried at cost.
A
M
A
L
G
A
M
A
T
I
O
N
3.84
(v) Preference shareholders were discharged by issuing equal number of
9% preference shares at par.
(vi) Equity shareholders of both the transferor companies are to be dis-
charged by issuing Equity shares of ` 10 each of the new company at
a premium of ` 5 per share.
Give your answer on the basis that amalgamation is in the nature of purchase.
Ans.
M/s. R Ltd.
Balance Sheet as at 1.4.2018
Particulars Notes ` in ‘000
Equity and Liabilities
1 Shareholders’ funds
a b
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Notes to accounts
` in ‘000
1. Share Capital
Equity share capital
5
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3.85
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` in ‘000
Q Ltd.
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,
1. Calculation of value of equity shares issued to transferor companies
0 0 8
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`
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9
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Working Notes:
i a v t b
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s 0
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t s i n i
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c v 1 c % o i o a s k d e i c B b e y i
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`
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a s % a x
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3.
4.
5.
6.
7.
8.
A B P I I T C L 1 T T
A
M
A
L
G
A
M
A
T
I
O
N
3.86
P Ltd. Q Ltd.
` `
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e
s
s
:
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,
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,
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0
2. Number of shares issued to equity shareholders, debenture holders and preference
shareholders
P Ltd. Q Ltd. Total
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s
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%
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f
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a
s
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` ` `
Que. 29 : Sun Ltd. and Moon Ltd. were amalgamated on and from 1st April,
2009. A new company Star Ltd. was formed to takeover the business of the
existing companies. The Balance Sheets of Sun Ltd. and Moon Ltd. as at 31st
March, 2009 are given below:
(` in lakhs)
Liabilities Sun Moon Assets Sun Moon
Ltd. Ltd. Ltd. Ltd.
Share capital: Fixed Assets:
Equity shares of ` 100 400 375 Land & Building 275 200
each
12% Preference shares 150 100 Plant & Machinery 175 125
of ` 100 each Investments 75 25
Reserves and surplus: Current Assets, Loans
and Advances:
Revaluation reserve 75 50 Stock 175 125
General reserve 85 75 Sundry Debtors 125 150
A
M
A
L
G
A
M
A
T
I
O
N
3.87
(` in lakhs)
Liabilities Sun Moon Assets Sun Moon
Ltd. Ltd. Ltd. Ltd.
Investment allowance 25 25 Bills Receivables 25 25
reserve Cash and Bank balances 150 100
Profit and Loss Account 25 15
Secured loan:
10% Debentures (` 100 30 15
each)
Current liabilities and
provisions:
Sundry creditors 135 60
Acceptance 75 35
1,000 750 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 @ ` 30 each, having a face value of ` 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 ` 150 per
share (face value ` 100).
(c) 10% Debenture holders of Sun Ltd. and Moon Ltd. are discharged by
Star Ltd., issuing such number of its 15% Debentures of ` 100 each so
as to maintain the same amount of interest.
(d) Investment allowance reserve is to be maintained for 4 more years.
(e) Liquidation expenses are:
Sun Ltd. ` 2,00,000
Moon Ltd. ` 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) Authorised equity share capital of Star Ltd. is ` 5,00,00,000, divided
into equity shares of ` 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.
(Nov. 2009) (16 Marks)
0 5 0 0 5 0 3 5 0 0 0 5 7 0 0 0
5 2 3 1 9 1 1 7 0 0 0 7 9 5 1 5
` in lakhs
Sun Moon
Ltd.
7 8 1 1 9 4 3 1 3 2 3 9 1
1 1
5
2
Ltd.
2
Balance Sheet of Star Ltd. as at 1st April, 2009
0 5 0 0
5 0 5
1 Z 1
h h
c c
a a
N e e
O h 0 h
I c 5 c 0
T
A a a 5
e e
`
M x
`
A 0 s 0 x s
0 e 0 s e
G 1 1 e
1. Computation of Purchase Consideration
r r
a
L a r
a
A s h s h
`
M e x s e x h s
A r s 0 r s s 0
a e 0 a e 0 0
h ) h r 0 h r 0 0
h c 5 s a , s a 0 ,
0
c a ) 2 0 h 0 0 h ,
0 0
a E 0 1 : 0 s 5 0 s 0 ,
E 0 0 s
r 0 0 ,
1 0 0 , 0
0 0 2 + e ,
0 0 ,
0 0 1 2
1 1 ) + 5 d 5 0
, = 0 0
, = : =
) 0 7 l ,
1 0 ,
1 0 s
5 1 5 1 o 5 m 0 m r 5
f f ) 2 ) 7 ( h , , e
`
`
o o 0 y + 5 ) 2 y ) e = 1 u
i = 1 u
i d x
s 0 + t
i 0 3 ) 1 ( r 5 ) ) r 0 m 0 m l 0
s
e s
e u 3 l
i 2 0 + g e 2 0 3 a 0 = 0 = o 0
r r l m 5 b ( s + 6 n n ) 5 - h 1 l e 1 l e h 1
a a p u + 2
( a e
i 2 i i + 5 1 0 s / a r / a r e /
h h r i 0 i s
e t 5 + d h 2 5 e 0 t
i p 0 t
i p r 0
s s u m 0 ) n L r i
l 7
( 5 + l c 5 1 + 1 ) c p s p s a
l
a S o t u i
b 3 i
u a 7 5 n 0 a e 0 a e h 0
4 5 ( 5
Working Notes:
t c c e i
t n t s 1 0 M + + 2 e 0
, c i
t 0
, c i
t s 0
,
i a a & r + 2 a e n a
i e ( 1 B t 2 r 0 i 0 i y 0
p l l P r e L c ( n 5 1 0 + e 0 e r 0 e r t 0
a 0 5 s y 0 + m r b n s
r l
l d
n
d
n e 7
1
( 5 f ,
0 r u ,
0 r u i
u ,
0
Liabilities
C 5 .
2 e t 5 5 a u e t
n a
t o i m ( s
r 2 5 e 5 a c 0 a c 0
y e – v
r i
r 2 g C p t w a a t o ( 2
( r , h e , h e q ,
t
i r - e u + ( l - D e
r e i d d t s k t k P 1 S S 1 S S E 4
u a C C s a n r c d o n n e c b n R
q S S e c R
5 m o % u c e o a v o e a / ) )
Ans. h e r a
3.88
E E R A
7 I A N 5 C A C G L l n t D B B
S P S ( 1 P I S ( (
b
a
0 0 5 0 0 5 5 5 0 5 0 0 )
0 0 5 5 5 0 5 0
3.89
5 0 1 1 0 2 2 2 5 2 0 5 1 6 3 0 4 0 4 1
` in lakhs
Sun Moon
Ltd.
` in lakhs
Sun Moon
Ltd.
` in lakhs
Sun Moon
Ltd.
4 6 2 1 1 1 1 7 1 6 6 (
0 5 0 0 5 5 5 5 5 5 0 0 0 5 5 0 0 5 )
5
0 2 3 2 7 7 7 7 2 2 5 0 2 3 7 3 7 2
Ltd.
Ltd.
Ltd.
6 8 2 1 1 1 1 0 1 2 7 8 5
(
,
1
0 0 0 0 :
0 0 5 0 t
s
2 4 1 3 e
r
e
t
n
i
f
o
h t
n
h c u
c a o
a e
N e 0 m
O h 0 h 2 a
I
T c 2 c e
a a 0
`
A e x e x m 0
2. Calculation of number of debentures issued
0
`
M s a 0
A 0 s s 0 e s 1 1
1 e e 1 r × ×
G n
1. Computation of Purchase Consideration
r r
a a i 0
L a h a 0
`
A x h h x s t 0 0 0
s s s n , 0 0
M
e s e 0 i 0 0
, 0
A r 0 0 r 0 n a 0 0 ,
0
a 0 0 a 0 o m ,
3 5
0 1 5
5 1
h 0 0
, h ,
0 i ,
3 ,
1
s ,
0 0 s 0 t
a o . .
0 s s
`
0 0 , 0 ,
5 r h t = R R
0 ,
0 5 0 1 e c d
0 2 1 0 d
i a e % % r e
,
0 = = ,
0 = s e u 0 = 0 = e v
0 0 n 0 s 1 s 1 s v r
e
, m 4 , m o 0 s
i x e
r x e
r o n s
0 u x 5 u c 1 e u u o e
2 1 0 0 r
3. Net assets taken over
i i e b 0 t 0 t y n e i
t R
= m 0 = m s 0 n 0 n r e v a
f k l
`
e 0 e a o o , e , e g e o r a
l
a r 1 l
a r h t 0 b 0 b r n n a
t s e t
t p / t p c s s 0 e 0 e e i i
h s r n d i
i 0 i r e e ,
0 D ,
5 D v d c r e k s o e i
s p
p s 0 p s u r r 3 % 1 % o l
i o l n e
i t
i k n a
a e
i 0 a e
i p u u 5 5 n u a s t b a t d e a C l
l
c t , c t t t 1 1 b m t b a i
l s e l t o / i
e i
r 0 e i
r f n n e n e v b i e r b s c ) w
`
r u 0
, r u o e e = f
o = f
o k d d e d i
e d b r C a t e l
l d
a c 5 a c t b b t t a
t n n c n a
i u y e s i o
h e 7 h e n e e s r s r a a m y e a L t y a s a w
S S , S S u D D e e e e s
t t k r r n r p s h d o
3 o r b r b
e d t s
e c d h :
s e d a c o g
% % e m e m s n n o n s
l s s b n s
l t r o t
m 0 5 t u t u s a a
l v t u l
i a e e u l
i e u e
A 1 1 n N n N A L P n S S B C L D S B N P G N
I I I (
A
M
A
L
G
A
M
A
T
I
O
N
3.90
L
i
qb
u
i
dd
a
t
i
oi
ne
ed
xt
po
eG
no
s
e
sd
o
fi
Sl
ua
nc
Lo
t
d
.n
at
ni
dt
Mh
ob
oo
no
Lk
t
d
,o
.
2S
l
ar
kL
ht
sd
a.
n
d
1
l
a
k
h
s
r
e
s
p
e
c
t
i
v
e
l
y
4. ` `
w
i
l
l
e
e
b
t
o
w
l
c
u
n
e
s
f
t
a
Que. 30 : P Ltd. and Q Ltd. were carrying on the business of manufacturing
of auto components. Both the companies decided to amalgamate and a new
company PQ Ltd. is to be formed with an Authorized Capital of ` 10,00,000
divided into 1,00,000 equity shares of ` 10 each. The Balance Sheet of the
companies as on 31.03.2014 were as under:
P Limited Balance Sheet as at 31.03.2014
Particulars Amount (`)
I. Equity and Liabilities
1. Shareholder’s Fund
(a) Share Capital 1,40,000
(b) Reserves & Surplus
Profit & Loss A/c 30,000
2. Non-Current Liabilities
8 % Secured Debentures 1,10,000
3. Current Liabilities
Trade Payable 54,000
Total 3,34,000
II. Assets
1. Non-current Assets
(a) Fixed Assets
Building at cost less Depreciation 1,00,000
Plant & Machinery at cost less Depreciation 25,000
2. Current Assets
(a) Inventories 1,35,000
(b) Trade Receivables 44,000
(c) Cash at bank 30,000
Total 3,34,000
Q Limited
Balance Sheet as at 31.03.2014
Particulars Amount (` )
I. Equity and Liabilities
1. Shareholder’s Fund
(a) Share Capital 2,50,000
(b) Reserves & Surplus
General Reserve 1,20,000
Profit & Loss A/c 35,000
A
M
A
L
G
A
M
A
T
I
O
N
3.91
Particulars Amount (` )
2. Current Liabilities
Trade Payables 1,40,000
Total 5,45,000
II. Assets
1. Non-current assets
(a) Fixed Assets
Building at cost less depreciation 1,90,000
Plant & Machinery at cost less depreciation 80,000
Furniture & Fixture at cost less depreciation 25,000
2. Current Assets
(a) Inventories 50,000
(b) Trade Receivables 1,42,000
(c) Cash at bank 58,000
Total 5,45,000
The assets and liabilities of the existing companies are to be transferred at
book value with the exception of some items detailed below:
(i) Goodwill of P Ltd. was worth ` 50,000 and of Q Ltd. was worth
` 1,50,000.
(ii) Furniture & Fixture of Q Ltd. was valued at ` 35,000.
(iii) The debtors of P Ltd. are realized fully and bank balance of P Ltd. are
to be retained by the liquidator and the sundry creditors are to be paid
out of the proceeds thereof.
(iv) The debentures of P Ltd. are to be discharged by issue of 8% debentures
of PQ Ltd. at a premium of 10%.
You are required to:
(i) Compute the basis on which shares in PQ Ltd. will be issued at par to
the shareholders of the existing companies.
(ii) Draw up a Balance Sheet of PQ Ltd. as at 1st April, 2014, the date of
completion of amalgamation,
(iii) Write up journal entries including bank entries for closing the books
of P Ltd. (May 2014) (16 Marks)
Ans.
Computation of Purchase Consideration
P Ltd. (` ) Q Ltd. (` )
A
s
s
e
t
s
t
a
k
e
n
o
v
e
r
:
G
o
o
d
w
i
l
l
5
0
,
0
0
0
1
,
5
0
,
0
0
0
B
u
i
l
d
i
n
g
1
,
0
0
,
0
0
0
1
,
9
0
,
0
0
0
P
l
a
n
t
&
M
a
c
h
i
n
e
r
y
2
5
,
0
0
0 -
8
0
,
0
0
0
F
u
r
n
i
t
u
r
e
&
F
i
x
t
u
r
e
s
3
5
,
0
0
0
0 0 0 0 - 0
) 0 0 0 0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Q Ltd. (` )
Amount (` )
`
0 0 0 0 0 0 5 0 0 0 0 0 0 0 0 0 0 0 0
,
0 ,
2 ,
8 ,
5 0
, ,
5 ,
6 ,
4 ,
1 ,
0 ,
0 ,
5 ,
0 ,
0 ,
5 ,
2 ,
8 ,
5 ,
0
5 4 5 0 0 6 5 5 1 1 4 1 3 0 8 4 5 1 0
,
1 ,
7 4
, ,
5 ,
7 ,
1 ,
1 ,
0 ,
4 ,
2 ,
1 ,
1 ,
0 ,
0
1
( 1 1 1
0 - - 0 ) -
0 0 0
0 0 0 0
P Ltd. (` )
0 0 0 0 9
,
5 ,
0 0
, ,
9 ,
8
3 1 1 8 1
, , 2 ,
Note
, 1 2 3 4 5
No.
1 3 1 1
(
h
c
a
e
PQ Limited Balance Sheet as at 1st April, 2014
N 0
1
O
I
f
`
T
A o
M .
d
A t
G L
L Q
A
M P
A f
o
s h
e c
r a
a s e
h g 0
s n
i 1
r
e f s s w s
v o u e e 7
o s l i
t o l f
e d p i
l r s s b o
I. Equity and Liabilities
n r u n l r i r s e t a s
e e s u a u b o e l e v e
k v s
i F t S a b i
t b s s i r
Notes to Accounts:
s o i i i a s t s s e
Share Capital
e a y s p & L m l
i y a e t e c a
l
b t n b ’
r a t r b a t s
s e i
r e k h
s s
Authorized
a s
e s e e d e C e n e a P n A s
s o R n
v k i e l k d e v e t
- i e e t e a 0
i n t
i r b a e l r r
e r g L r d A n B 0
s e l
i u a t fi o a s r n t d r e t e d 0
e c a b t
n y s s
i h h e u o n a u x e n v a t
a ,
0
i e B t t c r c i l r
Particulars
r a e a e a e
r S R - L e T - F e b e n
I T 0
o R t i P r l r h ,
II. Assets
t a L b s
s s a n r n b i r s 1
n e e e A ear h ) ) o ) u ) l o ) i g u ) ) a
e d h :
s D d bp S N C a N g n C C l
a
a s s a t ( ( ( ( t ( n a ( ( t
a
b
a
b
v a e % e ot ) ) ) o ) a t ) ) o
3.92
n r r N 1 2 3 1 n 2
T C L T Ta T T T
1
I 8 ( ( ( ( I ( (
c
.
0 0 0 0 0 0 0 0 m 0 0 0 0 0
3.93
0 0 0 0 0 0 0 0 0 0 0 0 0
`
`
0 0 0 0 0 0 0 0 u
i 0 0 0 0 0
,
4 ,
1 ,
0 ,
0 ,
5 ,
5 ,
0 ,
0 m ,
0 ,
5 ,
5 ,
4 ,
4
5
, 1 1
, 9
, 0
, 3 3
, 0
, e 0
, 2 3
, 4 6
,
7 1 2 1 4 2 r 1 1 1
p
%
0
1
oh) 0 0 0 0 0 0 t
a 0 0 0
t 0 0 0 0 0 0 0 0 0
`
tas 0 0 0 0 0 0 .
d 0 0 0
n c ,
0 ,
0 ,
5 ,
0 ,
0 ,
0 t ,
4 ,
0 ,
4
an 0
, 9
, 2 8 5 5
, L 0
, 1
, 5
ui 1 1 1 P 3 1
In the books of P Ltd. (Journal Entries)
sd
r f
uve o
pei s
r
pec e . . r
.
ur d
l r r
o D D D
dg
i h
a n
i e
pbe r
N u
t .
O ys
l n 0 o
I l t e 0 t
T u n 0
, d
A fe b 1 e
M sm e 1 r
A a y d r
G a g e
f
`
L dp n
i = s
A et
t t n o
t
t u s
i % a
M o o x 0 r d
Issued, Subscribed and Paid up
A l
lth t e 1 t e
r
Computation of Securities Premium
a i n e x h r
ew u h 0 s
a t e
h r n o t 0 y c n f
s
c a c o 0 r s
e t u n
a o
i c t
. , e l t n o
Long term borrowings -
e st A d 0 n b p u c a
r
e a t 1 i a e) )
Tangible Fixed Assets
0 r m e L , t
n h cnt o c t t
n
1 a m y r 1 c v
i xu c A su
ha u r u Q u e eo c e
Reserve & Surplus
f
f slg i e t o a s
e c A n i
t o
x P sc
`
o m s n
i i = c M i e t s s o
i ic
l
e
Intangible Asset
s ea e r h F y c g r
o R e c e e t i c
vm r b A n & s A l a b
e
r oa P u
t
c
a & d
m
u i
d t
t
n e s r
u b
a z
i aA
i
a bf s n e i n l n e d a n t y l l n
h ao e e M e
r l u m o
i i a v a l
lto
i n a a l
lto
i
s i b g l
i s t u l n r a e e a
ee t
i e n . & . u
t . w . s e a B P I T a b P R a
0 hm r i . . . d i r z giz giz
Working Note:
0 t u D d d d t d d i
n d d d t s P i o o o o nl e e o nl
4 lhe c l
i t t n t t r t o t L e l
a T T T T i a D d T i a
, l % u L L a L L u L o L r s e e a e
5 A c e
S B P Q l
P P Q F Q G P
.
Q u e
i R Be % r Be
7 (s 8 t
n t
i (R 8 T (R
e r
b u
e c
e
5
D S 1 2
0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0
envisaged a share capital equal to the combined capital of P Ltd. and Q Ltd.
Que. 31 : P Ltd. and Q Ltd. agreed to amalgamate their business. The scheme
for the purpose of acquiring the assets, liabilities and undertakings of the two
The Balance Sheets of P Ltd. and Q Ltd. as on 31st March, 2017 (the date of
`
Q Ltd. `
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
0 9 4 4 9 9 9 0
7
, 8
, 4 5 8
, 3 8
, 2
1 1 1 1
0 0 0 0 0 0 0 0
P Ltd. `
0 0 0 0 0 0 0 0
`
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
0 0 9 4 4 9 9 9
4
, 3 8
, 4 5 8
, 3 0
,
1 1 1 2
. r
r . .
r .
r .
r .
r .
r .
r
D D D D D D D D
Non-current
N s
e )
O l s
r
Assets:
Assets:
b n
Q Ltd. ` Assets
Summarised balance sheet as at 31-03-2017
I ) o
companies in exchange for share in PQ Ltd.
T a s i t e
A v e d d
l
M i l
b e.) )
e d o
e a vd r e
r h
A t y ) c y i
e t t
u n r e
G n t e e
r a cL g u e r
L u i
u u P eQ fio f a
A o d e r s h
M c q d e g c n) s
c E n a d nP n c ant t o
A A o
i r a of i A r n t
amalgamation) are given below:
o t t r i
t o c ’ t u u
s
’ t t a t m T a s n s no o e
r d n r n r e a r
l oc c d
e e) e
u d o
u r o e r a e i
t c c . a
d r t o i o f t da d
b l a A A d m
l
P Ltd. `
t o r
e n c s c d e i
s h ( o z’ ’ t
l n h f u c n c e t t d nS t h i
lrs s L t t
a
t u e s o A o A v n n a oy n e a r n n
i o r nc ede e Q e
p
a
c a
c h ac n c
e
i
n e u
o
u
o
m .
d ci
eu
t u r
o a r l d
l P u
o m
C A S r
t A o s o c c c t
n t s c h no o n c y
’ i
t i
a t t e c c L . a q c S oh h i c a
e s y ys a n
h u a r A A e d hE A y tre e s A p
r s t
ier z c z h m Q t cf fi r e l
a o t
i u i
l i
l
r o a s n k y P L r t
n i oa a r k a
h
S
L u
q qld a u
e P c a
c e C
o
i n
a a n Q uo o u
i q rh h a
h
n
a n
& E Eo t p i pm t pS S fi
y h d R A R gl) a B s P r a E y y S B
Shareholders
t t o ge t g l z
i g e go z o
i gt t g
i fi nr
i L o i
n k o i
nu l o n
i r o nf
i l ni
i i o o n
i
o T T T T T T T T
Liabilities
u e a e n ef a e a e e a e u u e
liabilities:
q Bh Q B a e h e Bq q
Equity &
r Bn R B Bh R B
E P (S P ( B (i ( S (t (E E (
3.94
3 4 5 6 7 8 9
A
M
A
L
G
A
M
A
T
I
O
N
3.95
Liabilities P Ltd. ` Q Ltd. ` Assets P Ltd. ` Q Ltd. `
Fund
(a) Share Capital 6,00,000 8,40,000 Fixed Assets 7,20,000 10,80,000
(excluding
Goodwill)
(b) Reserves 10,20,000 6,00,000 Current Assets
Current (a) Inventories 3,60,000 6,60,000
Liabilities
Bank Overdraft - 5,40,000 (b) Trade 4,80,000 7,80,000
receivables
Trade payables 2,40,000 5,40,000 (c) Cash at Bank 3,00,000 -
18,60,000 25,20,000 18,60,000 25,20,000
The consideration was to be based on the net assets of the companies as shown
in the above Balance Sheets, but subject to an additional payment to P Ltd.
for its goodwill to be calculated as its weighted average of net profits for the
three years ended 31st March, 2017. The weights for this purpose for the
years 2014-15, 2015-16 and 2016-17 were agreed as 1, 2 and 3 respectively.
