Illustrations Amalgamation

Q1. The Balance sheet as on 31st March,2003 of X Ltd and Y Ltd are as under: Balance Sheet X Ltd. Y Ltd. X Ltd. Liabilities Rs. Rs. Assets Rs. Share Capital of Rs 10 each fully paid up 12% Preference Share of Rs.100 each General reserve Profit and Loss A/C 14% Debentures Creditors

500,000 220,000 80,000 75,000

300,000 170,000 55,000 50,000

50,000 75,000

35,000 50,000

1,000,000

660,000

Fixed Assets: Buildings Machineries furnitures Investments Current Assets: Stock Debtors Bank balances

Y Ltd. Rs.

250,000 325,000 57,500 70,000

155,000 170,000 35,000 50,000

125,000 90,000 82,500

95,000 103,000 52,000

1,000,000

660,000

X Ltd takes over Y Ltd on 10 April 1998. The purchase consideration is discharged as follows: (i) Issued 35,000 equity shares of Rs.10 each at par to the equity shareholders of Y Ltd. (ii) Issued 13% preference shares of Rs.10 each at par to the equity shareholders of Y Ltd of Y Ltd at 10% premium. (iii) The debenturehoders of Y Ltd will be converted into equivalent number of debentures of X Ltd. Show the opening entries and opening balance sheet of X Ltd after amalgamation.

Liabilities

Q2. The summarised Balance Sheet of Sun Ltd and Moon Ltd as at are as follows: Balance Sheet as on 31st December, 2007 Sun Ltd Moon Sun Moon Rs. Ltd. Rs. Assets Ltd Rs. Ltd. Rs.

Share Capital of Rs 10 each fully paid up 11% Preference Share of Rs.10 each General reserve Profit and Loss A/C 12% Debentures Creditors

3,00,000

2,50,000

1,20,000 1,00,000 50,000 30,000

1,50,000 1,00,000 50,000

6,00,000

5,50,000

Fixed Assets: Plant and Machinery Current Assets: Stock Debtors Bank balances

3,50,0000

4,00,000

1,00,000 1,25,000 25,000

30,000 70,000 50,000

6,00,000

5,50,000

The above two companies agree to amalgamate and form a new company Sunmoon Ltd on the following conditions: Sun Ltd. (iv) For every 5 equity shares, 6 shares of Sunmon Ltd of Rs.10 each will be issued at par. (v) Debenture holders will be issued 12% debenture of Sunmoon Ltd of same amount and denomination. Moon Ltd. (i) The holders of 11% preference shares will be allotted 4, 13% preference shares of Rs.10 each of Sunmoon Ltd for every 5 preference shares held. (ii) For every 5 equity shares, 6 shares of Sunmoon Ltd of Rs.10 each will be issued at par. (iii) Debenture holders will be issued 12% debentures of Sunmoon Ltd of same amount and denomination. You are required to show : (1) the calculation of purchase consideration ; (2) journal entries in the books of Sunmoon Ltd ; and (3) Opening Balance Sheet of Sunmoon Ltd. Q3. The summarized Balance sheets of A Ltd and B Ltd as at 1.1.2002 are as

under : Liabilities Equity shares of Rs,10 each 10% Debentures 12% Debentures Profit and Loss Account Reserve Creditors

A. Ltd 1,50,00 0 50,000

B. Ltd 1,00,00 0 -

Assets Plant and Machinery Stock

A. Ltd 2,30,00 0 80,000

B. Ltd 1,10,000

-

1,00,00 0 60,000

Debtors

30,000

20,000

Cash and Bank

60,000

80,000

4,00,00 0

3,00,000

30,000 70,000 1,00,00 0

40,000

4,00,00 0

3,00,00 0

90,000

The above two companies agree to amalgamate and form a new company AB Ltd on the following conditions : (i) An exchange of 6 shares in AB Ltd. of Rs.10 each at par for every 5 shares. (ii) 90% of equity shareholders will be discharged by the issue of equity shares of AB Ltd. The balance 10% will be discharged by paying cash (All assets and liabilities are taken over at book value ). You are required to show : (i) The calculation of purchase consideration;

(ii) (iii) (iv)

Ledger accounts to close the books; Journal entries in the books of AB Ltd; and Opening Balance Sheet of AB Ltd.

The Balance sheet as on 31st March,2003 of X Ltd and Y Ltd are as under: Small Liabilities Big Ltd. Ltd Assets Share Capital of Rs 10 each fully paid up Security Premium Exports Projects Reserves Investment Fluctuation Reserve General Reserve Profit and Loss Accounts Sundry Creditors Staff Provident Fund Provision for Taxation

1000000.00 100000.00 17000.00

400000.00 8000.00

8000.00 250000.00 48800.00 83650.00 15000.00

3000.00 100000.00 23500.00 32840.00 6000.00

43000.00

13000.00

1565450.00

586340.00

Fixed Assets: Gudwill Machineries furnitures Investments Current Assets: Stock Debtors Bank balances Discount on Issue of shares

Big Ltd. 80000.00 910000.00 92500.00

15000.00 285000.00 60000.00

75000.00

24000.00

261000.00 93630.00 53320.00

101800.00 62310.00 32230.00 6000.00

1565450.00

Small Ltd merged into Big Ltd as on the abovementioned date. Big Ltd allotted at par 44000 fully paid up equity shares of Rs.10 each to be distributed among the shareholders of Small Ltd. Expenses which amounted Rs.7,000 were born by Big Ltd. You are required to Prepare necessary accounts in the books both companies. Solution :

Particulars Gudwill Machineries furnitures Investments Current Assets: Stock Debtors Bank balances

In the Books of Small Ltd Realisation Accounts Amount Particulars Amounts 15000.00 Staff Provident Fund 6000.00 285000.00 Provision for Taxation 13000.00 60000.00 Sundry Creditors 32840.00 24000.00 Puchase Consideration 440000 101800.00 62310.00 Loss t/f to Equity share 32230.00 a/c 88500 580340.00 580340.00

Small Ltd

586340.00

Equity Share Capital Account Particulars Discount on Issue of shares Realisation accounts(loss)

Equity shares in Big Ltd

Amount

Particulars

6000

Balance b/d

400000

Exports Projects Reserves Investment Fluctuation Reserve General Reserve Profit and Loss Accounts

8000.00

88500

440000

Amounts

534500

3000.00 100000.00 23500.00

534500

In the Books of Big Ltd. Balance Sheet

Liabilities

Big Ltd.

Share Capital of Rs 10 each fully paid up Security Premium Exports Projects Reserves Investment Fluctuation Reserve General Reserve Profit and Loss Accounts Sundry Creditors Staff Provident Fund Provision for Taxation

1440000 100000 25000 11000 320500 48800 116490.00 21000.00 56000.00 2138790

Assets

Big Ltd.

Gudwill Machineries furnitures Investments Current Assets: Stock Debtors Bank balances

95000.00 1195000.00 152500.00 99000.00 0.00 362800.00 155940.00 78550.00

2138790.00