Ex: 1. Amar Limited agreed to acquire the business of Kumar Limited as on 31.03.2012.

The summarized Balance Sheet of Kumar Limited on the date was as under: Particulars I EQUITY AND LIABILITIES Shareholders' Funds (a) Share Capital (b) Reserves and Surplus Non-Current Liabilities Long Term Borrowings Current Liabilities Trade Payables Total I I (
1

Notes No.

Amt(Rs)

( 1 ( (

1
2

3.00,000 1.40,000 50,000 10,000

3
4

5.00,000

( 2

ASSETS Non-Current Assets (a) Fi xed Assets (i) Tangible Assets (ii) Intangible Assets Current Assets (a) Inventories (b) Trade Recei vables (c) Cash and Cash Equivalents Total

6 7 8 9

3.20,000 50,000 84,000 18,000 28,000

5.00,000

Notes to Balance-Sheet: I. Share Capital consists of 30,000 Equity Shares of Rs. 10 each. 2.Reserves & Surplus consist of General Reserve Rs. 80,000, Profit and Loss Rs. 55.000 and Workmen Compensation Fund Rs. 5,000. 3.Long-term Borrowings refer to 6% Debentures of Rs. 100 each. 4.Trade payables consist of Creditors for Rs. 10,000. 5.Tangible Assets refer to Land and Building. 6. Intangible Assets refer to Goodwill. Current Assets include: (7) stock-in-trade Rs. 84,000 (8) Debtors worth Rs, 18,000 and (9) Cash balance worth Rs. 28,000. Other Information: The consideration payable by Amar Limit~d was agreed as under: 1. Cash Payment equivalent to Rs. 2.5 for every share of Rs. lain Kumar Limited. c 2.Issue of 45,000 Rs. 10 shares fully paid. in Amar Ltd. having an agreed value of Rs.15 per share. 3.Issue of such an amount of fully paid 5% debentures of Amar Limited at 96% as is sufficient to discharge the 6% debentures of Kumar Limited at a premium of20%. While arriving at the agreed consideration. the directors of Amar Limited valued Land and Building at Rs.6,00,000, the stock in trade at Rs. 71,000 and the debtors at their book-value subject to an allowance of 5% to cover doubtful debts. The cost of liquidation of Kumar Limited was Rs. 2,500 paid by Amar Ltd. On the date of acquisition, Kumar Ltd. had a liability towards a workmen for compensation against injury. The amount was ascertained at Rs. 3,000. The company paid the compensation in cash to the \\orker. Amnr limited also issued to the public 5,000 shares of Rs. 10 each at Rs. 15 per share. The shares were fully subscribed and paid for.

You arc requil'cd to draft journal elltries and prepare ledger accounts in the books of Kumar Limitcd. Also pass the opening journal entrics in the books of Amar Limited and prepare its opening balance sheet. Ex: 2. The following are the Balance Sheets of Alpha Ltd. and Beta Ltd. as on 31st March 2012. (Figures in Rs.) Particulars EQUITY AND LIABILITIES: Shareholders' Funds: (a) Share Capital (b) Reserves and Surplus Non-Current Liabilities: Long Term Borrowings Cu rrent Liabilities: (a) Trade Payables Total ASSETS Non-Current Assets (a) Fixed A~sets: (i) Tangible Assets Current Assets: (a) Inventories (b) Trade Recei vables (c)Cash And Cash Equivalents Total Note Alpha Ltd.
L

Beta Ltd.

(1) (2) (3)

II

1 2 3 4

15,00,000 8,09,360
-

6,00,000 15,000 2,00,000 5,100

2,33070

25,42,430

8,20,100

(1) (2)

5 6 7 8

16,03,500 5,37,340 2,80,630 1,20,960

4,49,500 2,52,410 97,850 20,340

25,42,430

8,20,100

Notes to Balance-Sheet: I.Share Capital of Alpha Ltd. consists of ] ,50,000 Equity Shares of Rs. 10 each and Beta Ltd. consist of 60,000 Equity Shares of Rs. 10 each. 2.Reserves & Surplus of Alpha Ltd. consist of Securities Premium Rs. ] ,50,000, General Reserve Rs. 4,70,000 and Profit and Loss Rs. 1,89,360 and Beta Ltd. consist of Capital Reserve Rs. 15.000. 3.Long-term Borrowings of Beta Ltd. refer to ] 0% Debentures of Rs. 100 each. 4.Trade payables of Alpha Ltd. and Beta Ltd. consist of Creditors for Rs. 2,33,070 and Rs. 5,] 00 respectively. 5.Tangible Assets of Alpha Ltd. consist of Land and Building Rs. 5,60,000, Plant Rs, 9,42,000,and Furniture Rs. 10] ,500 and Beta Ltd. consist of Plant Rs. 3,60,000 and Furniture Rs.89,500. Current Assets include: (6) stock of Alpha Ltd. Rs. 5,37,340 and Beta Ltd. Rs. 2,52,4]0 (7) Debtors of Alpha Ltd. Rs. 2,80.630 and Beta Ltd. Rs. 97,850 and (8) Cash at bank of Alpha Ltd. Rs. 1.20.960 and Beta Ltd. Rs. 20,340. Other Information: The two companies agree to amalgamate and form a new company call~d Gamma Ltd. which takes over all assets and liabilities of both the companies on 1 st April 2012. The consideration is agreed at Rs. 19.50,000 and Rs. 6,80,000 for Alpha Ltd. and Beta Ltd. respectively and the entire amount being payable by Gamma Ltd. in the form of its fully paid equity shar~s of Rs. 10 each. Beta Ltd.'s I 0% lkbentur~s are converted in to identical number of Gamma Ltd.s II % debentures for Rs. 2.00.000. Expenses of amalgamation amounting to Rs. ] 5,000 are borne by Gamma Ltd.