The profit had been:
2014-15 ` 3,00,000; 2015-16 ` 5,25,000 and 2016-17 ` 6,30,000.
The shares of PQ Ltd. were to be issued to P Ltd. and Q Ltd. at a premium
and in proportion to the agreed net assets value of these companies.
In order to raise working capital, PQ Ltd. increased its authorized capital by
` 12,00,000 and proceeded to issue 72,000 shares of ` 10 each at the same
rate of premium as issued for discharging purchase consideration to P Ltd.
and Q Ltd.
You are required to:
(i) Calculate the number of shares issued to P Ltd. and Q Ltd.; and
(ii) Prepare the Balance Sheet of PQ Ltd. as per Schedule III after recording
its journal entries. (May 2017) (16 Marks)
Ans.
(i) Computation of number of shares issued to P Ltd. and Q Ltd.:
Aa
ms
op
ue
n
tb
o
fl
Sn
hc
a
r
eh
Ce
ae
p
i
t
a
l
`
r
a
a
e
s
t
P
L
t
d
.
6
,
0
0
,
0
0
0
Q
L
t
d
.
8
,
4
0
,
0
0
0
1
4
,
4
0
,
0
0
0
S
h
a
r
e
o
f
P
L
t
d
.
= = = =
1
4
,
4
0
,
0
0
0
x
[
2
1
,
6
0
,
0
0
0
/
(
2
1
,
6
0
,
0
0
0
+
1
4
,
4
0
,
0
0
0
)
]
`
8
,
6
4
,
0
0
0
o
r
8
6
,
4
0
0
s
h
a
r
e
s
`
S
e
c
u
r
i
t
i
e
s
p
r
e
m
i
u
m
2
1
,
6
0
,
0
0
0
-
8
,
6
4
,
0
0
0
=
1
2
,
9
6
,
0
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(ii) Journal Entries in the books of PQ Ltd.
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h . h h a o o ui c u l y p n c u l r y p n s s
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o i Q h e ts
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t l n f s i
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t s c v o e s
t o y i
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a o o y i
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Particulars
8 f e m 5 s q
i q
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o i
t u s L L t e i a o r t T B a o r B T B a E S t a a E S t a A E
d i
r i d e gbl w t e a g t e g d gh d gh
e e
r u m e n o o na d d n h o o n d n o o o n i o o nc i o o nc k o
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s T T i o e e d s T T i e e d T T T i u T T i r u T T i r n T
s h c e s u e y o x v a a e x v a e q e q e a
Bu Bu
3.96
s e r s Ba G i n r B i n r B i i
I S S P I B (p F I T C ( F I T ( L (p L (p B
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
3.97
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Cr.
`
Amount (`) Amount (`)
0
, 0
, 0
, 0
, 0
. 0
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8
, 6
, 4
, 4
, 8
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, 0
, 4
, 2
, 6
, 0
, 2
, 4
, 6
, 4
, 4
,
0 1 2 5 7 7 8 5 0 2 1 7 6 1 2 5
1 2 3 6 1 1 1 2 6 2 2 3
Balance Sheet of PQ Ltd. on 31st March, 2017 after amalgamation
n
o
Dr.
i
Notes
1 2 3 t
a
r
e
d
i
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) n
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0
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t s n
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t o
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i
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d B e l
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e ( 0 s
s w 6 0 t 0 u 0 a o
i
u s 0 a d ,
0 n 1 1 ht
s s g 0 + 8 e d sa )
s u n ,
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a i 0m s
i i l o 4 a e
Equity and Liabilities
l l f f
`
l p w 4 b g 0 ( v a p 0a r
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a r ,
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g ( 0 s i
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o , d ,
Non-current assets
m t
i u r ( n s 0 e q i
p s s 4 a h
Current liabilities
u p S r s a t
e 6 l
b e a e n e 4m s
r a r ,
2 Reserves and Surplus
i a o e T s ,
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m c l d b l s ( d a 0
Current assets
a
t n b s a v
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e e i a m a t s e a r s s vf i ,
r r e e b oo
Particulars
p y e c a 6
3 Intangible Assets
c y y m
Notes to accounts
p a a s r a s l i d h i 1
s hl) c e e p s b
i
r
o e
r n S
t
i r
c t
i be e ,
2
e sa v t a t u s u am r
1 Share Capital
i t e r -
t e d g n e a l d q b q e p r
t yi r e r d l n d h a eh
Assets
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r t
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e Eg o 0 0 o r r 1 d
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e r A 2 I 2 ( S ( G
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A
M
A
L
G
A
M
A
T
I
O
N
3.98
Working Notes:
1. Calculation of goodwill
Particulars Amount Weight Weighted
amount
2
0
1
4
-
1
5
3
,
0
0
,
0
0
0
1 2 3 6
3
,
0
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,
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o
t
a
l
(
a
+
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)
1
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e
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/
6
]
`
G
o
o
d
w
i
l
l
5
,
4
0
,
0
0
0
2. Computation of purchase consideration
P Ltd. ` Q Ltd. `
A
s
s
e
t
s
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o
o
d
w
i
l
l
5
,
4
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i
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r
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y
a
b
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5
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4
0
,
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P
u
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c
h
a
s
e
c
o
n
s
i
d
e
r
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t
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n
2
1
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6
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0
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4
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0
,
0
0
0
Que. 32 : The financial position of X Ltd. and Y Ltd. as on 31st March, 2018
was as under:
X Ltd. (` ) Y Ltd. (` )
Equity and Liabilities
Equity Shares of ` 10 each 30,00,000 9,00,000
9% Preference Shares of ` 100 each 3,00,000 -
10% Preference Shares of ` 100 each - 3,00,000
General Reserve 2,10,000 2,10,000
Retirement Gratuity Fund (long-term) 1,50,000 60,000
Trade Payables 3,90,000 2,40,000
Total 40,50,000 17,10,000
Assets
Goodwill 1,50,000 75,000
Land & Buildings 9,00,000 3,00,000
Plant & Machinery 15,00,000 4,50,000
A
M
A
L
G
A
M
A
T
I
O
N
3.99
X Ltd. (` ) Y Ltd. (` )
Inventories 7,50,000 5,25,000
Trade Receivables 6,00,000 3,00,000
Cash and Bank 1,50,000 60,000
Total 40,50,000 17,10,000
X Ltd. absorbs Y Ltd. on the following terms:
(i) 10% Preference Shareholders are to be paid at 10% premium by issue
of 9% Preference Shares of X Ltd.
(ii) Goodwill of Y Ltd. on absorption is to be computed based on two times
of average profits of preceding three financial years (2016-17: ` 90,000;
2015-16: ` 78,000 and 2014-15: ` 72,000). The profits of 2014 -15 in-
cluded credit of an insurance claim of ` 25,000 (fire occurred in 2013-
14 and loss by fire ` 30,000 was booked in Profit and Loss Account of
that year). In the year 2015-16, there was an embezzlement of cash by
an employee amounting to ` 10,000.
(iii) Land & Buildings are valued at ` 5,00,000 and the Plant & Machinery
at ` 4,00,000.
(iv) Inventories are to be taken over at 10% less value and Provision for
Doubtful Debts is to be created @ 2.5%.
(v) There was an unrecorded current asset in the books of Y Ltd. whose
fair value amounted to ` 15,000 and such asset was also taken over by
X Ltd.
(vi) The trade payables of Y Ltd. included ` 20,000 payable to X Ltd.
(vii) Equity Shareholders of Y Ltd. will be issued Equity Shares @ 5% pre-
mium.
You are required to :
(i) Prepare Realisation A/c in the books of Y Ltd.
(ii) Show journal entries in the books of X Ltd.
(iii) Prepare the Balance Sheet of X Ltd. after absorption as at 31st March,
2018. (May 2018 - New Course) (20 Marks)
Ans.
In the Books of Y Ltd. Realisation Account
` `
T
o
S
u
n
d
r
y
A
s
s
e
t
s
:
B
y
R
e
t
i
r
e
m
e
n
t
G
r
a
t
u
i
t
y
6
0
,
0
0
0
G
o
o
d
w
i
l
l
7
5
,
0
0
0
F
u
n
d
L
a
n
d
&
B
u
i
l
d
i
n
g
3
,
0
0
,
0
0
0
B
y
T
r
a
d
e
p
a
y
a
b
l
e
s
2
,
4
0
,
0
0
0
P
l
a
n
t
&
M
a
c
h
i
n
e
r
y
4
,
5
0
,
0
0
0
B
y
X
L
t
d
.
(
P
u
r
c
h
a
s
e
1
5
,
9
0
,
0
0
0
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n
v
e
n
t
o
r
y
5
,
2
5
,
0
0
0
C
o
n
s
i
d
e
r
a
t
i
o
n
)
T
r
a
d
e
r
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c
e
i
v
a
b
l
e
s
3
,
0
0
,
0
0
0
B
a
n
k
6
0
,
0
0
0
1
7
,
1
0
,
0
0
0
0 0 0 0
0 0 0 0
Cr.
`
`
0
, 0
, 0
, 0
,
0 0 0 0 0 0 0
9 0 0 0 0 0 3 7 1
,
8 0
, 0 0 0
, 0 0
, 0 ,
8 ,
2 ,
2
1 0 0 0
, 0 0 0
, 0 0 4
9
, 0
, 0 0 9
, 0 0
, 0
,
5 0 4
, 5
, 5 3
, 2 0
1 6 2 7 1 3 1 6
Dr.
`
Notes
0 0 1 2 3
0 0 0 0 0 0 0
Balance Sheet of X Ltd. (after absorption)
0
, 0 0 0 0 0 0 0 0
,
0 0 0 5 0
In the Books of X Ltd. Journal Entries
0 , , , , , 0 0 0
9
, 0 0 0 2 0 0
, 0
, 9
,
5 5
, 0
, 0
, 7
, 0
, 0 5 5
1 1 5 4 4 3 6 1 1
.
r . r
r . r
. r
. r
. r
. r
. .
r
as at 31st March, 2018
D D D D D D D D D
N .
)
O e
I 0 0 0 v
T 0 0 0 r o
A 0 0 0 e b
M , , , t
n p a
A 0 0 0 s s
3 5
, 9
, t u a a
G 1 8 n o d
L 1 u c r c e
A o c e / fi
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r c A v A s
A n e c s o i
u v A t n l
a t
a
o o d b e t s
c e k i
p c
c n n t D a a / c n s s
e u n l c t / o u
Non-current liabilities
A k C A i n
Equity and Liabilities
. a t t F u u / s A t l
p o
n e l a
Shareholders’ funds
d t t
n n y o f
t A i e a r r i
s
t . t
n u u t
i c b t
i c r t m e u i
s L d o u o u c u e
s l / a i u d S v
r c t u c o c t A a i
b A h p i i o
e ) / Y L o c c c a o a S a m s l d r
d n A f c A c A r s
e D h i .
d C n a n p
l o o Y c A G l c L t e e o t
i
o i
t e f t A y t s b r r . L c e r C p a m
h a s s o n r n s t t a o u dn) n r
a P a s r
e s a r g e u e
l e n y f P no Y e s e c e e
r i
l h o s u n n o b s
s e a n s ai r h e s v t
e a a c t
a s
e o i i
h c a t a m p o s t f e
f S i a e r -
c s
r n ) h e r n c d
l c c v n i e sa
t o e y t
i h r e g
n e o n S R u d
i i c i A i u d e e s
i n e u s r t r c a s n
e d o P u s A u a e o e r
i d v i s l r P i u r h e o
r l m i
t y n u l B M y c c d t a o s s a o u c u S R L
Particulars
e o p t s q
i b l r e c r e r r u Av t % q e P
f h u i
u o s L i & & o r A o R T P B a 9 E S
e i m t e g w t c ged d g A B A
r e
r m e q fi n o n d d t n e k e o o o o ne i o o o n
P e d E oF i
s T i o n e d n r T T T T i u T T T i
3.100
a r e r/ u e o n a v a n e r q e
o h P o PB B a l n r a Bg i B
T S ( R T ( B ( G L P I T B U (a L (
2
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
3.101
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
`
0
, 5
, 5
, 0
, 0
, 5
, 0
, 0
, 0
, 5
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 5
, 0
, 0
, 0
,
0 7 7 0 0 2 0 5 0 7 0 0 0 0 0 0 0 0 7 0 0 0
1
, 2
, 0
, 0
, 2
, 8
, 1 1
, 2
, 0
, 3
, 3
, 6 1
, 7
, 1
, 1
, 0
, 0
, 0
,
6 9 3 3 2 8 2 9 2 6 8 2 2 2 6 4 9 3
5 3 1 5 4 4 1 1 3
0 e
0 c
0
, n
0 1 e
Notes
4 5 6 7 8 9 1 0 r
1 2
, e
1 ) f
e
esh r
va P
oc 0
br 0
ao 3
,h)
ff
o
3 s
n ea
tha vc
u t or
N Or bo
O (e af
I dth fn
o
T i a
A a o th
u
M pn t
A yio Or
G l (e
l
u t hh
L
fra ct
A e ao
M hd en
A s csi 0o
t an 0ti
n eo 1a
e
l 0c r
n a 1n fde
`
s
t v o ) . s
t
o
i e i i i
s * d b
s s u d sn 0 e
`
i s q fe e d t e
Non-current assets
v s e s e o l r o n 0 a D
Current liabilities
s o s t
e l
b A u a a c 0
, n
ss u
5. Short-term Provisions
e t h t hn 0 l
2. Reserves and Surplus
r t i
3. Long-term provisions
l p e s
s a n s e
r s i Si f 2 m u
i p
Current assets
b s s a v
i e a l a a y - f
t
a m t s s e r c a hre ed m t 0 i
l b y
y e a e e c r t c ce i 0 e
Notes to accounts
a r s e l i
r e u d i
p Se e nu u
i u 0 s u s r
e
e s b n e t , o g
4. Trade payables
P l yw r es
6. Tangible assets
t a b i o
t r c a a a r m v a 0 g D n n
e -
t s i g e r c t s e s r r 4 n i i
1 Share Capital
d r l t d g n n d e h l i e h f i e
r e G , i r d h
a o a
t e
s e n a e a h s a
t e u r s e e s 2 w o l
i c
r h o s x a t v r t a o r qa e r r P e t + f u a
T S T A i
F T n n T O C T a Eh c Pe s R n O M
I I h e n B
Particulars
s 0S n %w e
i l 0 l
a o
0y e 9es t
i a m 0 u i & &
A B A A B C D y
t 0it r r r e 0
, t s
i
i , e
f 0r l
a u e l
a r
i 0 u v d t
n l
a
u 0 u e 0a t c n t t 9 M o n a t
q 2q
, r 3h
, o e e o e ,
3 r a l o
E 4 E P 6 S T S G T R ( * P L P T
2
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 )
0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
`
0 5 0 0 0 0 0 0 0 0 0 0 0 5 0 0 0 5 0 0 0 0 0 0 0
,
0 ,
2 ,
0 ,
5 ,
0 ,
0 ,
8 ,
7 ,
5 ,
5 ,
0 ,
0 ,
0 ,
2 ,
0 ,
5 ,
0 ,
7 5
, ,
0 ,
0 ,
0 ,
0 ,
0 ,
0
0 2 8 1 1 9 8 4 2 7 5 0 0 7 0 1 6 9 7 9 0 3 3 6 9
,
3 ,
2 ,
8 ,
2 ,
2 ,
1 ,
5 ,
4 ,
4 ,
3 ,
8 0
, ,
5 ,
3 ,
3 ,
2 ,
5
1 0 1 3 1 1 1
0 (
0
,
0
5
,
1
0 0 0
0 0 0
`
= 0
, 0
, 5
,
2 0 0 7 0
6 4
, 0
x 2 0
0 ,
0
0 2
0
, ,
1
5 f
7 o
` e
= u
N ) s s
s
O )
0 0 t i
I 0 0 fi y
T 0 0 o b
A ,
0 ,
0 ) )
0 r
M 6 0 p d
2 0 0 e e
A - + 0 0
, g fi
G 0 0 , a s
i
L 0 0 5
1 2 r . t
Computation of Purchase Consideration:
A 0 0 e d a m
M , 0
, + - v t s u
0 0 0 0 a n L e i
A ) 0
, 5 0 0 f o Y . b m
0 3 , 0 ,
0 o i d e
0 1 , t f t o r
5 + ( 8 2 s s a o L t
) ,
2 0 7 7 e t
b r
e s X . P
d
0 7 m %
11. Cash and cash equivalents
0 , 0 i e d r
e t
0 4 0 ( ( t d i f L 5
`
`
, , d d l s d o t
0 2 n l
1. Computation of goodwill
0 + 0 e t
e u o : o s Y a
5
, 0 , t t
a y f r h e .
f d
s s C e
10. Other current Assets
1 0 6
( u j
u t
i t
b e r o t
0 j d u e d r a s L
+ , d d e t u s n a h r
0 u y s a o a u h m S e
9. Trade receivables
0 5 a a l r s t s d X
7. Intangible assets
0 , 7 6 5 a g e e e r e h s S u e d f
l
0 7
( 1 1 -
1 v n n l s :
s G l
b r c
r a e i c o o
, - i b s o m n
0
5 6 -
5 4 t e
fi i
d h a a k e
i t
n a
y f u d c
e n e e h s
e e
Working Notes:
, 8. Inventories 1 1 1 o b l
i c v d n t
i e a n P e
fir r r r r
1 0 0 0 r o u a i
e e a l
i m o / s e P e a a
( 2 2 2 p t B M y c d b p i s
t i f
e h h
l
l f o
f o
f l l
l r e r B a e e s
i e t f % r S S
i o e l i o r o t i r d v s a e 0 P
w g i w & & t c a L i
t a o s s r 1 y y
d t fi
t fi
t a w
r d d t n e e h : e r r A e P : % t
i t l
o fi d o n e d r s R T P b % d 9 u i a
3.102
o o o o e o o n a v a n s s t
e u t
r r r v o a l n r a e o 0 d q q o
G P P P A G G L P I T U C L N T 1 A E e T
2.
A
M
A
L
G
A
M
A
T
I
O
N
3.103
MIX PROBLEMS - MERGER AND PURCHASE
Que. 33 : H Ltd. and N Ltd. are to be amalgamated into H N Ltd. The new
company is to takeover all the assets and liabilities of the amalgamating
companies.
Assets and Liabilities of H Ltd. are to be taken over at book values in exchange
of shares in H N Ltd. Three shares in the new company are to be issued at a
premium of 20% for every two shares of H Ltd.
The approved scheme for N Ltd. is as follows:
1. 10% Preference shareholders are to be allowed two 15% Preference
shares of ` 100 each in H N Ltd. for three Preference shares held in N
Ltd.
2. The Debentures of N Ltd. are to be paid off at 5% discount by the issue
of debentures of H N Ltd. at par.
3. The Equity shareholders of N Ltd. are to be allowed as many shares at
par in H N Ltd. as will cover the balance on their account and for this
purpose, plant and machinery is to be valued less by 15% and obsolete
stock forming 10% of the overall stock value is to be treated as worth-
less.
The summarised Balance Sheets of the two companies prior to amalgamation
are as follows:
Liabilities H Ltd. N Ltd. Assets H Ltd. N Ltd.
` ` ` `
Equity Shares of 6,40,000 12,50,000 Plant and Machinery 12,80,000 20,00,000
` 10 each
10% Preference - 7,50,000 Trade receivables 1,52,000 1,25,000
Shares of ` 100
each
General Reserves 8,80,000 - Inventory 1,00,000 1,50,000
Secured - 5,00,000 Cash and Bank 1,08,000 1,00,000
Debentures Balance
Trade payables 1,20,000 2,25,000 Profit and Loss - 3,50,000
Account
16,40,000 27,25,000 16,40,000 27,25,000
You are required to show the Journal Entries and the Balance Sheet of the
amalgamated company immediately after amalgamation.
Ans.
In the books of H N Ltd. (Amalgamated Company)
Journal Entries
Particulars Debit Credit
` `
1
.
B
u
s
i
n
e
s
s
P
u
r
c
h
a
s
e
A
/
c
D
r
.
2
5
,
1
2
,
0
0
0
0 0 0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0 0
Credit
`
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
2 0 0 8 2 5 5 0 0 2 0 0 5
5
, 6
, 2
, 6
, 5
, 7
, 2
, 6
, 6
, 9
, 6
, 0
, 7
,
1 3 1 3 1 4 2 3 9 1 8 5 4
1 1 1 1
0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0
Debit
`
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
0 2 0 8 0 5 5 0 2 0 5
8
, 5
, 0
, 0
, 0
, 2
, 3
, 0
, 5
, 6
, 7
,
2 1 1 1 7 1 1 1 1 3 4
1 1 1 1
. r
r . r
. r
. . r
r . r
. r
. .
r .
r .
r
D D D D D D D D D D D
)
r )
N e 0
O N v 0 m e
s
I o 0
, n a
T d 0 e u
i h
A n n 0 k c c
M a e ,
5 a m / r
. - k t e A u t
A d 0 a
t f . r p s
G t 0 . o d p l n
i
L L 0 d % t % a
t e a
A H , t 5 L 0 i g c g
M 0 L 9 N 2 p r
a / a
f 8
, H ( c c a A
A o 8 c c c f / c t / C h d
s ( / f / / o A a A e c . e
. . s c o s l A d) l r s
i d u
d d e ) c / A s A c A e a e. a a d t s
t t n e
t A e e s e i t m ud c t h L s
i
L L i o c / s i
t c r / s t
i c i
p u sLt / i
p o
s A A e a i A e A a l
i a i s A a S t N s
H N u N s v h l
i d s h b A m i . e s f c e
r )
f f b g y c e r c b y c l e c a . C sH d C c e o / ut.
d
o o f r A c l e r a r A c o l r i d e e
r e t e n r A t
o n
i e s / b s u i
l e s / h b u l t r r f L r e a s
r n L
s
r s
r k n e A a e d n e A a d L a P a o a r h e s e
e i l y P i l e y P n s hs N s e
o
t o
t s r
o h b k a R s n h b k r a s a H h e sr h e
f f) d
l r bN
a a a c a c n p l s a c a c n u
t p s f S i
t e f S e o n o u
t ef
d d h W a v / a a e s a v / a n e s o y i yd
t o y r o h n do
i i c M i A B e r
e ) n t M i A B e e n t
e t r i l s t P ei e nes
u u r r
e e d n00 i e e b d i s r i u u o r i uat e b
u d c y d a s s d c y d a s s o u c qh o u % sr r wr
Particulars
q
i q
i p f n e r r e0 u s n e r e r u a t q e ee t q 5 s u e ou
L L e r o n T G2, B a r o n D T B a E S r a E 1 i e t D t
g R a e t a g a e t a g) d ga d gid n gn
o o n - t d n h o o,1 o n t d n h o o o nr i o o nh i o o ns e o ne
T T i . n a e s T T5 T i n a e s T T T i e u T T i s u T T i n b T i b
e d a v a e a v a e q e q e e e
B t
L l
P
r
T n C B l
P
r
T n C Bv i
L Bo i
L Bo D Be
( I ( I (o (t (c (d
3.104
.
2 .
3 .
4 .
5 .
6
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 = s
i
3.105
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 s
`
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 r n
,
0 ,
0 ,
5 ,
5 ,
0 ,
0 ,
5 ,
7 ,
8 ,
0 ,
0 ,
0 ,
0 ,
8 ,
2 ,
0 ,
5 ,
0 e o
i
2
, 6
, 7
, 4
, 0
, 8
, 3
, 7
, 0
, 0
, 2
, 0
, 2
, 6
, 9
, 6
, 7
, 8
, d
l t
a
3 5 4 3 7 9 2 2 2 7 8 5 3 3 1 5 4 9 o r
2 3 2 3 1 2 2 h e
e d
i
r
a s
h n
s o
C
Balance Sheet of H N Ltd. after amalgamation
s
Note No.
’
. e
1 2 3 4 d s
t a
L h
H c
r
r u
o
f P
. e
d
t h
L t
N ,
e
O N r
I
T a
A H h
s
Computation of Purchase Consideration
M y r
A b e
G d p
L es.
A ue 2
M h sr 1
A c s
i a .
0
s a h
`
t
n h e es s0
i
e c 0 b0 0
,
l a 1 o0 e2
s
u a e t c5
i
l v
i s60
, r ,
Long-term Borrowings
0 f y 1
`
p s u 1 o s r e p1
Reserves and surplus
r s m e
(2) Non-current Liabilities
u g e q r e r 9 e
n l e s u u n a
(1) Shareholder’s Funds
S i e h= u
I. Equity and Liabilities
b f e i i
`
h t
`
l w a o r v m h s=
(1) Non-current assets
a d o v s a r n c s2 s
(3)Current Liabilities
a e e i
Tangible Assets
t
i n r s s i s h e r b a f/ 2
Notes to Accounts
p a r s e e c e s s o 3 e1
Share Capital
e t r P e M
For H Ltd.
a s o l e i c d e e hx
(2) Current assets
C e b b s s r
o e
r n a
h c R s D d rx
e t
v a t s t a s n l e
i d n 0 ,0
e r m y e
s a n e e a t
i e a b0 e 0
r
a e
s r a s e e d h y
t r r r r m0 c0
e e p a l v a s
a i e e u u t , n6,
h t b r u f n n u4
ParticularsS R - e l d i n
I T C e e c c a i
g g q r e e N6 S 9
II. Assets
n d a e n E P G S S l
P
) ) a t x ) ) l
) a
(
o
L
r
T
o
T i
F
a
T ( ( o
t
.
1
( (
a
b
a
b
c
T
1.
2.
3.
4.
A
M
A
L
G
A
M
A
T
I
O
N
3.106
2
.
F
o
r
N
L
t
d
.
`
A
s
s
e
t
s
t
a
k
e
n
o
v
e
r
:
P
l
a
n
t
a
n
d
M
a
c
h
i
n
e
r
y
(
2
0
,
0
0
,
0
0
0
l
e
s
s
1
5
%
)
1
7
,
0
0
,
0
0
0
T
r
a
d
e
r
e
c
e
i
v
a
b
l
e
s
1
,
2
5
,
0
0
0
I
n
v
e
n
t
o
r
y
(
1
,
5
0
,
0
0
0
l
e
s
s
1
0
%
)
1
,
3
5
,
0
0
0
C
a
s
h
a
n
d
B
a
n
k
b
a
l
a
n
c
e
1
,
0
0
,
0
0
0
T
o
t
a
l
A
s
s
e
t
s
2
0
,
6
0
,
0
0
0
L
e
s
s
:
L
i
a
b
i
l
i
t
i
e
s
T
r
a
d
e
p
a
y
a
b
l
e
s
(
2
,
2
5
,
0
0
0
)
S
e
c
u
r
e
d
D
e
b
e
n
t
u
r
e
s
(
4
,
7
5
,
0
0
0
)
N
e
t
P
u
r
c
h
a
s
e
C
o
n
s
i
d
e
r
a
t
i
o
n
1
3
,
6
0
,
0
0
0
D
i
s
c
h
a
r
g
e
:
P
r
e
f
e
r
e
n
c
e
S
h
a
r
e
h
o
l
d
e
r
s
(
7
,
5
0
,
0
0
0
x
2
/
3
)
5
,
0
0
,
0
0
0
E
q
u
i
t
y
S
h
a
r
e
h
o
l
d
e
r
s
(
b
a
l
.
fi
g
.
)
(
1
3
,
6
0
,
0
0
0
-
5
,
0
0
,
0
0
0
)
8
,
6
0
,
0
0
0
1
3
,
6
0
,
0
0
0
INTER COMPANY HOLDINGS
Que. 34 : The following are the summarised Balance Sheets of Y Ltd. and N
Ltd. as on 31st October, 20X1:
Y Ltd. N Ltd.
` (in crores) ` (in crores)
Sources of funds:
Share capital:
Authorised 5 5
Issued and Subscribed :
Equity Shares of ` 10 each fully paid 12 5
Reserves and surplus 88 10
Shareholders funds 100 15
Unsecured loan from Y Ltd. - 10
100 25
Funds employed in :
Fixed assets: Cost 70 30
Less: Depreciation (50) (24)
Written down value 20 6
Investments at cost:
30 lakhs equity shares of ` 10 each 3
Long-term loan to N. Ltd. 10
Current assets 100 34
Less : Current liabilities (33) 67 (15) 19
100 25
) 0 0 0 ) 2 0 0 0 0
.
3.107
0 0 0 8 0 2 2
On that day Y Ltd. absorbed N Ltd. The members of N Ltd. are to get one
equity share of Y Ltd. issued at a premium of ` 2 per share for every five
You are asked to pass journal entries in the books of the two companies to
Rupees in crores
Rupees in crores
1
equity shares held by them in N Ltd. The necessary approvals are obtained.
.
0 .
4 .
9 .
3 .
5 .
1 .
1
3 3 4 1 1
Cr.
0
0
0
0
0
0
0
0 Cr.
2
. 0
8
0
0
0
0
0
2
0
2
. . . . 1 . . . . .
4 4 5 0 3 5 0 1 1
6 2 1 1 1 1
Dr.
Dr.
( (
.
r . r
r . r
. o d
D D D D t e 2
d t
i 1
e d
. t . . r
. e . t .
`
r i
d r - r r r a r
D e D e D D c D h D
r r s c
o o c a u
l a
t t . h p e
d d s r
N e n t y u 0
O r o L t
i s 1
I r i
s Y u d
T e i q n f
`
A f
s v m e a o
M n o o
a r r o
t s s
A r p f e e
Journal Entries in the books of N Ltd.
G t d v r
a )
L . d e e r
e s
A d t n u r s hr
t n a d r e se
M L u n e
f t r yld
A t
n o s o s n , t
i o
Y c e i n u l
a u
u c i
t t a o t ) qeh
y o i a r t c i t er
t b c A l
i r t t n pn
n r c . b e t
n n n u
c au sa t .
t u e A d a d
i u A co hh n d
n o v n
t
n t
L t i
l s
t n u t
o n
o
i o o
c s ec ks u t
L
u c o o u n n c t
a c c r r c at
l o o
e a
give effect to the above.
o c i o Y u f u o c u i
s c A d hsa c Y
c A n t c o o o c o l
A c A l sr .
d 0nt c f
c e) a
i c m c c f a s o t 1e A o
t A s
t kt c A o c r)t c o) s c
t r e l
a u
l h fe
o L fm s
n e an
t e r A en
f A tn e A r t p e d o r s
e
u s
t s u r s f s u nu d n) i
p r r tl
n Y tot e r
o e s so p e
i n n no n u o l n u a o f p d a
c s A t
e c e t a o ac o o c o o ont a h uh o i l
l l h
c s s c d i
l i
t rc i
t c h i
t su C S S ore e a o s
A A t
n s A r i o a t A a mA e a so e d ma s cr h
a o b L s s an ar s o r n y e . eo
r e y
n d e
r n f a
i d i
l en i
l l lc
i c a a t
i ah r d f r t
i
o e r eo L e a hio a e o h a e h u es a t ee a u
i x u hti n r e tt h
e t i S e h a S s q hty h L hr h q
t i t o t u R t t s e t s t s
a
s F C gia
s i
s n gsa . R gia y R g r y v E gui y Y gha y E
i
l o o nl i
v
e
r
c
e o nl
i
i d
t o ns t o nd
l i e t
i r
e o nq t
i o ns t
i o
a T T i
e a o r s T e a i
L T e a u T il
e u s T i
e e u T i
e r u T
e Be u n Be Be q q e q q
Ans.
R r Bo Bo Be
(R P C U (R Y (R E (h E R (t E (p E
) 2 0 0 0 0 0 0 0 0 s
s
. 0 0 .
2 0 8 0 .
2 0 o
The companies agreed to amalgamate on and from 1-4-2011 and formed a new
company Z Ltd. to takeover the assets and liabilities of the existing companies.
Que. 35 : X Ltd. and Y Ltd. were carrying on same business independently.
Rupees in crores
1 . . . 3
. . . L
5 0 1 0 1 0 0
1 1 1 1 &
Cr.
` in crores
fi
o
The Balance Sheets of two companies as on 31-3-2011 are as follows:
r
2 0 0 0 0 P
.
1 0 0 2 0 0 o
.
6 .
4 .
1 .
0 2
. t
3 1 1 . d
Dr.
s e
h r
r
k e
( a
l f
s
.
r . r
r . .
r .
r 0 n
o D D D D D 1 a
Journal Entries in the books of Y Ltd.
t r
t
.
d = e
t e b
L r l
l
1.20 crores
Y a i
h w
s
12
m e
o d 2 N r r
u
r e e g
e e o p d
N f r t fi
h 0f e
`
O
I d g t 1o n 2 u g
T e a d .m e 1 s n
i
A v
i n n d v s
i c
e o t u i t n
`
M c i a Li g a e a
A e t r b l
G r a
r e Nm n
a s
e o
a
b
L s e v fre o r t
A e d o) o l a o
r i e p h s
M a s )
. nv t sa d h c r
A h t n d er n t r
e e s a e
s n o t t ke n t r y e g
u c L n as u u da
l u t
i
r
e
y o u t e o o o h c u 0 m
t
i c e
s Y o sr c c hac ) e q 1
u c a c c e l c c ee .
d s e f
q t A h m c / i
t a A A r t n f
o
`
e n c o A i
l t
i l a L u s o e
.
d r r A i p a h0 f h r
f u t u f e s b a t
i m s1 Y o k s u
o o L s
e ( s u ac p u n a e t
a
n c p i n a l i
c l a i of m n o l r n
∗
o t
`
o c N f t
i a h p / d t C m o i
t 0 a
i
t A o l
i o c r
u A n .
d e to
n
o
r
.
d i
t a 1 h
s
e
h
u e f
o t b L r s aed t e r s f t a r , t
s n a u S s L r P ee ( L l
l e .
e y n
b
i a r u i d P & s
o t r
r a mar n e d .
i t
i i
r h o o L e l e e N h s
e th a N c i
s u n
t ) c t s
t t r s
s e s f S i o o n n 2 q o
s
i s r a m e n u e v & s s f t
i l
l s L o a 1 e i
d r u d a s s c t aan o y r a y t c o t
Working Note:
e i t s e
r e n r
e t
i u t n C f a
ed P u e e i fier r ei ) d e o m
`
ho q h) s A r s s s o h t o u c hqu e e a h e × a
t l s
s i t s t u n u e r t t q e t r r o t s r g.
h e L 1 A n C U B R P g s a E S e a u L a e l t
ge n g. e u d gs h c g h b a
50 lakhs
nr o n.N d o o o o o npl i o o nh s e o n.) mun
i i
s T i e r T T T T ir
T e u T T i s T i c m
3.108
e a e x r q e r e d r ao
u BW ke n u
5
Bh i u Bu i Ba Bt u sc
(s B (- F C (s L (l p U (L P N Ac
*a
A
M
A
L
G
A
M
A
T
I
O
N
3.109
Liabilities X Ltd. Y Ltd.
(`) (`)
Share capital : Equity shares of ` 10 each (fully paid up) 30,00,000 18,00,000
Securities premium 6,00,000 -
General reserve 9,00,000 7,50,000
Profit & loss account 5,40,000 4,80,000
10% Debentures 15,00,000 -
Secured loan - 9,00,000
Sundry creditors 7,80,000 5,10,000
73,20,000 44,40,000
Assets X Ltd. (`) Y Ltd. (`)
Land & building 27,00,000 13,50,000
Plant & machinery 15,00,000 11,40,000
Investments (15,000 shares of Y Ltd.) 2,40,000 -
Stock 15,60,000 10,50,000
Debtors 12,30,000 7,80,000
Cash at bank 90,000 1,20,000
73,20,000 44,40,000
Following are the additional information:
(i) For the purpose of amalgamation, the shares of the existing companies
are to be valued as under:
X Ltd. = ` 18 per share
Y Ltd. = ` 20 per share.
(ii) A contingent liability of X Ltd. of ` 1,80,000 is to be treated as actual
existing liability.
(iii) The shareholders of X Ltd. and Y Ltd. are to be paid by issuing suffi-
cient number of shares of Z Ltd. at a premium of ` 6 per share.
(iv) The face value of shares of Z Ltd. is to be of ` 10 each.
You are required to:
(i) Calculate the purchase consideration (i.e. the number of shares to be
issued to X Ltd. and Y Ltd.)
(ii) Prepare Realisation Account and Shareholders Account in the books
of X Ltd. & Y Ltd.
(iii) Prepare the Balance Sheet of Z Ltd. after amalgamation.
(Nov 2011) (16 Marks)
0 )
0 0 0 0 s 0 0 0
No. of shares
0 0 2 0 e 0 0 0
Y Ltd.
Y Ltd.
Amount (` )
Amount (` )
0 0 0 0 r 5 5 0 0 0
,
0 0
, ,
5 ,
0 a ,
2 ,
7 ,
0 0 0 0 0 0 0 0 0 0
h 0 0 0 0
`
8 5 6 0 s 6 3 0 0 0 0 0 0 0 0 0 0 0
,
1 1
( ,
1 ,
3 ,
0 ,
2 ,
3 , 0 , , ,
0 0 0 0 0 ,
0
3 0 2 1 3 0 , 0 0 0 ,
0 ,
0 ,
0 ,
0 0
5 0
, 0
6
0
, 6
, , 0 0 6 4 ,
2
, 5 , 4 8 0 , , , , 4
6 1 9 5 7 3 6 9 3 5 5
`
0
,
2 0 0 0
0 0 0
X Ltd.
0
, 0
, 0
,
0 0 8 0 s 5 5 0 m
0 0 1 0 e 7
, 2
, 0
,
X Ltd.
0 0 0 r 3 0 4 u
i c
, , , a 3 2 5
Discharge of Purchase Consideration
0 0 0 h s s
r e m e / ) c
`
0 0 0 s e o )
0 s v A 0 /
, , , r t 0 a l e
r r 0 A
3 3 4 0 u i
d 0 h a
t p e
s s 0
5 s
Equity Shareholders Account
0 t e ,
0 c
r ) i e ,
o 0 n
5
, n r 8 u n p s r l o
7 e c , o a e
i l 8
, i
t
`
3 b 1 P
( i c t a & 1 a
, e y t i r - z
Realization Account
+ e r
Amount (` ) Particulars
3 r . a t 0 i
Amount (` ) Particulars
D d 0 d r r u e fi l
N % n 0 t e a c n 0
o 0 a
0 L d h e e
(i) Computation of Purchase Consideration
O 0 u , i e r 0
,
I
T 1 S 0 Z s S S G P 4 R
A y y 8
, y n y y y y 5
, y
e B B 7 B o B B B B ( B
M Y r
a ( c
A h
G n
i s
L . r 0 0
A d e 0 0 0 0 0 0 0
M t p h h 0 0 0 0 0 0 0 0 0
A L 6 c c h
0
, 0
, 0
0
0
, 0
, 0 0
0
0
, , ,
X 1 a a h 0 0 , 0 0 0 , 0 0 0
e e c c 0 0 0 6 3 0 0 6 0
, 0
,
y a a ,
7 ,
5 4 ,
5 ,
2 ,
0 4 ,
8 4 4
0 0 e e , ,
(ii) (a) In the books of X Ltd.
b 2 1 2 1 1 9 5 7 5 5
`
@ 1 1 6 6
d
l .
s e d
`
`
× c
`
×
`
e h t x x /
r
a s L s s s s A
h e n Z e e e e c
s r s o
i r r r r s
r
/
a e t f a a a a e A
f h r
a a o h h m h h y d .
o s r s s s s s r l d
r f h e e 0 0 u
i 0 0 : g e
n o t
e o s e d
i r l 0 5 m 0 5 s
t n i h L
b f r s a a 5 2 5 2 e i
d h e Z
m r
e o a n h t
i ,
7 ,
6 e ,
7 ,
6 s l
i c r
a
b r h o s p 3 0 r 3 0 s u a h n
u e s c f a , , p , , a b m s
t s F i
N m b r e o c 3 2 s 3 2 y n / s
Particulars
Particulars
Particulars
e e r d d e y e
Particulars
g u m p s r
e e = = i
t = = d n n s t
i B r
n N u a b r . . i . . n a a m r u ) a
i
t :. n e h a d d r d d u t t
s k o q t
fi h
s s u c m h t t u t t S d n e c t k E o S
3.110
i s d t
e l
a r u s L L c L L n a v o b n r
Ans. x e t u n e o a l n t e a o P o
E LL N V P N I X Y S X Y T L P I S D B T ( T
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
3.111
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Amount (` )
Amount (` )
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 5
, 5
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
(iii) Balance Sheet of Z Ltd. (After Amalgamation) as on 1st April, 2011
0 0 0 0 0 0 0 0 0 7 2 0 0 0 0 0 0 0 0 0 0 0
0
, 1
, 0
, 1
, 0
, 5
, 8
, 7
, 0
, 3
, 6
, 0
, 0
, 7
, 7
, 5
, 5
, 4
, 1
, 1
, 1
, 7
,
9 5 3 7 8 7 4 2 3 4 2 5 9 4 5 0 0 6 6 0 2 5
3 4 1 3 5 3 1 1 2
, 1 4 2 2 2 2
,
1 1
s
r e
o s e c c
t a v
r / /
n i
d h l
a e A A
a c) t s
Equity Shareholders Account
o e
r r n i e s n
l c uo p r s o
d Pi a l l i
o t
e y ( t c a a
s z
r .ra r
Realization Account
r e
Amount (` ) Particulars
Amount (` ) Particulars
u d d r e t
fii
l
N c n t e a n o a
O e u Ld h e r e
I S S Zni
s S G P R
T
A y y yo y y y y
M B B Bc B B B B
A 0 0 0 0 0 0 0 0 0
G 0 0 0 0 0 0 0 0 0
L 0 0 0 0 0 0 0 0 0
A ,
0 ,
0 ,
0 ,
0 ,
0 ,
0 ,
0 ,
0 ,
0
M 5 4 5 8 2 7 1 0 0
A ,
3 ,
1 ,
0 ,
7 ,
1 ,
2 ,
7 ,
3 ,
3
1 1 1 4 3 3
) )
0
0 h 0
c 1 r s
a 0
/ o ,
(b) In the books of Y Ltd.
f c 0
A f 1
`
o d n ,
s c e a 5
r
e / s u h +
y A e
r s t
r k d
l . a s r m 0
g e n o d i e 0
:
s n n a h t h p e h u s 0 y
t i i B e L s u r t i s r , g r
e d h r y d a o m e o 0 n e
s l
i c s
r a Z :
l t
i i s n e r t 8
, i n
s
a u a o h n a u a e r u n i
d 1 d i k
b m t s F i t q p r o
i p t a e l
i h n
y b / s i
p a t s n o r + u c a
r d d y E y h a e l l b a b
Particulars
Particulars
d n n e t B e a l
l s r e
i b d c 0 l m
Liabilities
n D i
u ) r c 0 u e t e e y 0 i & s
r t
a a t a e 5 f e d i
r r r 0 w s o a
u d t k q fi h r 7
, v i u D u d , d d t k t h
h s 0
Assets
S n n c E o S a 3 c o n c % c n 8 o n n c b s
o a a o
t o r o h 4 a b o e 0 e u , o a a o
t e a
T L l
P S T P T S ,
5 a S 1 S S 7 G L l
P S D C
( e ( c (
0 0 )
0 0 0
0 0 0 0
Y Ltd. `
0 0 0 0 0
,
0 ,
0 0
, ,
0 ,
0
0 4 0 3 7
,
3 ,
4 1
, ,
0 ,
2
3 4 4 3
1
(
0 0 )
0 0 0
0 0 0 0
X Ltd. `
0 0 0 0 0
,
0 ,
0 0
, ,
0 ,
0
0 8 0 2 8
, , 6 , ,
Calculation of Goodwill/(Capital Reserve)
4 0 ,
4 6 7
5 7 2 4
(
) )
0
N 0 0
O 0 0
I 0
, ,
T 0 0
A 9 2
,
M + 1
A 0 +
G 0 0
L 0
, 0
A 0 0
,
M 3
, 0 .