Pass journal entriesand prepare important ledger accounts to close the books of Alpha Ltd. And Beta Ltd. Also pass journal entries in the books of Gamma Ltd. and prepare its balance sheet immediately after the amalgamation. Ex: 3. ABC Ltd. was absorbed by XYZ Ltd. as on 30.06.201::. All the assets and liabilities of ABC were taken over by XYZ Ltd. The purchase consideration was agreed at Rs. 3,36,600 and was paid in so many fully paid equity shares of XYZ Ltd. to be distribut~d to the equity shareholders of ABC Ltd. The followin!! are their balance sheets ( Amt. in Rs) I Particulars EQUITY AND LIABILITIES: Shareholders' Funds: (a) Share Capitajc (b) Reserves and Surplus Current Liabilities: (a) Trade Payables (b) Other Long-term liabilities (c) Short-term provisions Total I ASSETS Non-Current Assets (a) Fixed Assets: (i) Tangible Assets (ii) Intangible Assets Current Assets: (a) Inventories (b) Trade Recei vables (c) Cash And Cash Equivalents (d) Other current assets Total Note XYZ Ltd. ABGLtd.

(1)

1
2

7,50,000 1,82,502 58,567 10,000 12,000

2,00,000 71,900 '30,456 4,000 5,000

(2)

3
4

10,13,069

3,11,356

II

(1)

6
7

3,12,000 2,00,000 2,65,000 2,21,200 14,869

1,00,000 60,000 80,000 56,000 8,656 6,700

(2)

8 9 10 11

10,13,069

3,11,356

Notes to Balance-Sheet: 1.Share Capital of XYZ Ltd. consists of 75,000 Equity Shares of Rs. 10 each and ABC Ltd. consist of 20.000 Equity Shares of Rs. 10 each. 2.Reserve & Surplus of XYZ Ltd. consist of General Reserve Rs. 1,50,000, Profit and Loss Rs. 20,502 and workmen compensation fund Rs. 12,000 and ABC Ltd. consist of General Reserve Rs. 50,000 .. Profit and Loss Rs. 12,900 and workmen compensation fund Rs. 9,000. 3.Trade payables of XYZ Ltd. and ABC Ltd consist of Creditors for Rs. 58,567and Rs. 30,456 respectively. 4.Other Long-term liabilities of XYZ Ltd. and ABC Ltd. consist of Staff provident fund for Rs. 10,000 and Rs. 4,000 respectively. 5.Short-term provisions of XYZ Ltd. and ABC Ltd. consist of Provision for taxation for Rs.12,000 and Rs. 5.000 respectively. 6.Tangible Assets refer to Plant and Machinery. 7.lntangible Assets refer to Goodwill. Current Assets include: (8) stock of XYZ Ltd. Rs. 2,65,000 and of ABC Ltd. Rs. 80,000 (9) Debtors of XYZ Ltd. Rs. 2,21.200 and of ABC Ltd. Rs. 56,000 and (10) Cash in hand Rs. 869 and Cash at bank of XYZ Ltd. Rs. 14,060, Cash in hand Rs. 356 and Cash at bank Rs. 8,300 of ABC Ltd .. (I I) Other current assets of ABC Ltd. consist of Prepaid insurance Rs.700 and Income tax refund Rs.6,000.

Pass necessary journal entries and prepare necessary ledger accounts in the books of both the companies. Also p'"epare balance sheet of XYZ & Co. after the amalgamation. Ex: 5. ;\ Ltd. & B Ltd. were EX:4. The foIl 31st March 2012 . 'he Bal f Llovd Ltd Sh Amt(Rs) ~ Note Particulars as atd sl March I EQUITY AND LIABILITIES: (1) Shareholders' Funds: (a) Share Capital 4,00,000 1 (b) Reserves and Surpl us 2 79,600 (2) Non-Current Liabilities: Long Term Borrowings 2,50,000 3 (3) Current Liabilities: (a) Trade Payables 4 1,28,700 Total 8,58,300 II ASSETS ~ (1) Non-Current Assets (a) Fixed Assets: (i) Tangible Assets 5 5,70,000 (2) Current Assets: (a) Current investments 50,600 6 (b) Inventories 7 80,700 ( c) Trade Recei vab I es 8 1,40,500 (d)Cash And Cash Equivalents 16,500 9 Total 8,58,300 Notes to Balance-Sheet:

:H

amalgamat~d on st April 2012. A new company AB' Ltd. was form cd to take 1

I. Share Capital consists of 40,000 Equity Shares of Rs. 10 each. 2.Reserve & Surpl us consist of General Reserve Rs. 50,000 and Profit and Loss Rs. 29,600. 3.Long-terrn Borrowings refer to 10 % Debentures of Rs. 100 each. 4. Trade payables consist of Creditors for Rs. 1,28,700. 5.Tangible Assets refer to Building Rs. 1,70,000 and Plant Rs. 4,00,000. Current Assets include: (6) investments Rs. 50,600 (7) stock Rs. 80,700 (8) Debtors Rs, ],40,500 and (9) Cash at bank Rs. 16,500. Other Information: Lloyd Ltd. \\as absorbed by Sail Ltd. on the above mentioned date on the following conditions: Sail Ltd. to: I.Assume all liabilities and to acquire all assets except investments which were sold by Lloyd Ltd. for Rs. 45,000. 2.Discharge the debentures of Lloyd Ltd. at a discount of 5% by the issue of 12% debentures of Rs. 100 each in Sail Ltd. 3.Issue t\\O equity shares of Rs. 5 eacl; in Sail Ltd. at Rs. 6 per share and also to pay Rs. 2 per share in cash to the shareholders of Lloyd Ltd. in exchange of every share in Lloyd Ltd. and 4.Pay the cost of absorption Rs. 2,500. Lloyd Ltd. sold in the open market 1/4111 of the shares received from Sail Ltd. at the average rate of Rs. 5.50 per share. Show necessary ledger accounts in the books of Lloyd Ltd. and the opening entries in the books of Sail Ltd.

over the business of the existing companies. Their Balancc Shccts as ton
-

3r

I
(1)

(2)
(3)

II
(1)

Particulars EQUITY AND LIABILITIES: Sharcholdcrs' Funds: (a) Share Capital (b) Reserves and Surplus Non-Current Liabilities: Long Term Borrowings Current Liabilities: (a) Trade Payables Total ASSETS Non-Current Assets (a) Fixed Assets: (i) Tangible Assets (b) Non-current investments

Notc

Alpha Ltd.

Bcta Ltd.

2
3

1 ]00 420 60 420

2,000

950 330 30 190

1,500

900 150

650 50

Current Assets: 6 (a) Inventories 350 250 7 (b) Trade Receivables 300 350 8 (c)Cash And Cash Equivalents 300 200 2,000 1,500 Total Notes to Balance-Sheet: (Rs. in Lakhs) : I.Share Capital of A Ltd. consists of 8.00,000 Equity Shares of Rs. 100 each, 12% 3,00,000 preference shares of Rs. 100 each and Beta Ltdo consist of 7,50,000 Equity Shares of Rs. 100 each, 12% 2.00,000 preference shares of Rs. 100 each. 2.Reserve & Surpl us of A Ltd. consist of Reval uation Reserves Rs. ISO, General Reserve Rs. 170. EXpOl1 Profit Reserves Rs. 50 and Profit and Loss Rs. 50 and B Ltd. consist of Re\'aluation Reserves Rs. 100, General Reserve Rs. 150, Export Profit Reserves Rs. 50 and Prot}t and Loss Rs. 30. 3.Long-term Borrowings of A Ltd. and B Ltd. refer to 10% Debentures of Rs. 100 each. 4.Trade payables of A Ltd. consist of Creditors Rs. 270 and Bills Payable Rs. 150 and B Ltd. consist of Creditors Rs. 120 and Bills Payable Rs. 70. 5.Tangible Assets of A Ltd. consist of land and Building Rs. 550 and Plant Rs, 350 and B Ltd. consist of Land and Building Rs. 400 and Plant Rs. 250. Current Assets include: (6) stock of A Ltd. Rs. 350 and B Ltd. Rs. 250 (7) Sundry Debtors Rs. 250 and Bills receivable Rs. 50 of A Ltd. and Sundry Debtors Rs. 300 and Bills receivable Rs. 50 of B ltd. and (8) Cash at bank of A Ltd. Rs. 300 and B ltd. Rs. 200.
(2)

Additional information: I.10% Debenture holders of A Ltd. and B Ltd. are discharged by C Ltd. by issuing such number of its 15% Debentures of Rs. 100 each so as to mai ntai n the same amoLint of interest. 2.Preference shareholders to two companies are issued equivalent number of 15% preference shares of C Ltd. at a price of Rs. ] 50 per share ( face val ue Rs. 100). J.C Ltd. will issue 5 equity shares for each equity share of A Ltd. and 4 equity shares for each equity share of B Ltd. The shares are to be issued Rs. JO each having a face value of Rs. 10 pcr share. @ 4. Export Protits Reserve is to be maintained for 4 more years. st Prepare the Balance Sheet of C Ltd. a$ onApril 2012 after the amalgamation has bC'cn carried out basis of 1 011 the amalgamation in the nature of purchase.