2 8
, d
A 1 7 t
+ + L
0 0 X ) .
0 0 0 d
0
, 0
, f
o 0 t
) . 0 0 0
, L
A d 6
, 5
, r
e 0 Y
( t 5 0 v 8
,
n L 1 1 1 f
o X + + o o
i
t 0 0 n + r )
a f
o 0 0 e 0 e 0
r 0 0 k 0 v 0
e r ,
0 ,
0 a 0
, o 0
d e t 0 n ,
i
s v 0
, 4
, s 8 e 0 )
n o 5 1 e
i ,
7 k 1
, ) A
o n 1 1 t
i + a 5 B -
Working Note:
c e + + l
i t + ( B
k 0 0 b 0 s s (
e t l
Particulars
s a
t 0 0 a
i 0 e
i 0 e l
i
a 0
, 0
, L 0
, t
i 0 s w
h s
t 0 .
d 0 0 l
i 0
, s d
c e 0 t 5 :
s 0 b 0 a
, , , o
3.112
r s 7 L 3 s 5 a 0
, t
e o
u s 2 1 e 1 i 9
P A ( Y ( L ( L ( N G
4 INTERNAL RECONSTRUCTION
CHAPTER
BASIC QUESTIONS
Que. 1 : Pass journal entries for the following transactions:
(i) Conversion of 2 lakh fully paid equity shares of ` 10 each into stock of
` 1,00,000 and balance has 12% fully convertible Debenture.
(ii) Consolidation of 40 lakh fully paid equity shares of ` 2.50 each into 10
lakh fully paid equity share of ` 10 each.
(iii) Sub-division of 10 lakh fully paid 11% preference shares of ` 50 each
into 50 lakh fully paid 11% preference shares of ` 10 each.
(iv) Conversion of 12% preference shares of ` 5,00,000 into 14% preference
shares ` 3,00,000 and remaining balance as 12% Non-cumulative pref-
erence shares. (Nov. 2013) (4 Marks)
Ans.
Journal Entries
Particulars ` `
(
)
E
q
u
i
t
y
s
h
a
r
e
C
a
p
i
t
a
l
A
/
c
D
r
.
2
0
,
0
0
,
0
0
0
i
T
o
E
q
u
i
t
y
S
t
o
c
k
1
,
0
0
,
0
0
0
T
o
1
2
%
F
u
l
l
y
C
o
n
v
e
r
t
i
b
l
e
D
e
b
e
n
t
u
r
e
s
1
9
,
0
0
,
0
0
0
( a
B1s
e
i
neu
gal
cc
ohc
ni
vn
e
r
s
i
ot
ncb
o
fod
2 e
l
a1
k,
h0t
e0r
q0e
u
i
t
yn
sd
hb
a
r
e
sa
o
fe
0f
t
ov
sr
o
k
f
0
,
0)
a
a
l
n
c
` `
l
y
o
n
e
t
i
l
e
b
e
n
u
s
(
)
E
q
u
i
t
y
S
h
a
r
e
C
a
p
i
t
a
l
A
/
c
(
2
.
5
0
)
D
r
.
1
,
0
0
,
0
0
,
0
0
0
ii `
T
o
E
q
u
i
t
y
S
h
a
r
e
C
a
p
i
t
a
l
A
/
c
(
1
0
)
1
,
0
0
,
0
0
,
0
0
0
`
(e
Ba
e
i
nh
gi
cn
ot
n1
s0
o
l
i
da
a
t
i
os
nh
o
fr
4e
0o
l
af
k
h1
s0
he
a
r
e
sh
o
f
2
.
5
0
`
c
l
k
h
a
s
a
c
)
`
(
)
1
1
%
P
r
e
f
e
r
e
n
c
e
S
h
a
r
e
s
C
a
p
i
t
a
l
A
/
c
(
5
0
)
D
r
.
5
,
0
0
,
0
0
,
0
0
0
iii `
T
o
1
1
%
P
r
e
f
e
r
e
n
c
e
S
h
a
r
e
C
a
p
i
t
a
l
A
/
c
(
1
0
)
5
,
0
0
,
0
0
,
0
0
0
`
(o
Bf
e
i
n5
g0
se
ua
b
-
d
i
v
sn
i
i
oo
n5
o
fl
1a
0k
ah
l
ks
hh
p
r
e
f
e
r
ef
n
c1
e0
se
ha
a
r
e
s)
c
h
i
t
0
a
r
e
s
o
c
h
` `
(
)
1
2
%
P
r
e
f
e
r
e
n
c
e
S
h
a
r
e
C
a
p
i
t
a
l
A
/
c
D
r
.
5
,
0
0
,
0
0
0
iv
T
o
1
4
%
P
r
e
f
e
r
e
n
c
e
S
h
a
r
e
C
a
p
i
t
a
l
3
,
0
0
,
0
0
0
4.1
I
N
T
E
R
N
A
L
R
E
C
O
N
S
T
R
U
C
T
I
O
N
4.2
Particulars ` `
TC
oa
1p
2i
%a
N
o
n
-
c
u
m
u
l
a
t
i
v
e
P
r
e
f
e
r
e
n
c
e
S
h
a
r
e
2
,
0
0
,
0
0
0
t
l
(
B
e
i
n
g
c
o
n
v
e
r
s
i
o
n
o
f
p
r
e
f
e
r
e
n
c
e
s
h
a
r
e
s
)
Que. 2 : Pass Journal Entries in the following conditions:
(1) Super Ltd. had 62,000 equity shares of ` 50 each on which ` 45 is paid
up. In September, 2017 company decided to sub-divide each share into
5 shares of ` 10 with ` 9 paid up.
(2) Top Ltd. had 1,05,000 equity shares of ` 10 each fully paid up. In No-
vember, 2017 company decided to convert the issued shares into stock.
But in January 2018 the company re-converted the stock into equity
shares of ` 100 each fully paid up.
(3) New Ltd. had capital of ` 15,00,000 divided into 1,50,000 equity shares
of ` 10 each on which ` 6 is paid up. During the year, company decided
to reorganize its capital by consolidating 5 shares into one share of ` 50
each, ` 30 paid up. (May 2018) (6 Marks)
Ans.
Date Particulars ` `
Sept., Journal Entries in books of Super Ltd.
E
q
u
i
t
y
S
h
a
r
e
C
a
p
i
t
a
l
A
/
c
(
5
0
)
D
r
.
2
7
,
9
0
,
0
0
0
2017 `
T
o
E
q
u
i
t
y
S
h
a
r
e
C
a
p
i
t
a
l
A
/
c
(
1
0
)
2
7
,
9
0
,
0
0
0
(1)
`
( o
B5f
e
i
n(1
g 0
s4e
u5a
b
-
d
i
v
i
su9
i
opp
n)a
o
fad
6c
2
,
0i
0n
0o
e3
q,
u
i
t
y,
s0
h0
a
r
e
sa
o
fs
0
pc
a
i
d
ei
hp
t
1
0
0
s
h
r
e
` `
h
(
u
)
)
` `
Nov. Journal Entries in books of Top Ltd.
D
r
.
1
0
,
5
0
,
0
0
0
2017 (a) Equity share Capital A/c (` 10)
T
o
E
q
u
i
t
y
S
t
o
c
k
A
/
c
1
0
,
5
0
,
0
0
0
(2)
(s
Bh
e
i
nr
ge
co
of
n1
v0
e
r
s
oa
i
nh
o
fn
1
,
0t
5
,
0k
0o
0f
l
a1
k0
h5
e,
q0
u
i
t
y
a
s
e
c
i
t
o
s
o
c
,
0
0
0
)
`
D
r
.
1
0
,
5
0
,
0
0
0
(b) Equity Stock A/c
T
o
E
q
u
i
t
y
S
h
a
r
e
C
a
p
i
t
a
l
A
/
c
1
0
0
)
1
0
,
5
0
,
0
0
0
`
(e
Bq
e
i
ni
gt
cs
oh
na
vr
e
r
s
oo
i
n
o
f1
10
0
,
5e
0
0c
,
0h
0)
s
t
o
c
k
i
n
t
o
1
0
,
5
0
0
u
y
e
s
f
0
a
`
(3) Journal Entries in books of New Ltd.
E
q
u
i
t
y
S
h
a
r
e
C
a
p
i
t
a
l
A
/
c
(
1
0
)
D
r
.
9
,
0
0
,
0
0
0
`
T
o
E
q
u
i
t
y
S
h
a
r
e
C
a
p
i
t
a
l
A
/
c
(
5
0
)
9
,
0
0
,
0
0
0
`
( (
B6
e
np
i
gdp
cua
o i
npd
seu
o
l
dc
i
a
t
i
ot
no
o
f0
1
,
50
0
0s
,
0h
0a
se
hs
a
r
e
s5
o
f0
1a
0
,h
`
a
i
ap
h)
i
n
3
,
0
0
r
o
f
e
c
` `
3
0
`
I
N
T
E
R
N
A
L
R
E
C
O
N
S
T
R
U
C
T
I
O
N
4.3
Que. 3 : Following is the summarized Balance Sheet of M Ltd. as at March
31, 2013.
Liabilities ` Assets `
Share capital: Goodwill 20,000
Equity shares of ` 100 each 15,00,000 Other fixed assets 15,00,000
9% Preference shares of ` 100 5,00,000 Trade receivables 6,51,000
each
General reserve 1,80,000 Inventory 3,93,000
Profit and loss account - Cash at bank 26,000
12% Debentures of ` 100 each 6,00,000 Own debentures 1,92,000
Trade payables 4,15,000 (Nominal value ` 2,00,000)
Profit and loss account 4,13,000
31,95,000 31,95,000
On 1.4.2013, M Ltd. adopted the following scheme of reconstruction:
(i) Each equity share shall be sub-divided into 10 equity shares of ` 10 each
fully paid up. 50% of the equity share capital would be surrendered to
the Company.
(ii) Preference dividends are in arrear for 3 years. Preference shareholders
agreed to waive 90% of the dividend claim and accept payment for the
balance.
(iii) Own debentures of ` 80,000 were sold at ` 98 cum-interest and remain-
ing own debentures were cancelled.
(iv) Debenture holders of ` 2,80,000 agreed to accept one machinery of
book value of ` 3,00,000 in full settlement.
(v) Trade payables, trade receivables and inventory were valued at ` 3,50,000,
` 5,90,000 and ` 3,60,000 respectively. The goodwill, discount on issue
of debentures and Profit and Loss (Dr.) are to be written off.
(vi) The Company paid ` 15,000 as penalty to avoid capital commitments of
` 3,00,000. You are required to give Journal entries for reconstruction
in the books of M Ltd.
Ans.
Journal Entries
In the Books of M Ltd.
Particulars Dr. Cr.
01.04.2013 Amount ` Amount `
E
q
u
i
t
y
s
h
a
r
e
c
a
p
i
t
a
l
(
1
0
0
)
A
/
c
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r
.
1
5
,
0
0
,
0
0
0
`
T
o
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t
y
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(
1
0
)
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/
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1
5
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0
0
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0
0
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e
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so
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.
7
,
5
0
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0
0
0
0 0 0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0 0
Cr.
Amount `
0
, 5
, 8
, 6
, 2
, 8
, 0
, 0
, 0
, 0
, 0
, 0
, 9
,
0 3 6 1 5 4 0 1 3 0 3 5 5
5
, 1 7 1
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, 1 4
,
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0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0
Dr.
Amount `
5
, 4
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 9
,
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t f / c e r t eA/ c r t cd c / / a c / a c a / s d / / v o s
c o A b u c l / u c ne / A A t / A v / i
l A c o n A d
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u n t u a A t u ar A y / L a
d n n i e n d s n n d cl n y r A n i
e A d n A n a n e
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e e e nta s
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i n i t / y t r ai
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l c l a p
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t
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ad c p od
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v s
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e w w ro a a ho
01.04.2013
a r r a pn / a pr b a pt b r m0 r r n a r o r G r a p r a t t
C l B A O C l e O C e l M 0 p l T I l G P g l B ) l C
g a
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t g0, e a
t g a
t a
t gts a
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o n i o nd k o o nit o o ne i o n8 d i o o n i o o n i o nn i o ne
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e p T i
e i n T T i
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e r % p T i
e , a p T T i
e p T i)
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v r f e r
B a Bi a Ba 2 Be 2 a B2 r a B a Bf a B a Be
C (d B (c 1 1 C T C C (o C (m C
4.4
( (f ( ( (f
`
I
N
T
E
R
N
A
L
R
E
C
O
N
S
T
R
U
C
T
I
O
N
4.5
Que. 4 : The ledger balance of C Ltd. as on 31st March, 2014 are:
Profit & loss account (Dr.) balance 10,20,000, Fixed Assets ` 7,00,000, Invest-
ment ` 10,000, Inventory ` 3,90,000 Trade receivables ` 4,60,000. Equity Share
Capital (60% paid) ` 6,00,000,10% First Debentures ` 2,00,000,12% Second
Debentures ` 5,00,000, Bank overdraft ` 50,000, Trade payables (including
Y for ` 8,50,000) ` 11,50,000, Outstanding interest for one year on both type
of debentures.
Due to heavy losses, the following scheme of re-construction is agreed:
(a) To make the existing ` 100 equity shares fully paid up and then to reduce
them to ` 20 each.
(b) To settle the claims of first Debenture holders by issuing 2,000, 13.5%
Debentures of ` 100 each.
(c) To discharge the claims of the second debenture holders by issuing 15%
4,000 debentures of ` 100 each.
(d) To pay ` 3,00,000 to Mr. Y in full settlement of his account.
(e) To allot 15,000 fresh equity shares of ` 20 each to discharge the remain-
ing trade payables.
(f) Market value of investments is ` 20,000, and
(g) To reduce the value of fixed assets.
Assuming all formalities are duly complied with, pass journal entries to give
effect to the above scheme and prepare the post-reconstruction Balance Sheet.
Ans.
Journal Entries in the books of C Ltd.
Particulars Dr. (`) Cr. (`)
E
q
u
i
t
y
S
h
a
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F
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a
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a
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.
4
,
0
0
,
0
0
0
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Cr. (`)
`
0
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, 0
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0
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1 1
0 0 0 0 0 0 0
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Dr. (`)
0 0 0 0 0 0 0
Balance Sheet of C Ltd. as at 31 March, 2014 (And Reduced)
, , , , , , ,
Note No.
0 0 0 0 0 0 0
0
, 0
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, 8 3
, 1
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.
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a e a
t w-h a ov u b r r e
Equity and liabilities
c ’ f A r ’ du / c e t c d s c c b cd f l a r u r
/ s
r s i
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A e e c e e e oc c A p A r u A e A c r s t b n t
d u / r f r d cc / s f a t O r u a r i t e n
s l d A u o u l ea e n o C n f ( n unt /
s A fs e p n m b e
e o ’ t t o s A r o c o o o t c s o e d a e r e b
r h n s n n n h fes
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u o r e o e o s
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t e i
t e i
t b e d e n u e A a u n r u be e ol h e u g % D
n r p d b p e r rl d e r s c h r e e r ed n d s i e r c
- 5
e u l e D u e o l b t m e / S t m t t df o n s t
a t
s r a n n . %
b t m o D m t f
s h o e s e l A s e n s i a A s a a h o 3 5
e n e h e d n ns h D n l
t b y n l I n nto t t d i h S o L 1 1
D e d e % d e e o t a k t
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b e r 5 e n b ae
r r % c e y n u c t
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o x t f ) ) ) )
t o r r
Particulars
s e R u .
3 R e Tu u 5 e S a a q e S u e tu t r i Uo 1 2
r D t c D t R ) p B E R t R s o s P F ) ( ( ( (
a
i g n 1 g e gnt n 1 gs g n e c n c gng
F o n e o n S o ne e o o nm e o o o n e o r c o o o/ nti
% T i b T i % T i b b T T i i d T T T i b T e
t a c T TA i
e e e e a a e e i
0 B e B 2 Be e Bl r B e n
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4.6
( ( ( (
I
N
T
E
R
N
A
L
R
E
C
O
N
S
T
R
U
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O
N
4.7
Note No. `
II Assets
(
1
)
N
o
n
-
c
u
r
r
e
n
t
A
s
s
e
t
s
(
)
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:
1
,
9
0
,
0
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a
(
)
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o
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c
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e
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t
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1
0
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(
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)
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s
(
)
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s
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,
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(
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s
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0
0
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(
)
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a
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&
c
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[
(
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+
4
,
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0
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3
,
0
0
,
0
0
0
]
1
1
,
0
0
,
0
0
0
Notes to Accounts
1 Share capital:
2
5
,
0
0
0
E
q
u
i
t
y
S
h
a
r
e
C
a
p
i
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s
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o
f
2
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,
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te
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u
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)
2 Fixed assets:
F
i
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d
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s
s
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t
s
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,
0
0
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0
0
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e
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s
:
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m
o
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(
5
,
1
0
,
0
0
0
)
1
,
9
0
,
0
0
0
Que. 5 : The Balance Sheet of Vaibhav Ltd. as on 31st March 2014 is as follows:
Liabilities ` Assets `
Equity Shares of ` 100 2,00,00,000 Fixed Assets 2,50,00,000
each
6%, Cumulative Preference 1,00,00,000 Investments (Market Value 20,00,000
Shares of ` 100 each ` 19,00,000)
5% Debentures of ` 100 80,00,000 Current Assets 2,00,00,000
each
Sundry Creditors 1,00,00,000 P&LA/c 12,00,000
Provision for taxation 2,00,000
Total 4,82,00,000 Total 4,82,00,000
The following scheme of Internal Reconstruction is sanctioned:
(i) All the existing equity shares are reduced to ` 40 each.
(ii) All preference shares are reduced for ` 60 each.
(iii) The rate of Interest on Debentures increased to 6%. The Debenture
holders surrender their existing debentures of ` 100 each and exchange
the same for fresh debentures of ` 70 each for every debenture held by
them.
(iv) Fixed assets are to be written down by 20%.
(v) Current assets are to be revalued at ` 90,00,000.
(vi) Investments are to be brought to their market value.
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
Pass journal entries and show the Balance Sheet of the company after giving
with 60000 equity shares of ` 40 each in full and final settlement of his
(Nov. 2014) (16 Marks)
` 40,00,000 decides to forgo 40% of his claim. The creditor is allotted
(vii) One of the creditors of the company to whom the company owes
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
0 0 0 0 0 0 0 0 0
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
0 0 0 0 6 4 4 6 3
(ix) It is decided to write off the debit balance of Profit & Loss A/c.
8 2
, 6 4 5 2 2 1
1
0 0 0 0 0 0
0 0 0 0 0 0
`
0
, 0
, 0
, 0
, 0
, 0
,
0 0 0 0 0 0
Journal Entries in the books of Vaibhav Ltd.
0
, 0
, 0
, 0
, 0
, 0
,
0 0 0 0 2 1
0
, 0
, 8 4
(viii) The taxation liability is to be settled at ` 3,00,000.
2 1
N
.
r .
r .
r .
r . r
r .
O D D D D D D
I
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-
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p c e p0 ua u dl rle
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sb
s o c eah ot
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r sc e
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)
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i
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e i
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N a o ea e P o 61 ) ( o r a o 4yr e ) n c a t a
i i i sea c i s x
`
I ( C t fe f t ff 0 s t r l C t ba e o / a frt
`
l c e e c 0 c e / c i
`
o o e r uit fms hu A T o
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a e u 0 r v
i u o 1 r u t A e u o t oe)
t
i r d n4 P t d nal u d un
t p s r d i d a n r nfu
p a e o a e oit ( t e n ea r a e ra yis x o o oyd
h i e l c i ebc h ocl t a i f i
`
a u s n o i t t
`
c S R s
r o v / R r p s
e e R beo t S R t
i u h T c y s
r i
l t
t i mA a i s i n
effect to the above.
e y l
a e n t l
a e c r b l
a edt d y l
a d iqo f r u t
i e b
r t t vi a
l u0) t vs u e t d%d e t t eh e o d l
i va u
a i
u i nh u c C6 i ne t D i e r i
u i r
c r 0 t f e b ni o
h q
p
a oc mA
/
%(
p
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e %
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Balance Sheet of Vaibhav Ltd. (After Reconstruction) as on 31.3.2014
,
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s e r r a
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Notes to accounts
r e s c s
Share Capital
e e r e i r o r e c e P a l m u r
R & x r
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Que. 6 : The Balance Sheet of A & Co. Ltd. as on 31-12-20X1 is as follows:
0 0 0 0 0 0 0 0 0 0 0 0
6,42,500
55,000
9,10,000
,
0 ,
0 ,
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4,25,000
50,000
37,500
1,30,000
4,85,000
4,25,000
0
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t v
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s 0 e s m m m n o c e s n e
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Fixed Assets:
Working Note:
d a i s
Inventory
e s s s t y t
Goodwill
e 0h
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2.
3.
4.
5.
6.
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4.11
Assets ` `
Profit and Loss Account 5,35,000
Total 21,42,500
Liabilities
Share Capital:
4,000 6% Cumulative Preference Shares of ` 100 each 4,00,000
75,000 Equity Shares of ` 10 each 7,50,000 11,50,000
6% Debentures (Secured on Freehold Property) 3,75,000
Accrued Interest 22,500 3,97,500
Current Liabilities:
Bank Overdraft 1,95,000
Trade payables 3,00,000
Directors’ Loans 1,00,000 5,95,000
Total 21,42,500
The Court approved a Scheme of re-organisation to take effect on 1-1-20X1,
whereby:
(i) The Preference shares to be written down to ` 75 each and Equity
Shares to ` 2 each.
(ii) Of the Preference Share dividends which are in arrears for four years,
three fourths to be waived and Equity Shares of ` 2 each to be allotted
for the remaining quarter.
(iii) Accrued interest on debentures to be paid in cash.
(iv) Debenture-holders agreed to takeover freehold property, book value
` 1,00,000 at a valuation of ` 1,20,000 in part repayment of their hold-
ings and to provide additional cash of ` 1,30,000 secured by a floating
charge on company’s assets at an interest rate of 8% p.a.
(v) Patents and Goodwill to be written off.
(vi) Inventory to be written off by ` 65,000.
(vii) Amount of ` 68,500 to be provided for bad debts.
(viii) Remaining freehold property to be re-valued at ` 3,87,500.
(ix) Trade Investments be sold for ` 1,40,000.
(x) Directors to accept settlement of their loans as to 90% thereof by allot-
ment of equity shares of ` 2 each and as to 5% in cash, and balance 5%
being waived.
(xi) There were capital commitments totalling ` 2,50,000. These contracts
are to be cancelled on payment of 5% of the contract price as a penalty.
(xii) Ignore taxation and cost of the scheme.
You are requested to show Journal entries reflecting the above transactions
(including cash transactions) and prepare the Balance Sheet of the company
after completion of the Scheme.
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Particulars
S a q Rs . a r Ra d a A n e r od d a / % / r a nio r q
`
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Date
Ans. 0e 0e
4.12
2D 2D ” ” ” ”
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
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4.13
0 0 0 0 0 0 0 0 0 0 0 0 0 0
Cr.
`
13,17,500
0
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,
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2 3 3 6 6 1 3 6 8 0 6 3 6
Balance Sheet of A & Co. Ltd. (And Reduced) as on 1st January, 20X2
,
1 ,
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Non-current liabilities
T c y
Equity and Liabilities
N u o d A e e
r t A r de
s o drt i o s
l i t
Shareholders’ funds
I d n n r pui n o s r in w s s e
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Non-current assets
o o e i t
`
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Current liabilities
c R r o r i
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s
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t w o i a ant l l p a e
Current assets
a c r d y
t a 0 d n t
n s
i n
t e epe a
t b b s l
k t
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r d i ee0 d v k fi fh i a m t e
l b s
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t o e o n o tft dm p m y e b i e
i
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Particulars
a a Ds R q r s6 R a o r a a r a r
e s i n r
B C l E Ais 9 l P G n
I P B P pnn ai c e P t a g o
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`
13,17,500
5,64,000
3,85,000
0
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Notes
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Particulars
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Share Capital Equity share capital
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`
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a a u r s s
I s u e t h f
t e r r
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l e p n d d
Long-term borrowings
b r b a e u u n e n
h
Short term provision
a s a e c c o y u u u e
v a hv e n s s d t n f u s
i c sa ) r e e e r o o f l f l e
Trade receivables
e yhs h r r r r s e i f a f a l
Intangible assets
c d t a e u u o t p t
a d o v o v b
e h f a
Tangible assets
i sa f t t e o i e n g n
Notes to accounts
r n u e c s e n n n s s r c s g v
e a qar e r e e o t s p e o e n
t e
t n i
e
d h Eh n c P b b i e a r p t
i i
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i i
y c
a s a n % d e e s
i s
s e d p s r r l
l r r e
r a 0sh e e D D v a l l
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T C 00t r 6 r o b A D t a w a e
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Total
Total
35, e 0 c x e a t e o e a
Less
Less
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r e a r a r
Add
b ,
1 4ot P ,
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4.14
6
I
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I
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4.15
Que. 7 : V Limited decided to reconstruct its business as it has accumulated
huge losses. The following is the summarized Balance Sheet of the company
as on 31.03.2014 before reconstruction:
Summarized Balance Sheet as on 31.03.2014
Particulars ` Particulars `
6,00,000 Equity shares of Goodwill 10,40,000
` 10
each fully paid up 60,00,000 Patents 3,00,000
3,20,000, 6% Preference Land & building 34,00,000
shares
of ` 10 each fully paid up 32,00,000 Plants machinery 4,00,000
6% debentures (secured Investments (at cost) 4,40,000
against
land & building) 30,00,000 Trade receivables 34,80,000
Bank overdraft 11,60,000 Inventory 34,00,000
Trade payables 24,00,000 Profit & loss A/c 37,00,000
Provision for income tax 4,00,000
1,61,60,000 1,61,60,000
Following scheme of reconstruction is approved by all interested parties and
the Court:
(1) All equity shares are reduced to ` 3 each and preference shares to ` 7
each.
(2) Debenture holders agreed to takeover a part of land and building, book
value of which is ` 14,00,000, towards their 50% claim. Rate of interest
of balance 50% debentures will be increased to 9%.
(3) Goodwill and Patent will be written off.
(4) 10% of Trade receivables to be provided for bad debts.
(5) Inventory to be written off by ` 5,20,000.
(6) 50% of balance of Land & Building sold for ` 12,00,000 and remaining
Land & Building valued at ` 12,00,000.
(7) Investments to be sold for ` 4,00,000.
(8) There are pending contracts amounting to ` 20,00,000. These contracts
are to be cancelled on payment of penalty @ 5% of pending contract
amount.
(9) The income tax liability of the company is settled at ` 6,12,000. Provi-
sion for income tax will be raised accordingly.
(10) 1/3 of trade payables decided to forgo their claim.
(11) After making all the above adjustments, balance amount available
through scheme, will be utilized to write off the value of plant & ma-
chinery to that extent.
You are required to pass the necessary Journal Entries.
0 0 0 0 0 0 0 0 0 0 0 0 0
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0
, 0
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, 0
, 0
, 0
, 0
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,
0 0 0 0 0 0 0 0 0 0 0 0 0
0
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Journal Entries (in the books of V Limited)
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q Bh % Bo % Byae a Ba a Ba a a B r Bla a
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Ans. . . . . . . . .
4.16
1 2 3 4 5 6 7 8
I
N
T
E
R
N
A
L
R
E
C
O
N
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T
R
U
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4.17
Dr. (` ) Cr. (` )
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x
Que. 8 : K Limited decided to reconstruct its business as it has accumulat-
ed huge losses. The following is the Balance Sheet of the company as on
31.03.2016 before reconstruction:
Balance Sheet as on 31.03.2018
Particulars ` Particulars `
6,00,000 Equity shares of Patents 3,00,000
` 10
each fully paid up 60,00,000 Land & building 34,00,000
3,20,000, 6% Preference Plants machinery 4,00,000
shares
of ` 10 each fully paid up 32,00,000 Investments (at cost) 4,40,000
6% Debentures (secured Trade receivables 34,80,000
against land & building) 30,00,000 Inventory 34,00,000
Bank overdraft 11,60,000 Profit & loss A/c 47,40,000
Trade payables 24,00,000
Provision for income tax 4,00,000
1,61,60,000 1,61,60,000
Following scheme of reconstruction is approved by all interested parties and
the Court:
(1) All equity shares are reduced to ` 3 each and preference shares to ` 7
each.
(2) Debenture holders agreed to takeover a part of land and building, book
value of which is ` 14,00,000, towards their 50% claim. Rate of interest
of balance 50% debentures will be increased to 9%.
(3) Patent will be written off.
(4) 10% of Trade receivables to be provided for bad debts.
(5) Inventory to be written off by ` 5,20,000.
0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0
(6) 50% of balance Land & Building sold for ` 12,00,000 and remaining
(8) The income tax liability of the company is settled at ` 4,50,000. Provi-
(10) After making all the above adjustments, balance amount available
through scheme, will be utilized to write off the value of plant & ma-
Cr. (` )
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
0 0 0 0 0 0 0 0 0 0
0
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, 6
, 0
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8 2 2 9 4 5 1 0 2 2
1 4 2 1 1 1
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, 4
Journal Entries (In the books of K Limited)
0 2 0 2 2 4
6 3 3 1
(9) 1/3 of trade payables decided to forgo their claim.
.
r .
r .
r .
r .
r . r
r .
You are required to pass the necessary Journal Entries.
D D D D D D D
sion for income tax will be raised accordingly.
N
O o
t h dgl k e
c eina o u
-
I a gv l
T h e r b o a
C c a a f b v
U a 0 hho g k
Land & Building valued at ` 12,00,000.
R e ) 1 cgs t n o
T s i
(7) Investments to be sold for ` 4,00,000.
S 0 7 i n e v o
1 f d b
`
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( sid e h g
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. . . .
Ans.
4.18
1 2 3 4 .
5 .
6
I
N
T
E
R
N
A
L
R
E
C
O
N
S
T
R
U
C
T
I
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4.19
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t
Que. 9 : Proficient Infosoft Ltd. is in the hand of a Receiver for Debenture
Holders who holds a charge on all asset except uncalled capital. The follow-
ing statement shows the position as regards creditors as on 30th June, 2016:
Liabilities ` Assets `
8,000 shares of ` 700 each - Property (cost is ` 3,80,800)
` 60 paid up estimated at 1,08,000
First Debentures 3,60,000 Plant & Machinery
Second Debentures 7,80,000 (Cost is ` 2,87,200)
Unsecured trade payables 5,40,000 estimated at 72,000
Cash in hand of the receiver 3,24,000
5,04,000
Uncalled capital 3,20,000
8,24,000
Deficiency 8,56,000
16,80,000 16,80,000
A holds the first debentures for ` 3,60,000 and second debentures for ` 3,60,000.
He is also an unsecured trade payable for ` 1,08,000. B holds second deben-
tures for ` 3,60,000 and is an unsecured trade payable for ` 72,000.
The following scheme of reconstruction is proposed.
(i) A is to cancel ` 2,52,000 of the total debt owing to him; to bring ` 36,000
in cash and to take first debentures (in cancellation of those already
issued to him) for ` 6,12,000 in satisfaction of all his claims.
I
N
T
E
R
N
A
L
R
E
C
O
N
S
T
R
U
C
T
I
O
N
4.20
(ii) B to accept ` 1,08,000 in cash in satisfaction of all claims by him.
(iii) In full settlement of 60% of the claim, unsecured trade payable (other
than A and B) agreed to accept three shares of ` 25 each, fully paid
against their claim for each ` 100.
The balance of 40% is to be postponed and to be payable at the end
of three years from the date of Court’s approval of the scheme. The
nominal share capital is to be increased accordingly.
(iv) Uncalled capital is to be called up in full and ` 75 per share cancelled,
thus making the shares of ` 25 each.
Assuming that the scheme is duly approved by all parties interested and by
the Court, give necessary journal entries. (Nov. 2016) (16 Marks)
Ans.
Journal Entries :
Particulars Debit (`) Credit (`)
F
i
r
s
t
d
e
b
e
n
t
u
r
e
s
A
/
c
D D D
. r
r
3
,
6
0
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0
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e
c
o
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d
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e
b
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/
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3
,
6
0
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0
0
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n
s
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c
u A A
r
e
d
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p
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a
b
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s
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/
c
1
,
0
8
,
0
0
0
T
8
,
2
8
,
0
0
0
( A
B
e
i
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’
s
t
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i
a
b
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)
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r
.
2
,
5
2
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0
0
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o n k o n
C c A A c
a
p
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A
/ b
c
2
,
5
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,
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0
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( B
B a
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a c
n
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)
`
n
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r
.
3
6
,
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0
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3
6
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0
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( A
B
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a
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)
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.
6
,
1
2
,
0
0
0
T
o nu n e
F
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r
s
t
d i
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b
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n
t
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r
e
s d
A
/
c
6
,
1
2
,
0
0
0
(b S U
Be e n
e
i
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b
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6
0
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4
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4
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8
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a
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2
,
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0
0
0 0 0 0 0 0 0 0 0 ) 0 0
2. Ascertainment of profit and loss account’s debit balance at the time of reconstruction.
4.21
0 0 0 0 0 0 0 0 0 0 0 0
`
`
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0 0 0 0
,
4 4 0 0 0 0 8 2 ,
6 0
, ,
4 2
Debit (`) Credit (`)
4
, 5 2
, 2
, 0
, 0
, 6
, 6 1 2 5 9
,
1 3 3 2 6 1 ,
2 6
, 9
1 1
(
0 0 0 0 0
0 0 0 0 0 0 0 0
0
, 0
, 0
, 0
, 0
, 0 0 0
`
0 0 0 8 2 0
, 0
, 0
,
Settlement of claim of remaining unsecured Trade payables
2
, 2
, 0
, 6
, 6 8 4 0
3 3 8 1 6
, 2
, 8
,
1 6 3 4
N
.
r .
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r .
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R T ) 1 u i o e o f d )
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`
T d e e o s c u a s s r 0
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`
N r v e
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r e l
a ,
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l a c e p ec a a r t 7
/ / c e c a v / c r r l 0 a i 8
A A e u e v e A u c a c 6 h h p ,
2 :
s
) s d r c u c s / le
a r 1 s s a e
d n n c y e
y c a n d / A t v 0 i ,
2 f 0 C + i
e o u / e e a F o e c A n c e i r 0 e = o 8 t
i
r i A n n F ( i r / o / v p e 0 h r 4 o 0 l
i
u t
c f l c l t
c l s t
s i A r as ,
0 t 0 e , t 0 b
c o a o / o ( a a A o c e ce 6 g 0 b 6 d 8 a
e u t t m A m c t u t
i n l u n s nlr , n 1 e ,
0 i
s d n i l / i d p o r) o e i 3 i / m = r 8 L
n e e p l
l l l A
l p e a i d t i
t R a r
e 0 u 3 r ,
r m c a a a a a r c t n s 2 c eit x e 3 &
U c c c cp f d 0 N f (
`
c
Working Notes:
( l
a / c l
c a l
a e a n . u l
a na o i 0 s l l
a
t e
l A e l e l i
t e t r u oN
t c d t ac s , :
s 0 n s
t a t
n i t
t l r a r a p r i a d fi . e i l % n 6 s 6 a e t
i i
p
a p l a n c a n a a p e o e p a o 1 e 1
h r rW 0 r s p
Particulars
o a e
s a h fi/ h fic h a s r R a bto 6 C ,
2 L ,
2 T s a a
L C c S S S C l P g- l C a c
g e g A g e g a
t s a
t gd s
t d
C e
o o n r o n k o n r o o n i o ne i o ne e h :
s r
T T i
e a T i
e n T i
e a T T i
e p is
T e p T i
e r s e s s a
B h B a B h B a Bos a Ber s x
i a e h
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I
N
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A
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4.22
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e
b
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s
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s
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2
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r
o
fi
t
a
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s
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c
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e
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i
t
b
a
l
a
n
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e
)
(
1
1
,
6
8
,
0
0
0
)
Que. 10 : The summarized Balance Sheet of V Ltd. as on 31st March 2014
is as follows:
Liabilities ` Assets `
Equity Shares of ` 100 each 2,00,00,000 Fixed Assets 2,50,00,000
6%, Cumulative Preference 1,00,00,000 Investments (Market Val-
ue ` 19,00,000
Shares of ` 100 each 80,00,000 Current Assets 20,00,000
5% Debentures of ` 100 each 1,00,00,000 P&LA/c 2,00,00,000
Trade Payables 2,00,000 12,00,000
Provision for taxation
Total 4,82,00,000 Total 4,82,00,000
The following scheme of Internal Reconstruction is sanctioned:
(i) All the existing equity shares are reduced to ` 40 each.
(ii) All preference shares are reduced to ` 60 each.
(iii) The rate of Interest on Debentures increased to 6%. The Debenture
holders surrender their existing debentures of ` 100 each and exchange
the same for fresh debentures of ` 70 each for every debenture held by
them.
(iv) Fixed assets are to be written down by 20%.
(v) Current assets are to be revalued at ` 90,00,000.
(vi) Investments are to be brought to their market value.
(vii) One of the creditors of the company (included under trade payables
in the above balance sheet) to whom the company owes ` 40,00,000
decides to forgo 40% of his claim. The creditor is allotted with 60000
equity shares of ` 40 each in full and final settlement of his claim.
(viii) The taxation liability is to be settled at ` 3,00,000.
(ix) It is decided to write off the debit balance of Profit & Loss A/c.
Pass necessary journal entries and show the Balance Sheet of the company
after giving effect to the above.
Ans.
Journal Entries (In the books of V Ltd.)
Particulars ` `
(
)
E
q
u
i
t
y
s
h
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c
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0 0 0 0 0 0 0 0 0 0 0 0 0 0
4.23
0 0 0 0 0 0 0 0 0 0 0 0 0 0
`
0
, 0
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, 0
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0 0 0 0 0 0 0 0 0 0 0 0 0 0
0
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, 0
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0 0 0 6 4 4 6 3 2 0 0 1 6 3
2
, 6 4 5 2 2 1 1 5 1 2
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0 0 0 0 0 0 0
0 0 0 0 0 0 0
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0
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0
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u 0 P v u o 1 r u unt i c e u o t o x s e r
e s e i e n
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t s f & A r t s e
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`
e i e l e oo ( e ebc A h e o f a i f i c A n e t e x A m
`
s v i n m o t i r t s e R tPn
`
R r o i u R s l s
e e R beo e S R t
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n t mc l r a r b l edt l l d i
a s r u t r f ) u A A n m l u f e s T n a
a vi a a e t e a d%d b y a ecl e o i
l e e e t a fr n r e p
t
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i vi u
t D t
i a t
i t
i r r )
s f d i vyu
t d L d r s t
i oor a o r
u np a e b nl e e mgut r
Particulars
p oc / CA p n p %5r e y u p c sh e i d & e r p f r e
a ca mA %) a oa e % a 6 r a q a ahi
su
n R a
i oi R x
i u v a anCe y u h
C 60 C cc b 6 C g e P E C ryd
o
i l L cbn t l P F C n
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t,c t C t
ge u0) ges ginf ge s a gia a g i g
o n0 C0 o6 o nr e
D o o nt s e
d o o nd ti
i s i
v t
i o nl u t
i o o o o o nri s
t
e
n
a
l
i
b o n
T i 0 T( T i T T i san T T i nuh o p T i oo p T T T T i
T e ws l T i
e %1 e a e i a e e a e
`
B1 Bh % Bxr r Beqf r a Bnt m a BnA sa i B
( 6( (s 5 (et T (reo P C (i a C (i B L (
`
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) ) ) ) ) )
vii
( (
iii
iv
vi
( ( (
ii
v
(
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
`
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
4 6 6 0 6 0 9 7 6 4 0 4 6 6 0 9
6 2 5 6 0
, 0 1 8 0
, 0
, 6 6
, 2 5 0
, 1
1 3 2 3 1 1 2
Balance Sheet of V Ltd. (After Reconstruction) as on 31.3.2014
0 )
0 0 )
0
0 0
Notes
`
1 2 3 4 5 6 0 0 0 0
,
0 0
, ,
0 0
,
0 0 0 0
,
0 0
, ,
0 0
,
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`
u , p o l
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l s 0 d s t d o o
p s g 0
, n sn i n e c c
r e e p v e e
3. Long-term borrowings
s i n 0 l a o a i
2. Reserves and Surplus
d u t i 0 s a r c a t r r
n S i
l w ,
1 t t d a r c d a
l r r
i s e i ho e e
Equity and Liabilities
u l d b o e ( s p e sf e e u d d
f a n a r i s s s s s a b r b m e
Notes to accounts
’ t
i a i
l r t
i e a t t t s c i
r yd a i
r v s
e n n
o l n t t h u
4. Tangible assets
s
r p t b i l
b t e e e e c i e s c r r u u
s s s e s u s C e s
1. Share Capital
e a e n b a n s s s r b u b s u t t t
c a m s qs e t n n
5. Investments
d v e m i y e a a a a u es c u % e n e
s e e
l e r r r l a r d e t
s h s i n s 6 R e s
o r e r e t P r e l e t s 0n e 0 d A m m
h a s u t n u b v n y ,
d 0e r ,
d 0 l
a e b t t
Particulars
e h e c - e e c x
i i n e t 0e e 0 l t r e d s s
r S R -
n g r d -
n F g I r i e , f e , a i u D e u u
a n r a l n r u u 0 b e u 0 t p c x j j
h ) ) o o u r o ) a ) u l q s
s 6e
, r s
s 0
, o a e % i d d
Assets
S ( ( N L C a
T t N ( T ( C a
t E I 2 v P I 1 T C S 6 F A A
b
a
a
o o a
4.24
.
1 .
2 .
3 T .
1 .
2 T h
I
N
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N
A
L
R
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C
O
N
S
T
R
U
C
T
I
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N
4.25
` `
6. Current assets
A
d
j
u
s
t
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e
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d
(
3
,
0
0
,
0
0
0
)
8
7
,
0
0
,
0
0
0
Working Notes:
Capital Reduction Account
T
o
L
i
a
b
i
l
i
t
y
f
o
r
t
a
x
a
t
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P
&
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c
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y
6
%
C
u
m
u
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a
t
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e
4
0
,
0
0
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0
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s
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p
r
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n
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s
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a
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c
a
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l
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r
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s
s
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t
s
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0
,
0
0
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0
0
B
y
5
%
D
e
b
e
n
t
u
r
e
s
2
4
,
0
0
,
0
0
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T
o
I
n
v
e
s
t
m
e
n
t
1
,
0
0
,
0
0
0
B
y
S
u
n
d
r
y
c
r
e
d
i
t
o
r
s
1
6
,
0
0
,
0
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o
C
a
p
i
t
a
l
R
e
s
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r
v
e
(
B
a
l
.
fi
g
.
)
2
6
,
0
0
,
0
0
0
2
,
0
0
,
0
0
,
0
0
0
2
,
0
0
,
0
0
,
0
0
0
Que. 11 : Following is the Balance Sheet of XYZ Ltd. as on 31st March, 2010:
Liabilities ` Assets `
8,000 - 71/2 Preference 8,00,000 Plant and Machinery 8,50,000
shares @
` 100 each fully paid
1,80,000 Equity shares 18,00,000 Furniture and Fittings 1,60,000
@ ` 10
each fully paid
11% Debentures 10,00,000 Patents and Copyright 60,000
Bank overdraft 1,65,000 Goodwill 35,000
Loan from director 15,000 Investments (at cost) 65,000
Trade creditors 6,20,000 Sundry debtors 12,00,000
Stock 13,00,000
Cash in hand 12,000
Profit & Loss A/c 7,18,000
44,00,000 44,00,000
Due to heavy losses and overvaluation of assets, the following scheme of
reconstruction was finalised:
(i) Preference shareholders will surrender their 20% shares and they have
been allotted 9% (new) preference shares for the remaining amount.
(ii) Debenture holders having charge on plant and machinery would accept
plant and machinery in full settlement.
(iii) Trade creditors accepted to takeover the stock upto the value of ` 6,20,000.
(iv) Equity shareholders are to accept reduction of ` 4 per share.
0 0 0 00 0 00 0 0 0 0 0
0 0 0 00 0 00 0 0 0 0 0
Pass necessary journal entries in the books of XYZ Ltd. assuming that all the
legal formalities have been completed. Prepare capital reduction account and
(May 2010) (16 Marks)
(vi) Sundry debtors and remaining stock is to be valued at 90% of their
0
, 0
, 0
, 0,
, 0 0
, 0,
, 0 0
, 0
, 0
, 0
, 0
,
0 0 0 0 0 0 0 0 0 5 8 0 5
4
, 6
, 0
, 5,
, 5 2
, 8,
, 2 2
, 6 6 3
6 1 0 8 1 6 0 7 1
1 1
0 0 0 0 0 0
0 0 0 0 0 0
`
0 0 0 0 0 0
(viii) Patents and Copyright and Goodwill have no more value.
,
0 ,
0 ,
0 ,
0 ,
0 ,
6
(v) Investment is to be valued at market price i.e., ` 60,000.
0
, 0
, 0
, 2
, 0
, 0
,
8 0 0 6 8 0
1 1 1 1
.
r .
r .
r .
r .
r .
r
D D D D D D
N
O ees e e r
i
In the books of XYZ Ltd.
I cr r r e
T na u u
t h
C eh t
n n t
r
Balance Sheet of the company after reduction.
(vii) Directors have to forgo their loan in full.
U e s e e t
s
Journal Entries
R f
e e b b n
T r c e e i
a )
S Pen d d g e
N c o r
a
O / %er t o
t a
A 5f s ) h
C c l .
7 e d n r 6 s
E / a r e e o
t y
R A it yp r
r v i ( t
i
b% i d
`
L l p s9 e g e ) c u
A a a e c f
s c r 0 / q
N t
i c c r f / n / c y c 1 A c e t
R p / a o A a A / r
e e / r h
a re A he r A ) ( l
a A e g
nnt d
`
E c a sc s t y i a c t p i
r
T h n %ne ) r s c r n h / i n y
N e s
r o 0ua e
d e / e
n o ce r
t A p
a o 4 c c p
I a e i
t 2s c
n c l r A i i
t am o l c i
t / / o
h c o u h e c t f
`
c fs a / h t s c c ml / a e c o A A c
s n u o il A n r u t
t A n t
i r u c t d
e e d rda e et) e a d de e p a d n n / n n
c r e e nb s
e r bn d m e ns s c v a h e o o
i A e c a l
n fe r da r u eu l r all r / i
g c s r i t s / l
i
e e l ns g u t do o & l o A l t
c c r m A s w
r a er n t n h a tfu t
i k k e
r y a u u o t k t
r i c n t n
book value.
e P t
i r en n e %c e t t
i d c c a i t
i d t s
e c e d
f p r dai e b 1a r n p an
l e o o h u p d e b o t o
e
r % a ul b e 1s u a
l a p i r t t s q a e r e v t a o
P 9 C so m e D t P C s c S s E C r l D n S P G
gehe ger n ger e g) y g a I
% To o nr D o nd e o o nd o ns t
i o o n t
i o o o o o
T i r % T i b T T i d T i e u T T i p T T T T T
/ 2 e ar e l e e l a e q e a
Bho 1 Bo D Bo r
T Bu E B C
(h (h (d
1
7 (sf 1 (
) ) ) ) ) )
Ans.
(
4.26
( (
iii
iv
vi
( ( (
ii
v
i
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
4.27
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
`
Amount (`)
Amount (`)
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
8 5 9 0 0 0 5 5 0 0 9 5 4 0 0 2 0 2 4
1
, 1 3 6
, 5
, 2
, 1 4
, 4
, 8
, 3 6
, 2
, 6
, 6 1
, 8
, 1 2
,
7 1 1 7 0 6 0 1 9 1 6 0 9
1 1 1 1 1
0 0 e c
0 0 r
`
0 0 a / 0 )
,
5 ,
9 h A 0 0
(`)
s c l 0 0
Balance Sheet (and reduced) of M/s XYZ Ltd.
1 3 / a c , 0
e A t
i / 0 ,
0
c p A 0
, 2
n s
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(v D ( C (f re t a / o r a 9 0 l o u m y r n
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4.28
Que. 12 : The Balance Sheet of X Limited as on 31st March 2011, was as
follows:
Liabilities Amount Assets Amount
` `
Authorised and subscribed 10,00,000 Fixed Assets:
capital:
10,000 Equity shares of ` 100 Machineries 3,50,000
each
fully paid Current Assets:
Unsecured loans: Stock 2,53,000
15% Debentures 3,00,000 Debtors 2,30,000
Accrued interest 45,000 Bank 20,000
Current Liabilities: Profit & loss A/c 5,80,000
Creditors 52,000
Provision for income tax 36,000
14,33,000 14,33,000
It was decided to reconstruct the company for which necessary resolution
was passed and sanctions were obtained from the appropriate authorities.
Accordingly, it was decided that:
(i) Each share be sub-divided into 10 fully paid up equity share of ` 10
each.
(ii) After sub-division, each shareholder shall surrender to the company
50% of his holding for the purpose of reissue to debenture holders and
creditors as necessary.
(iii) Out of shares surrendered 10,000 shares of ` 10 each shall be converted
into 10% Preference shares of ` 10 each fully paid up.
(iv) The claims of the debenture holders shall be reduced by 50%. In consid-
eration of the reduction, the debenture holder shall receive Preference
Shares of ` 1,00,000 which are converted out of shares surrendered.
(v) Creditors claim shall be reduced by 25%. Remaining creditors are to
be settled by the issue of equity shares of ` 10 each of out of shares
surrendered.
(vi) Balance of Profit and Loss account to be written off.
(vii) The shares surrendered and not re-issued shall be cancelled.
Pass Journal Entries giving effect to the above and the resultant Balance
Sheet. (May 2011) (16 Marks)
Ans.
In the books of X Limited Journal Entries
S. No. Particulars ` `
(
)
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4.29
0 0 0 0 0 0 0 0 0
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,
X Limited (and reduced) Balance Sheet as on......
0 2 2 0 5
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S. No. Particulars
San e b d e 5n o o r e l c u 0 q e s t d n t r a dda s f s o v
e r e R o R c usc e S E R I euo s P C el) : :
l e o n i
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( ee 1 A (eei C (ceb S (ct s R (at c 1
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4.30
Liabilities `
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Que. 13 : The Balance Sheet of L Limited as on 31-03-2016 is given below:
Particulars Note Amount
No. (` in lakh)
Equity & Liabilities
Shareholders’ Funds
Shares’ Capital 1 1,400
Reserves & Surplus 2 (522)
Non-Current Liabilities
Long-term Borrowings 3 700
Current Liabilities
Trade Payables 4 102
Other Liabilities 5 24
Total 1704
Assets
Non-Current Assets
Fixed Assets
Tangible Assets 6 750
Current Assets
Current Investments 7 200
Inventories 8 300
Trade Receivables 9 450
Cash & Cash Equivalents 10 4
Total 1704
I
N
T
E
R
N
A
L
R
E
C
O
N
S
T
R
U
C
T
I
O
N
4.31
Notes to Accounts:
` in Lakhs
(1) Share Capital
Authorised:
200 lakhs shares of ` 10 each 2,000
8 lakhs, 8% Preference Shares of ` 100 each 800
2,800
Issued, Subscribed and paid up:
100 lakhs Equity Shares of ` 10 each, full paid up 1,000
4 lakhs 8% Preference Shares of ` 100 each, fully paid up 400
Total 1400
(2) Reserves and Surplus
Debit balance of Profit & Loss A/c (522)
(3) Long Term Borrowings
6% Debentures (Secured by Freehold Property) 400
Directors’ Loan 300
700
(4) Trade Payables
Trade payables for Goods 102
(5) Other Current Liabilities
Interest Accrued and Due on 6% Debentures 24
(6) Tangible Assets
Freehold Property 550
Plant & Machinery 200
750
(7) Current Investment
Investment in Equity Instruments 200
(8) Inventories
Finished Goods 300
(9) Trade Receivables
Trade receivables for Goods 450
(10) Cash and Cash Equivalents
Balance with Bank 4
The Board of Directors of the company decided upon the following scheme
of reconstruction with the consent of respective shareholders:
(1) Preference Shares are to be written down to ` 80 each and Equity Shares
to ` 2 each.
(2) Preference Shares Dividend in arrears for 3 years to be waived by 2/3rd
and for balance 1/3rd, Equity Shares of ` 2 each to be allotted.
I
N
T
E
R
N
A
L
R
E
C
O
N
S
T
R
U
C
T
I
O
N
4.32
(3) Debenture holders agreed to take one Freehold Property at its book value
of ` 300 lakh in part payment of their holding. Balance Debentures to
remain as liability of the company.
(4) Interest accrued and due on Debentures to be paid in cash.
(5) Remaining Freehold Property to be valued at ` 400 lakh.
(6) All investments sold out for ` 250 lakh.
(7) 70% of Directors’ loan to be waived and for the balance, Equity Shares
of ` 2 each to be allowed.
(8) 40% of Trade receivables and 80% of Inventories to be written off.
(9) Company’s contractual commitments amounting to ` 600 lakh have
been settled by paying 5% penalty of contract value.
You are required to:
(a) Pass Journal Entries for all the transactions related to internal recon-
struction;
(b) Prepare Capital Reduction Account; and
(c) Prepare notes on Share Capital and Tangible Assets to Balance Sheet,
immediately after the implementation of scheme of internal reconstruc-
tion.
Ans. :
(a) Journal Entries in the books of L Ltd.
Particulars Debit Credit
(` in lakhs) (` in lakhs)
(
)
8
%
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U
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4.34
Notes to Balance Sheet
S.No. Particulars (` in lakhs) (` in lakhs)
1. Share Capital
Authorised:
2
0
0
l
a
k
h
s
E
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2. Tangible Assets
F
r
e
e
h
o
l
d
P
r
o
p
e
r
t
y
5
5
0
L
e
s
s
:
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t
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) 0 0
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:
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y
Que. 14 : The shareholders of L Ltd. decided on a corporate restructuring
exercise necessitated because of economic recession. From the given sum-
marised balance sheet as on 31-3-2017 and the information supplied, you are
required to prepare (i) Journal entries reflecting the scheme of reconstruction,
(ii) Capital reduction account, (iii) Cash account in the books of L Ltd.
Summarised Balance Sheet of L Ltd. as on 31.3.2017
Liabilities ` Assets `
Share Capital Fixed Assets
30,000 Equity shares of ` 10 each 3,00,000 Trade marks and Patents 1,10,000
40,000 8% Cumulative Preference 4,00,000 Goodwill at cost 36,100
shares ` 10 each
Freehold Land 1,20,000
Reserves and Surplus Freehold Premises 2,44,000
Securities Premium Account 10,000 Plant and Equipment 3,20,000
Profit and Loss Account (1,38,400) Investment (marked to 64,000
market)
Secured Borrowings
9% Debentures (` 100) 1,20,000 Current Assets
Accrued Interest 5,400 1,25,400 Inventories:
I
N
T
E
R
N
A
L
R
E
C
O
N
S
T
R
U
C
T
I
O
N
4.35
Liabilities ` Assets `
Share Capital Fixed Assets
Current liabilities Raw materials and packing
Trade payables 1,20,000 materials 60,000
Tax payable 50,000 Finished goods 16,000 76,000
Temporary bank overdraft 2,23,100 Trade receivables 1,20,000
10,90,100 10,90,100
Note: Preference dividends are in arrears for 4 years.
The scheme of reconstruction that received the permission of the Court was
on the following lines:
(1) The authorized capital of the Company to be re-fixed at ` 10 lakhs
(preference capital of ` 3 lakhs and equity capital of ` 7 lakhs). Both
classes of shares are of ` 10 each.
(2) The preference shares are to be reduced to ` 5 each and equity shares
reduced by ` 3 per share. Post reduction, both classes of shares to be
re-consolidated into ` 10 shares.
(3) Trade Investments are to be liquidated in open market.
(4) One fresh equity shares of ` 10 to be issued for every ` 40 of preference
dividends in arrears (ignore taxation).
(5) Expenses for the scheme were ` 10,000.
(6) The debenture holders took over freehold land at ` 2,10,000 and settled
the balance after adjusting their dues.
(7) Unprovided contingent liabilities were settled at ` 54,000 and a pending
insurance claim receivable settled at ` 12,500.
(8) The intangible assets were all to be written off along with ` 10,000
worth obsolete packing material and 10% of the receivables.
(9) Remaining cash available as a result of the above transactions is to be
utilized to payoff the bank overdraft to that extent.
(10) The Equity shareholders agree that they will bring in necessary cash
to liquidate the balance outstanding on the overdraft account by sub-
scribing the fresh shares. The equity shares will be issued at par for this
purpose.
Ans.
(i) In the books of L Ltd.
Journal Entries
Dr. Cr.
2
0
1
7
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0 0 0 0 0 y
-
0 0 0 0 0 a
Que. 15 : The summarized Balance Sheet of SK Ltd. as on 31st March, 2018
`
(` in 000)
Amount
35,000
17,500
14,000
17,500
350
84,350
43,750
3,500
35,000
2,100
84,350
5
, 0
, 0
, 1
, 1
, p
2 4 0 3 7 r
9
, 5 1 2
, 8
, o
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h0
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a 0
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-
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t e 0 1 0
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r
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r
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`
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t l pt 0 0
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l
a a pn p ma r , , rep
(iii) Cash Account
U l l ae x er F 4 4 Ffa7 , o 0
R u
c
u
c Cg E Td - 6
( 5
- -oc9 h,1
e3
8%, Cumulative Preference Shares of ` 100 each
T i i
S t
r t
r r
a 2
N a a y y y h2,
Investments (Market value ` 3325 thousand)
O P P B B B
C s
y=
`
E 0 0 0 0 0 0 0 0 0 0
Current Assets (Including Bank Balance)
R 0 0 0 0 0 0 0 0 0 0 t
i
`
L 0
, 0
, 0
, 4
, 5
, 0
, 6
, 5
, 0
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-
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6% Debentures of ` 100 each
s s , x
r n 2 enk
Equity Shares of ` 10 each
e i
( 1h
d c d ) lc
a oa
Profit and Loss Account
nls s l n t
-
aa e a o 0 o t
i a b
0 e df
Provision for taxation
i l
b e h 4 i p
le
a r a t v e , t
c a
c0
eo
i t v n r r 5
2 u) e1
ue
r a i u e t u , dm sc
Sundry Creditors
e
t m e o s
e n t 1 ei r
a s
i
c n - n
is given below.
`
a c r e 0 r h sa
mng e
r c l m e
b 0 lca
l s@ e l
a 0 a yes r a
Fixed Assets
s i e a
t t s t
s e , t t
r
a wck d h i n r
a e D 0 i e i r a b
p u hf
Liabilities
l aa a s p u l v 1
, c a
u r a ao u n % 2 an qh So
c RP T C Cc c I 9 ( Ca Es
i i t
Assets
t t n
Total
Total
Note:
r
a r
a e
o o o o o o o o
4.38
P T T T T P T T T T m
I
N
T
E
R
N
A
L
R
E
C
O
N
S
T
R
U
C
T
I
O
N
4.39
The following Scheme of Internal Reconstruction is approved and put into
effect on 31st March, 2018.
(i) Investments are to be brought to their market value.
(ii) The Taxation Liability is settled at ` 5,25,000 out of current Assets.
(iii) The balance of Profit and Loss Account to be written off.
(iv) All the existing equity shares are reduced to ` 4 each.
(v) All preference shares are reduced to ` 60 each.
(vi) The rate of interest on debentures is increased to 9%. The Debenture
holders surrender their existing debentures of ` 100 each and exchange
them for fresh debentures of ` 80 each. Each old debenture is exchanged
for one new debenture.
(vii) Balance of Current Assets left after settlement of taxation liability are
revalued at ` 1,57,50,000.
(viii) Fixed Assets are written down to 80%.
(ix) One of the creditors of the Company for ` 70,00,000 gives up 50% of
his claim. He is allotted 8,75,000 equity shares of ` 4 each in full and
final settlement of his claim.
Pass journal entries for the above transactions.
(November 2018 - New Course) (10 Marks)
Ans.
Journal Entries in the books of SK Ltd.
` ‘000 ` ‘000
(
)
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Que. 16 : The Balance Sheet of M/s. Ice Ltd. as on 31-03-2011 is given below:
` ‘000
`
5,50,000
2,00,000
2,00,000
4,50,000
5 5 1
, 7
, 7 1 ,
, 3 0
, 0
, 8
, 5
, 3
,
2 8 8 4 1 7 2 3 4
1 2 3
0 5 5 5 s
5 7 2 2
` ‘000
3 1 5 1 e
, c
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3 e
Trade investment (at cost)
l r
e
a
t f
. r
r . .
r .
r i e s
4,00,000 Plant and machinery
D D D D p r r
a p s o
c e e t
10,00,000 Freehold property
sof oe) gto e v l
a r i
d
i t nnt r i
t t u
Sundry debtors
h s n u i e a a i t e
r
re i d t
i r d h l p n c
N e r nnt r r e s u a e
O da wur r m c b y
Capital Reduction Account
I nh ou
i C y
t u e e r
T es t n,f e i r D d
C r y a o i s s u C a n
U r t xm dt n q % h % u
` Assets
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COMPREHENSIVE QUESTIONS
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1,00,000 Equity shares
of ` 10 each fully paid
4,000, 8% Preference
shares of ` 100 each
i i
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nme i t T ni i T n t T T T T T n tit t / A n l
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fully paid
(c P C (l L ( C (oAC a
i & x
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) ) )
o o o o o o
4.40
vii
(
vi
(
v
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up
T T T T T T
I
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T
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U
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4.41
Liabilities ` Assets `
6% Debentures 4,00,000 Stock-in trade 3,00,000
(secured by freehold
property)
Arrear interest 24,000 4,24,000 Deferred advertisement 50,000
expenses
Sundry creditors 1,01,000 Profit and toss account 4,15,000
Director’s loan 3,00,000
22,25,000 22,25,000
The Board of Directors of the company decided upon the following scheme
of reconstruction with the consent of respective stakeholders:
(i) Preference shares are to be written down to ` 80 each and equity shares
to ` 2 each.
(ii) Preference dividend in arrear for 3 years to be waived by 2/3rd and
for balance 1/3rd, equity shares of ` 2 each to be allotted.
(iii) Debenture holders agreed to take one freehold property at its book value
of ` 3,00,000 in part payment of their holding. Balance debentures to
remain as liability of the company.
(iv) Arrear debenture interest to be paid in cash.
(v) Remaining freehold property to be valued at ` 4,00,000.
(vi) Investment sold out for ` 2,50,000.
(vii) 75% of Director’s loan to be waived and for the balance, equity shares
of ` 2 each to be allotted.
(viii) 40% of sundry debtors, 80% of stock and 100% of deferred advertisement
expenses to be written off.
(ix) Company’s contractual commitments amounting to ` 6,00,000 have
been settled by paying 5% penalty of contract value.
Show the Journal Entries for giving effect to the internal re-construction and
draw the Balance Sheet of the company after effecting the scheme.
(Nov. 2011) (18 Marks)
Ans.
Journal Entries (In the books of Ice Ltd.)
S. Particulars Debit Credit
No. ` `
(
)
8
%
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Credit
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a s e / v / / o l / e5 m a n
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t
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t c d t d k r a
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a i i e d i r ec t e i
a d k c p i p d i d l i i eed e fi c e k i i
r fic
h u p h e u r ba n e l ) n c d p p c a p s
a ’ u p r R o n o f n p a oan
s q a t r q a e r c y d a a l a a / r a r
t r q a i
d g r u t e a a vr
E C l E oe b F t
r e B o C A T C o E C r l P S S D B C pal
y
t g) a gt e ge u g h g g c
t ga a g, b
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i o nr 2 D o np r o n e o n k o o n e o o nh t
i o o o o o o nt
u T T i
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e n T T i
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B B Br
E (e C (yo 6 (p A ( F ( B ( D (d C (t a
) ) ) ) ) ) ) )
No.
viii
4.42
vii
( (
iii
S.
iv
vi
(
ix
( ( (
ii
v
( (
I
N
T
E
R
N
A
L
R
E
C
O
N
S
T
R
U
C
T
I
O
N
4.43
Balance Sheet of Ice Ltd. (As reduced)
Liabilities `
S
h
a
r
e
c
a
p
i
t
a
l
1
,
5
3
,
5
0
0
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q
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i
t
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s
h
a
r
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s
o
f
2
e
a
c
h
3
,
0
7
,
0
0
0
`
(
o
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t
o
f
w
h
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c
h
5
3
,
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0
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h
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r
e
s
h
a
v
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n
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s
s
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e
d
f
o
r
c
o
n
s
i
d
e
r
a
t
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o
n
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t
h
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r
t
h
a
n
c
a
s
h
)
4
,
0
0
0
,
8
%
P
r
e
f
e
r
e
n
c
e
s
h
a
r
e
s
o
f
8
0
`
e
a
c
h
f
u
l
l
y
p
a
i
d
u
p
3
,
2
0
,
0
0
0
C
a
p
i
t
a
l
r
e
s
e
r
v
e
2
,
9
8
,
0
0
0
6
%
D
e
b
e
n
t
u
r
e
s
1
,
0
0
,
0
0
0
S
u
n
d
r
y
c
r
e
d
i
t
o
r
s
1
,
0
1
,
0
0
0
1
1
,
2
6
,
0
0
0
Assets `
F
r
e
e
h
o
l
d
p
r
o
p
e
r
t
y
4
,
0
0
,
0
0
0
P
l
a
n
t
a
n
d
m
a
c
h
i
n
e
r
y
2
,
0
0
,
0
0
0
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u
n
d
r
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d
e
b
t
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r
s
2
,
7
0
,
0
0
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t
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c
k
-
i
n
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t
r
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e
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0
,
0
0
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a
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h
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t
b
a
n
k
1
,
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6
,
0
0
0
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2
,
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0
,
0
0
0
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2
4
,
0
0
0
-
3
0
,
0
0
0
)
1
1
,
2
6
,
0
0
0
Que. 17 : M/s. Platinum Limited has decided to reconstruct the Balance Sheet
since it has accumulated huge losses. The following is the Balance Sheet of
the company as on 31st March, 2012 before reconstruction:
Liabilities Amount Assets Amount
(`) (`)
Share Capital
50,000 shares of ` 50 Goodwill 22,00,000
each fully paid up 25,00,000 Land & Building 42,70,000
1,00,000 shares of ` 50 Machinery 8,50,000
each ` 40 paid up 40,00,000 Computers 5,20,000
Capital Reserve 5,00,000 Stock 3,20,000
8% Debentures of ` 100 each 4,00,000 Trade Debtors 10,90,000
12% Debentures of ` 100 6,00,000 Cash at Bank 2,68,000
each
Trade Creditors 12,40,000 Profit & Loss A/c 7,82,000
Outstanding Expenses 10,60,000
Total 1,03,00,000 Total 1,03,00,000
I
N
T
E
R
N
A
L
R
E
C
O
N
S
T
R
U
C
T
I
O
N
4.44
Following is the interest of Mr. Shiv and Mr. Ganesh in M/s Platinum Limited:
Mr. Shiv Mr. Ganesh
8% Debentures 3,00,000 1,00,000
12% Debentures 4,00,000 2,00,000
Total 7,00,000 Total 3,00,000
The following scheme of internal reconstruction was framed and implemented,
as approved by the court and concerned parties:
(1) Uncalled capital is to be called up in full and then all the shares to be
converted into Equity Shares of ` 40 each.
(2) The existing shareholders agree to subscribe in cash, fully paid up equity
shares of ` 40 each for ` 12,50,000.
(3) Trade Creditors are given option of either to accept fully paid equity
shares of ` 40 each for the amount due to them or to accept 70% of
the amount due to them in cash in full settlement of their claim. Trade
Creditors for ` 7,50,000 accept equity shares and rest of them opted for
cash towards full and final settlement of their claim.
(4) Mr. Shiv agrees to cancel debenture amounting to ` 2,00,000 out of
total debentures due to him and agree to accept 15% Debentures for the
balance amount due. He also agree to subscribe further 15% Debentures
in cash amounting to ` 100,000.
(5) Mr. Ganesh agrees to cancel debenture amounting to ` 50,000 out of
total debentures due to him and agree to accept 15% Debentures for
the balance amount due.
(6) Land & Building to be revalued at ` 51,84,000, Machinery at ` 7,20,000,
Computers at ` 4,00,000, Stock at ` 3,50,000 and Trade Debtors at 10%
less to as they are appearing in Balance Sheet as above.
(7) Outstanding Expenses are fully paid in cash.
(8) Goodwill and Profit & Loss A/c will be written off and balance, if any,
of Capital Reduction A/c will be adjusted against Capital Reserve.
You are required to pass necessary Journal Entries for all the above transactions
and draft the company’s Balance Sheet immediately after the reconstruction.
(May 2012) (16 Marks)
Ans.
Journal Entries
Particulars ` `
1
.
E
q
u
i
t
y E
S q
h u
a
r
e y
fiS
n h
a a
l
c e
a
l
l a
A p
/ i
c a
D
r
.
1
0
,
0
0
,
0
0
0
T
o
i
t
r
C
t
l
A
/
c
1
0
,
0
0
,
0
0
0
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e
i
nr
ge
fi
n
a
l
c
a
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a
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e
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r
1
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a
c
h
o
n
1
,
0
0
,
0
0
0
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a
s
)
0 0 0 0 0 0 0 0 0 0 0 0 0 0
4.45
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`
0
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, 0
, 0
, 0
, 0
, 0
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, 0
, 0
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,
0 0 0 0 0 3 7 0 0 0 0 0 4 0
0
, 0
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, 5
, 4
, 4
, 0
, 0
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, 5 4
, 6
,
0 0 5 2 7 3 1 5 2 1 2 9 0
1 6 1 1 1
0 0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0
`
0
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,
0 0 0 0 0 0 0 0 0 4 0 0
0
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, 4
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e fia
t e u h e s / e u a0 c / u u nni u t c / u u nc e g u s n g
r i r d nc r e A r d m7 / A t d oofp t n / A t d on r n d s e n
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c u o h u p oo c u e e u n p n e % p asr c % e n e % p a&t d p l
a i n u
`
ax d
Particulars
/ q m s q a ct / q n r q a a pe e b 5 a cis r / 5 n e b 5 a ch,e n a v a o
A E g y E C n A E C E B C b e 1 C e A 1 b e 1 C a C g n B
t gi g e ge e D g&f g e D gs c k a
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n s o n
n i u
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e a T T T i
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e % T T i
e nl n o T e t T i
e
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. . . . . . . . .
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` Particulars
C el c s
t n
U z l
i c d u a
R i
l w a a l
a
i
t d r O B
T
u n Balance Sheet (as reduced) as on 31.3.2012 T c
S o o y y/ y
N
ngo i
t B BA B
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c c d 0 0 0 0 0
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A / / r s f c c ca f l A
o fAo
`
A A o c / nc o l l
n s t / L o L e A u a a c
at c
1. Cash at Bank Account
o y r b A d t&l u d l s t
i /
i
t r e e l e e a s e )
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c e t D l
i n n a v r bin r . a a
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h p e t of e a tg
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e d d fi n s
e t
i b a s s g W e e u
c m a o o mfl i p ed y e n d r r t
Particulars
R a o r o r aoa l R a de :
l t r i s ( / a a n
i r
Working Notes:
l M C T G P gf l C a u u d
l o k b h h e
a
t g nn a
t gst t
i q t i s t n e S S b
i o o o o o ni i o nu p E n u y r b a c e
p T T T T ii
T e tw p T i e B r e e B y y
Particulars
e j a e n t t D
a Bro a b t
Liabilities
Bd C 0 e & n u D t a i i
u
C (wd C (a e 0
0 D i
h p e k a l
a
u
q q %
r , d d h 5
Assets
. . a 0 % n c m a c s B E E 1
1 2 h 0 a a o o a o o o o
4.46
1 1 , 5 M r t
S 2 1 L C T S C T T T T
I
N
T
E
R
N
A
L
R
E
C
O
N
S
T
R
U
C
T
I
O
N
4.47
2. Capital Reduction Account
Particulars ` Particulars `
T
o
M
a
c
h
i
n
e
r
y
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/
c
1
,
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y
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e
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s
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o
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y
8
%
a
n
d
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e
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s
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o
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y
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y
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k
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y
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0
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3
3
,
4
1
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0
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3
3
,
4
1
,
0
0
0
Que. 18 : The Balance Sheet of M/s. Cube Limited as on 31-03-2013 is given
below:
Particulars Note No. Amount (` in
lakh)
Equity & Liabilities
Shareholders’ Funds
Shares’ Capital 1 700
Reserves & Surplus 2 (261)
Non-Current Liabilities
Long-term Borrowings 3 350
Current Liabilities
Trade Payables 4 51
Other Liabilities 5 12
Total 852
Assets
Non-Current Assets
Fixed Assets
Tangible Assets 6 375
Current Assets
Current Investments 7 100
Inventories 8 150
Trade Receivables 9 225
Cash & Cash Equivalents 10 2
Total 852
I
N
T
E
R
N
A
L
R
E
C
O
N
S
T
R
U
C
T
I
O
N
4.48
Notes to Accounts:
(` in lakhs
(1) Share Capital
Authorised:
100 lakh shares of ` 10 each 1,000
4 lakh. 8% Preference Shares of ` 700 each 400
1,400
Issued, Subscribed and paid up:
50 lakh Equity Shares of ` 10 each, full paid up 500
2 lakh 8% Preference Shares of ` 700 each, fully paid up 200
Total 700
(2) Reserves and Surplus
Debit balance of Profit & Loss A/c (261)
(3) Long Term Borrowings
6% Debentures (Secured by Freehold Property) 200
Directors’ Loan 150
350
(4) Trade Payables
Sundry Creditors for Goods 51
(5) Other Current Liabilities
Interest Accrued and Due on 6% Debentures 12
(6) Tangible Assets
Freehold Property 275
Plant & Machinery 100
375
(7) Current investment
Investment in Equity instruments 100
(8) Inventories
Finished Goods 150
(9) Trade Receivables
Sundry Debtors for Goods 225
(10) Cash and Cash Equivalents
Balance with Bank 2
The Board of Directors of the company decided upon the following scheme
of reconstruction with the consent of respective shareholders:
(1) Preference Shares are to be written down to ` 80 each and Equity Shares
to ` 2 each.
(2) Preference Shares Dividend in arrears for 3 years to be waived by 2/3rd
and for balance 1/3 rd, Equity Shares of ` 2 each to be allotted.
I
N
T
E
R
N
A
L
R
E
C
O
N
S
T
R
U
C
T
I
O
N
4.49
(3) Debenture holders agreed to take one Freehold Property at its book value
of ` 150 lakh in part payment of their holding. Balance Debentures to
remain as liability of the company.
(4) Interest accrued and due on Debentures to be paid in cash.
(5) Remaining Freehold Property to be valued at ` 200 lakh.
(6) All investments sold out for ` 125 lakh.
(7) 70% of Directors’ loan to be waived and for the balance, Equity Shares
of ` 2 each to be allowed.
(8) 40% of Sundry Debtors and 80% of Inventories to be written off.
(9) Company’s contractual commitments amounting to ` 300 lakh have
been settled by paying 5% penalty of contract value.
You are required to:
(a) Pass Journal Entries for all the transactions related to internal
reconstruction;
(b) Prepare Reconstruction Account; and
(c) Prepare notes on Share Capital and Tangible Assets to Balance
Sheet, immediately after the implementation of scheme of internal
reconstruction.
(May 2013) (16 Marks)
Ans.
(a) Journal Entries in the books of M/s. Cube Ltd.
Particulars Debit (` in Credit (` in
lakhs) lakhs)
(
)
8
%
P
r
e
f
e
r
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h
)
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r
.
2
0
0
i `
Tc
oh
8
%
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)
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1
6
iii
T
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r
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c
`
0 2 5 0 5 5 5 1 0 0 5 3 0 0 5 5
Dr.Cr.
5 1 7 0 2 4 0 6 9 2 1 4 4 0 7 2
Debit (` in Credit (` in
(` in
lakhs)
1 1 1 2 1 1 4
lakhs) lakhs)
0 2 5 5 0 9
5 1 7 2 5 2 l
a
1 1 1 6 t
i
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ih x 1 9 2 6
`
r e
(` in
lakhs)
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i l
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T y ueh e u h a t
i wg / 5 / a r
t wit
t A t A A / A
t t t c d p nrf A vn ep
(b) Reconstruction Account
N r e c A s A x
`
I e n r n
i n / n n
i / n l
o a n aao e fo ca
ef e c r
s o e 0 o c c
c p
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i n A o
i s c
e
o
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l c c
/ s t d 0 v
r ef n
ato
/ r eo r e y t
c o s
t t
c t / r t
c s e o b a 3 e uo l
A p Dr u d t i n sdi r A l r ( s l a l
t c r
e u t
a n u e A a
h u ’
r a n d e t c e a
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e
a
t
s
e d
l
fe
o f
n
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e p r
t i
c
e
m
r
t m n s r
t o s
g h o n d -
n / r o t i
p c
/
r o s b A u o s e s a
t o y s t
c ny i
t y
a r i
- A l ni
i t i r a s s
u h mn e r r n r t
s n s t n eei c t d k a
t a a b e C r d A
t e ira d k c p o p) e o e l i o r t
i u fi c k i t l esf o
t o s
n e a n c c py c v c v ’
s u c i bu r o n o n p r l d n e b s
Particulars
e r l t d a a d e / e n r q e d t r u t a a e e ta r o o
b F c y e B l
o R at A n R i o E R eq s P S S B C ccn r a e G L
e gb u g h ger I g c
t gnce n gan ut h D d
D o nt r o n e o np k o o n e o o na s o o o o o o nc oe S y e &
T i
e r c T i
e e T i
e o n T T i
e r T T i
e lkh c T T T T T i
e cc r h
% Ba c B r Br a B i Baa e Bncn y
t d s t
fi
6 (p A ( F (p B ( D (bl R (oaa i
u n i
n o
q u i r
) ) ) ) ) ) E S F P
viii
o o o o
4.50
vii
(
iv
vi
(
ix
( (
v
( ( T T T T
I
N
T
E
R
N
A
L
R
E
C
O
N
S
T
R
U
C
T
I
O
N
4.51
(` in (` in
lakhs) lakhs)
T
o
B
a
n
k
A
/
c
1 4 4
5 3 5
B
y
D
i
r
e
c
t
o
r
’
s
L
o
a
n
1
0
5
T
o
C
a
p
i
t
a
l
R
e
s
e
r
v
e
1 6
6
4
5
(c) Notes to Balance Sheet
(` in (` in
lakhs) lakhs)
1. Share Capital Authorised:
1
0
0
l
a
k
h
s
E
q
u
i
t
y
s
h
a
r
e
s
o
f
2
e
a
c
h
2 3 5
0 2 2
0 0 0
`
4
l
a
k
h
s
8
%
P
r
e
f
e
r
e
n
c
e
s
h
a
r
e
s
o
f
8
0
e
a
c
h
`
I
s
s
u
e
d
:
8
0
.
5
l
a
k
h
s
e
q
u
i
t
y
s
h
a
r
e
s
o
f
2
e
a
c
h
1 1 3
6 6 2
1 0 1
`
2
l
a
k
h
s
P
r
e
f
e
r
e
n
c
e
S
h
a
r
e
s
o
f
8
0
e
a
c
h
2. Tangible Assets
F
r
e
e
h
o
l
d
P
r
o
p
e
r
t
y
2
7
5
L
e
s
s
:
U
t
i
l
i
z
e
d
t
o
p
a
y
D
e
b
e
n
t
u
r
e
h
o
l
d
e
r
s
(
1 1
5 2 7
0
) 5 5
A
d
d
:
A
p
p
r
e
c
i
a
t
i
o
n
2 1 3
0 0 0
0 0 0
P
l
a
n
t
a
n
d
M
a
c
h
i
n
e
r
y
Que. 19 : M/s. Planet Limited has decided to reconstruct the Balance Sheet
since it has accumulated huge tosses. The following is the balance sheet of
the company as on 31st March, 2017 before reconstruction:
Particulars Note Amount
No. (` in lakh)
Equity & Liabilities
Shareholders’ Funds
Share Capital 1 2,100
Reserves & Surplus 2 (783)
Non-Current Liabilities
Long-term Borrowings 3 1,050
Current Liabilities
Trade Payables 4 153
Other Liabilities 5 36
Total 2,556
I
N
T
E
R
N
A
L
R
E
C
O
N
S
T
R
U
C
T
I
O
N
4.52
Particulars Note Amount
No. (` in lakh)
Assets
Non-Current Assets:
Fixed Assets
Tangible Assets 6 1,125
Current Investments 7 300
Inventories 8 450
Trade Receivables 9 675
Cash & Cash Equivalents 10 6
Total 2,556
Notes to Accounts:
` in lakh
(1) Share capital
Authorised:
300 lakh shares of ` 10 each 3,000
12 lakh, 8% preference Shares of ` 100 each 1,200
4,200
Issued, Subscribed and Paid up:
150 Lakh Equity Shares of ` 10 each, fully paid up 1,500
6 lakh 8% Preference Shares of ` 100 each, fully paid up 600
2,100
(2) Reserves and Surplus
Debit balance of Profit & Loss A/c (783)
(3) Long-term borrowings
6% Debentures (Secured by freehold property) 600
Director’s Loan 450
1,050
(4) Trade payables
Trade payables for Goods 153
(5) Other Liabilities
Interest Accrued and Due on 6% Debentures 36
(6) Tangible Assets
Freehold Property 825
Plant & machinery 300
1,125
(7) Current Investment
Investment in Equity Instruments 300
(8) Inventories
Finished Goods 450
I
N
T
E
R
N
A
L
R
E
C
O
N
S
T
R
U
C
T
I
O
N
4.53
` in lakh
(9) Trade Receivables
T
r
a
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e
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e
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e
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v
a
b
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e
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f
o
r
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o
o
d
s
6
7
5
(10) Cash and Cash equivalents
B
a
l
a
n
c
e
w
i
t
h
b
a
n
k
6
The Board of Directors of the company decided upon the following scheme
of reconstruction with the consent of respective shareholders:
(1) Preference Shares are to be written down to ` 75 each and Equity Shares
to ` 2 each.
(2) Preference Shares Dividend in arrears for 3 years to be waived by 2/3rd
and for balance 1/3rd, Equity Shares of ` 2 each to be allotted.
(3) Debenture holders agreed to take one Freehold Property at its book value
of ` 450 lakh in part payment of their holding. Balance Debentures to
remain as liability of the company.
(4) Interest accrued and due on Debentures to be paid in cash.
(5) Remaining Freehold Property to be valued at ` 550 lakh.
(6) All investments sold out for ` 425 lakh.
(7) 70% of Directors’ loan to be waived and for the balance, Equity Shares
of ` 2 each to be allotted.
(8) 40% of Trade receivables and 80% of Inventories to be written off.
(9) Company’s contractual commitments amounting to ` 900 lakh have
been settled by paying 8% penalty of contract value.
You are required to:
(a) Pass Journal Entries for all the transactions related to internal recon-
struction;
(b) Prepare Capital Reduction Account, Bank Account; and
(c) Prepare Notes to Accounts on Share Capital and Tangible Assets, im-
mediately after the implementation of internal reconstruction.
(Nov 2017) (16 Marks)
Ans.
(a) Journal Entries related to internal reconstruction (in the books of Planet
Ltd.)
(` in lakh)
Particulars Debit ` Credit `
(
)
8
%
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e p e nk e o c e e e e er e ia p e ni p e c
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E ( C (dl 6 (p A ( F (f B (D (bs C (cw C (a
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)
viii
4.54
( ( (
iii
iv
vi
(
ix
( ( (
ii
x
vii
( (
0 0 5 5 5 5 6 2 3 1 0 0 0 3 0 3 0 0 0
4.55
(` in lakh)
(` in lakh)
(c) Note to Accounts on Share Capital and Tangible Assets after implemen-
5 0 7 2 1 6 3 7 2 3 0 0 0 8 5 3 5 0 5
`
(` in lakh)
1 2 1 1
, 3 9
, 3 4 5
6 9 , 4 4 9 5 3 8
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i
% q e
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Bank Account
T 8 E F Bv D A C( c B u p
S s
s y
N y y y y y y y y i l
l
O B B B B B B B B n u
C h e f
E 8 3 0 0 2 2 5 6 0 5 1 c e h
4 8 7 6 7 3 6 0 2 3 a
`
R 7 2 3 9
4 , 3 1 4 b c s
e a r
L 1 5 e e e
A 7 h v 5 d
tation of internal reconstruction
N c a 7 l
o
R a h h
(b) Capital Reduction Account
`
E o e s f e
`
T 2 e o r
Issued, subscribed and paid up:
N s
e r u
I r a s t
f h e
`
h a o s r n
c h a e
l a s s h h b
a
t e e e
r k s e
i s 2 c a a e D y
p e
l n n h l c y r
a b e o e s 5 n a e
C i f
`
a v t o r y .
1 e y
t p n n
e v r c e
f t 9h) r r o i
r i
e e d s
t u s e i e
f s e o i
t h
a c s s
e / n d e r u has e t p t a c
h e e
i b e e r P q cc r e o d i a
r R r a E i s r c
Share Capital
S c R o e m h % h P s p e
z e m
/ l c l s h n a r
Authorised:
y A e t a n t a 8 wa % d i
l p d
t
i d n k t
i a s t
i h , k h 8 e l i
t n
u L e n p l e p k h a ft , l
b o U p a
q & a
r v a a a v a a k l o h i h A
E P T n B C B n C l a 5 r
e k g e :
s : t
I I 0 l .
1 th a n e s d n
o o o o o o o o o 0 2 4 u t l a r e d a
l
T T T T T T T T T 3 1 2 oo
( 6 T F L A P
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N
A
L
R
E
C
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T
R
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T
I
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N
4.56
Working Note:
Calculation of number of equity shares issued:
E
q
u
i
t
y
s
h
a
r
e
h
o
l
d
e
r
s
1
5
0
L
a
k
h
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r
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e
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a
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e
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r
s
(
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n
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e
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)
2
4
L
a
k
h
D
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t
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s
6
7
.
5
L
a
k
h
2
4
1
.
5
L
a
k
h
Que. 20 : The Abridged Balance Sheet (Draft) of C Ltd. as on 31st March,
2012 is as under:
Liabilities ` Assets `
24,000, Equity shares of 2,40,000 Goodwill 5,000
` 10 each.
5000, 8% cumulative pref- 50,000 Fixed Assets 2,57,000
erence shares of ` 10 each.
Inventories 50,000
8% Debentures 1,00,000 Trade receivables 60,000
Interest accrued on de- 8,000 Bank 1,000
bentures
Trade payables 1,00,000 Profit & Loss Account 1,25,000
4,98,000 4,98,000
The following scheme is passed and sanctioned by the court:
(i) A new company M Ltd. is formed with ` 3,00,000, divided into 30,000
Equity shares of ` 10 each.
(ii) The new company will acquire the assets and liabilities of C Ltd. on
the following terms:
(a) Old company’s debentures are paid by similar debentures in new
company and for outstanding accrued interest, shares of equal
amount are issued at par.
(b) The trade payables are paid for every ` 100, ` 16 in cash and 10
shares issued at par.
(c) Preference shareholders are to get equal number of equity shares
at par. For arrears of dividend amounting to ` 12,000, 5 shares
are issued at par for each ` 100 in full satisfaction.
(d) Equity shareholders are issued one share at par for every three
shares held.
(e) Expenses of ` 8,000 are to be borne by the new company.
(iii) Current Assets are to be taken at book value (except stock, which is to be
reduced by ` 3,000). Goodwill is to be eliminated, balance of purchase
consideration being attributed to fixed assets.
(iv) Remaining shares of the new company are issued to public at par and
are fully paid.
0 0 0 0 0 0 0 0 0 0 0 0
4.57
0 0 0 0 0 0 0 0 0 0 0 0
(ii) Summarised Balance Sheet as per the requirements of Schedule
`
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
0 8 0 6 5 9 0 0 8 6 3 7
0
, 0
, 3
, 3 7
, 4
, 4
, 1 3 5
1 1 1 3 2 2
(a) (i) In the books of C Ltd i.e. Old company’s books
× 16
-
a
n s
r l n
a
(b) (i) In the books of M Ltd (New company)
o e t o
1, 00, 000
d e d i
p s
s s l e )
.
100
s e e a ) o a s g
e u l h n h c n fi
r r b c o e e e
u c s a r i r r p .
l
t
n c e y u t
a a a x a
N a r a r h ) h e s
e B
O e t u p P
( e s .
g S r l (
I b s t . d y fi o b d
T e e n e d i t y f a
Realisation Account
C D r e d t s i .
l t
i ( y /
U e
t b a L n u a u ln) a c
R % n e r o q B q l
i P e
Bank Account
T 8 I d T P c E ( E wio c
S y y y y y dpt e n
d
(ii) Equity Shareholder’s Account
N B B B B B y or a
l
B oo a
r a
O Gs
C 0 0 0 0 0 0 0 0 0 0 0 T B
E 0 0 0 0 0 0 0
`
0 0 0 0
`
R 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0 0 0 0
5 7 0 0 1 6 9 , , , , y y y
(b) In the new company’s books:
L 5 5 6 7 5 0 5 0 B B B
(a) In the old company’s books:
(ii) Equity Shareholders’ Account
A , , 2
, 8 3 4
,
2 3
(i) Realisation Account
N 1 2 0 0 0
R 0 0 0
`
E 0
, 0
, 0
,
T 1 6 7
N 5 5
(i) Bank Account
I
You are required to show:
.
d
t
L c
s M e iA
l /
e s
-
e
l r c n a p
b a / i c h pnt
a h A s / c ae
v s A r
III.
s
t s i c e
s r u em
r
e e e e / s a n P a t
l s i c c A o h
l o hlo
l
i s r e n s i
t s sl
w a o r e s ) & y a s
d d
t
n e k
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e
r
e 3
. t i
t s e
n ya
t
o e e d f d N fi i
l i i&4 )
x v a n e l . o u a s u
o i n r a r o W r q e u qn.
G F I T B P h ( P E R B Eo.
i N
t
Ans.
o o o o o o o o o o oa W
T T T T T T T T T T Tc (
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
`
`
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
0 0 0 2 8 7 0 3 0 0 0 8 0 6 0 6
0
, 0
, 0
, 5
, 4 6 3 0
, 0
, 0
, 5 8 3
,
3 1 4 2 4 3 1 1
0
0
Note No.
`
0
,
1 2 3 0
0
(ii) Balance Sheet as on 31st March, 2012
,
3
0
N 1
O n
I e
`
T e @
C b )
U e 0
R v 0
T a 1
S hh)
N ss /
`
O p e a s
C u r c e
r
1. Computation of Purchase consideration
E d a a
i hn h
R a sa s
L h p )th
A c y 4
. s
r 5
N a l
l N r e x
s e u . e d
R
) t 0 f Wth l 0
E 2 n 1 (o o 0 s
r
T . e
l h h 0
, e
N N a l
a c 0n s e 2 d n
. f a 0o r
`
I
s W v
i t
i o d e 4t g a 1 l
o 0o
g p e , i n 0( i
1t
(2) Non-Current Liabilities
( s u a s b 0 4 a i h 1: h a
n q
`
i * s e c e i
r 1 2r w s e r
`
* l e r
(1) Shareholder’s Funds
w s t
e b r c ,de o e d a @e
e a
I. Equity and Liabilities
e n
`
t h s r s c d
(1) Non-current assets
s a f @
`
o e s s r h b o vsi r t n e h )i
s
r
r s a v
i a a s u on o s e e sd s 3n
s s e c l h y s bo B e s r i y /
Notes to Accounts
l
a o a e e c a s t S e ac r s e e
rv t 1o
t
(2) Current assets
t b s e l
b i
r e d i d i r u a f ai
d i xc
i t l i o r n p e u d a er m t e e h u e
p m e b g t a a s q n h ho r n l l
l r sf q ss
a r s i n e C i e a s t f e d e b i p o e ea
Working Notes:
C e s g n e d h r fd T e b i w y r
t a n a
t v a s e o 0 d 0 o - r e g o ts
r o ah
- d t i t c
Particulars
e g l d a n n r a r h 0 e 0 tue g u D n ua hr
r
a n a e T I I T C a t 0
, u 0
, u n c a o t qe t su
t u s t o n n
II. Assets
h o o x ) ) ) ) ) h 0 s 0 ois
s o e % n e er e 0p
S L T i
F S A 3 I 3 ( L S 8 I G r 0
( ( ( ( l
( a m 0a m 0l
b
a
c
t y 0r y ,a
t
o a 0o a 4o
4.58
T P ,
5F P 2T
1.
2.
3.
(
ton )e
s 0 0 0 0 ) 0 0 0 0 0 ) 0
a t v 0 0
2. Calculation of fair value at which fixed assets have been acquired by M Ltd.
4.59
0 0 0 0 0 0 0 0 0 0
`
Number of shares
gti e a 0 0 0 0 0 0 0 0 0 0 0 6
na s
s h ,
6 ,
8 ,
6 ,
0 0
, ,
2 ,
0 ,
6 ,
6 ,
0 4
, ,
5
i r
e a s
t 3
, 0
, 1
, 6
,
8
0 5
, 5 5 3 4
2
e d e 1 1 1 3 , 2 (
bi . ds 1
(
sns d es
i e xa
i
noi r f d
ocu
i gxe 0
0
0
0
0
0 l
a
0
0
0
0
0
0
0
0
0
0
t eq
s ni 0 0 0 t 8 0 0 6 0
a
r a c i
d f ,
7 ,
0 ,
1
i
p ,
0 ,
5 ,
8
e h a uhe 4 6 a )
. 1
4. Calculation of number of Equity shares issued to public
drcn l c g
i
s e c t e fi
nub e xh r .
l
ofp ec
(
a
h a
i B
co e
v sh
t
S (
N eta e w e n h
s
O
I s
a n h s t c
n
o
i a
T hou s
a a e t
a c
C cm s
t e r s r
U r e tu d e
f i
l o
R uas s e l e e a f
a
100 × 16 100 × 10 × 10
T pe a nv r
i r e r
a
S fr u P R
N fht
o o q y y p
te i
x 5
O a c B B t
etn ef a a
C
cae ue n c
E
nhh l × 1, 00, 000 0 0 i
l
24,000
R t a h e 0 0
3. Preference shareholders’ Account
12,000
`
ad t e b
vt 0 0
100
L l b , , u
A a e
i h ris s 6
5
6
5 p
bl c i s
3
N ‘ i n t a . o
R p h a
f e h d t
E tm
a o
i s s s t d
w
T hit ft s
a t e L d e
o a .
N t s e r r C n d u
I sti a eer t
e ) s
s o
f u
t f e t s
e i cd 0 a .
d n o d L s
i
t , e nsi
N 0 t s d e
i
v s
a ’
s u
l en / 0
, d L e e b
.
d s
r i C e
n e u d
1, 00, 000
t
s t
e a r o 3 x M
r
a s e t
L e f
o r
a
s v e o i
t - fi h s d d e h
ns f c 0 i l c s
100 × 10 shares
r f a 0 h n s s n C o n r s
oa
i i
a i
d e r
e 0 c i y e o f h e e y
t
s df s . d ,
0 i
h
s
e t
i r d o e r d t
i
e ee ead i :
s s s 5 r u a
h e s r
a
e
f l
o u
uixh hhe
t c
s
n e
i e
r
e
l ( w
t
a
h q
e s u
r
e
l h e
r h q
e
qft r r o t b y b s p e
,u i i u a a S c a r
`
o o e u c l
i t k d t
i c e f a f
et t r pq e b n y
a c e y e u a y
a c o h o
hd l o c s a e o s u t
i s
i q t n s r
1,00,000
t a e a i b P t r l u r s P e s e
,eu
t f
e ha h L e e S o a
v q o E e e r r
a y b
e u r t c : d : t k h : r d e t
i
cb q e den r d D
a s
s b n r
i E t s
s e a f
e e
r u m
ni
i e hn e u d % r e e a a o u e t
n r r r q u
S ri
t s Tab P A 8 T L D B F T A L I T P A E N
I
N
T
E
R
N
A
L
R
E
C
O
N
S
T
R
U
C
T
I
O
N
4.60
Que. 21 P Limited has decided to reconstruct the Balance Sheet since it has
accumulated huge losses. The following is the draft Balance Sheet of the
company as on 31st March, 2014 before reconstruction:
Liabilities Amount (` ) Assets Amount (` )
Share Capital
50,000 shares of ` 50 Goodwill 22,00,000
each fully paid up 25,00,000 Land & Building 42,70,000
1,00,000 shares of ` 50 Machinery 8,50,000
each ` 40 paid up 40,00,000 Computers 5,20,000
Capital Reserve 5,00,000 Inventories 3,20,000
8% Debentures of ` 100 4,00,000 Trade receivables 10,90,000
each
12% Debentures of ` 100 6,00,000 Cash at Bank 2,68,000
each
Trade payables 12,40,000 Profit & Loss Account 7,82,000
Outstanding Expenses 10,60,000
Total 1,03,00,000 Total 1,03,00,000
Following is the interest of Mr. S and Mr. G in P Limited:
Mr. S Mr. G
8% Debentures 3,00,000 1,00,000
12% Debentures 4,00,000 2,00,000
Total 7,00,000 3,00,000
The following scheme of internal reconstruction was framed and implemented,
as approved by the court and concerned parties:
(1) Uncalled capital is to be called up in full and then all the shares to be
converted into Equity Shares of ` 40 each.
(2) The existing shareholders agree to subscribe in cash, fully paid up equity
shares of 40 each for ` 12,50,000.
(3) Trade payables are given option of either to accept fully paid equity
shares of ` 40 each for the amount due to them or to accept 70% of
the amount due to them in cash in full settlement of their claim. Trade
payables for ` 7,50,000 accept equity shares and rest of them opted for
cash towards full and final settlement of their claim.
(4) Mr. S agrees to cancel debentures amounting to ` 2,00,000 out of total
debentures due to him and agree to accept 15% Debentures for the bal-
ance amount due. He also agree to subscribe further 15% Debentures
in cash amounting to ` 1,00,000.
(5) Mr. G agrees to cancel debentures amounting to ` 50,000 out of total
debentures due to him and agree to accept 15% Debentures for the
balance amount due.
0 0 0 0 0 0 0 0 0 0 0
4.61
0 0 0 0 0 0 0 0 0 0 0
(6) Land & Building to be revalued at ` 51,84,000, Machinery at ` 7,20,000,
(8) Goodwill and Profit & Loss A/c will be written off and balance, if any,
Computers at ` 4,00,000, Inventories at ` 3,50,000 and Trade receivables
You are required to pass necessary Journal Entries for all the above transactions
and draft the company’s Balance Sheet immediately after the reconstruction.
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
0 0 0 0 0 3 7 0 0 0 0
of Capital Reduction A/c will be adjusted against Capital Reserve.
0
, 0
, 0
, 5
, 5
, 4
, 4
, 0
, 0
, 0
, 0
,
0 0 5 2 7 3 1 7 1 6 2
1 6 1 1
at 10% less to as they are appearing in Balance Sheet as above.
0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0
`
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
0 0 0 0 0 0 0 0
0
, 0
, 5
, 4
, 0
, 0
, 0
, 0
,
0 5 2 2 3 4 1 8
1 7 1 1
Journal Entries in the books of P Ltd.
.
r .
r .
r .
r . r
r . .
r .
r
D D D D D D D D
N
O h h
(7) Outstanding Expenses are fully paid in cash.
I c s e
T a a c
C e c ) n
U 0 r S a
l
R 5 o f a
T s
e o b
S r s d
`
N f a e
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e
R i h i e S r n
p s
e b y uou
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N d / e e a d ec
R e A r 0 y % e ba
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T c e c 0 h c c % p 1 i
r do
/ c / 4 s / t / 0 e d c i
`
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t l a a b c / 5u
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0 i
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n a c c o a c 9 c d% c u r c t
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u u o i
0 r i r d n r s / r 4 d m7 / A o n t d
0 a n p a e o a e A a ( e A i e n a
, h o a h R i
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a s h c R tf s
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a b e e ec
0
0 s y c s r )
h S h e s / n o s
e r l
l e b R co
, y e r
e y l e y s l
b y A l et r u e d e l nt
1 t n a t a
t vc t t a
t mn u t c c c D a ad
t
( i o h i i na i w a i k i yte t n / n / w i u
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a ax n e A a c A e s
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m s
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E n p E B C pe e b c / n 5 a i r
A y
g t g4 A g ge b e S g A S g 1 C g e
f
o o o o e o o o e D o o c
k
T n i
i T T n
i k
T n
i d T T T nh
i D T n
i k
T n
i / o o i
nns
A T T e
`
n e u e o n e a e t % e n e
a B q t a a a
Ans.
Bn B r Bo % 2 B B Br
B ( E (i B ( T (t 8 1 ( B ( S (t
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
`
`
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
0 0 0 4 0 0 0 9 0 2 0 0 0 0 4
0
, 5
, 5 4
, 6
, 3
, 2
, 0
, 0
, 8
, 0
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, 5
, 5
, 0
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3 2 9 0 1 1 1 2 7 5 0 8 8 3
1 2 8 8 6
0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0
`
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
0 0 0 4 0 0 1 0
Notes
0
, 0
, 0
, 1
, 3 6
, 4
, 0
, 1 2 3
Balance Sheet (as reduced) as on 31.3.2014
1 2 3 9 0 3 5
1 3
. r
r . .
r . r
r . .
r .
r .
r
D D D D D D D D l
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t l a
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N e d i c
r n dd c
O u a ed a
C t ) ) )
h z n
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e 0 s i
l n o
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l t
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0 i u
A d n c 7 n
i nw
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R % ba 2 ) d i
t o e s
E 2 en 4 d i c o r g
1 e a ug l n
Non-current liabilities
T do - p
Equity and Liabilities
s d, a ) i
Shareholders’ Funds
N d c %ci
t 0 c a s ee c t
i e w
I n 0 e e c p v
Non-current assets
a c / 5u 0 / r c s / Rc / aer o
r
% / A 1d ,
4 A c / n
e
A c ln
a
/ t a
A cs r s
t
8 A n wre 8 n n
I A s l n fre l o e
s o e ,
1 o s p c e A i a o o a b s s
f
o e i
t l 5 i
t s e x / c c l
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t l t
i t s
c r c na ( c t
e s e A / / s a ) c c ea p m e a
c / n fp
u u o t
i u s n g A a c o Cr. t
e / u cit a r s e
/ A o t d g d s e n n A v
i / L fD s A d np c e s l
A i n a n a i o y s e A s aa t a b
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a e e ec i
d e
f
p
x c d i
t r r
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a c e
r
-
g d i
g
s b R co R n tcr R
Assets
e r l
l l
i o e / n c e t e l
i n / v bst a n e n
r u e e l nt u l e A a u n
i u r w a u e r
e l t h o x
i a
u t
n
c
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t
i u B s a
t
i u
g
n k
t
s d h p e d t o
fi
Ah
t s a
t
i ii
b
n S L F T
t n e t e c d e
n e A a s
% p s e d i p l
a i
d n u m a o o mLo p ega
Particulars
e b c 5 a i r
r n r a v a o R a o r o r a&f R a da
b e G 1 C g e a o C n B l M C T G P g o l C
e g c f t g a g a Pe a gd
a
D o n / o o i
n s d n o n t
s o n t
i o o o o o n- t
i o ne
D T i e i i i l u i
%
% e A T T e n
a n
a v T e t
u
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a
T T T T T e
fa p
a
T e t
s
4.62
2 B G Br L n B O B C Bf C Bu
8 1 ( (t I ( ( (ov (j
1
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
4.63
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
`
`
0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
0 1 5 0 0 0 4 3 0 5 8 0 7 0 0 4 0 0 1
5
, 8
, 1
, 5
, 0
, 5
, 0
, 4
, 6
, 1
, 1
, 0
, 4
, 0
, 5 1
, 3 0
, 4
,
3 9 2 8 0 8 3 3 0 2 6 5 1 2 9 5 3
1 8 8 6 1 1 2 1 3
0 0 0 s c
0 0 0 e /
`
0 0 0 s ) A
Notes
,
4 ,
0 ,
0 n . l
8 2 0 c e g a c c
, , , / p fi t
i / /
1 7 4 A x .
l p A A
5 s e a a s g e
r b C r n
i v
o
t g ( e o
t d r
l i n
i d r i l
i e
s
N a d d / a d u s
e e
t
o e c h e B i
O r n r r R
Capital Reduction Account
I T C a e S C o l
1. Cash at Bank Account
T t c y & t a
e e c
` Particulars
` Particulars
C s
t n t
i c / d n t
i
U d u a u d / n e p
R a l
a q a A A a v a
) r O B r G n
T
S d T c E T S L I C
N e
r y y/ y y y y y y y y
O u B BA B B B B B B B B
C c
E e
s 0 0 0 0 0 0 0 0 0 0 0
R 0 0 0 0 0 0 0 0 0 0 0
e 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
, 0
,
L s b 8 0 0 0 8 0 0 9 0 2 1
A t 0 o 6
, 0
, 5
, 0
, 1
, 3
, 2
, 0
, 0
, 8
, 4
,
N n 4 t 2 0 2 1 6 1 1 1 2 7 3
R e
l d 1 1 2 2 3
a f
`
E e
T v
i o m
N
I s u s
e u c c
Long-term borrowings
e q r s / /
l e a s A A
b h h a
( c
a s s g l l /
a a
Current assets
v
i a y s
e n t t A c
s
e e c
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