MODULE 1: CORPORATE ACCOUNTING BBA SEMESTER III

MODULE 1: AMALGAMATION (PRATICALS)

CALCULATION OF PURCHASE CONSIDERATION

1. Calculate purchase consideration to be made by B Ltd to A Ltd from the

following information:
• The assets of A Ltd are valued at Rs.3,00,000
• The liabilities of A Ltd are valued at Rs.45,000
• Rs. 60,000 cash is paid for the share holders of A Ltd.
• The balance of purchase consideration is discharged by issue of
shares of Rs.10 each at Rs. 20 per share.

2. MN Limited purchased by YZ Limited at on following agreed terms:

• A payment in cash at Rs.40 for equity share in MN Limited.
• A further payment in cash of Rs.110 for every debenture in MN
Ltd.
• An exchange of 4 shares in YZ Limited of Rs.50 each at the
market value of Rs.50 for every share in MN Ltd.
• Share capital of MN Ltd is 10,000 shares of Rs. 20 each.
Calculate the amount of purchase consideration.

3. White Company acquired the business of Black Company & agreed to

pay a purchase consideration as follows:
• A cash payment of Rs.2.50 for every share to Black Limited.
• Issue of 90,000, Rs.10 share at an agreed value of Rs.12.50 per
share.
• 6% debentures of Black Limited are taken over by white Limited
& are discharged by the issue of 5% debentures.
• The equity share capital of Black Ltd is amounted to
Rs.6,00,000 of fully paid share of Rs.10 each.
Calculate the total amount of purchase consideration.

4. Z Company Ltd., has an Authorised Capital of Rs. 14, 00,000/-. In the

form of 50,000 preference shares of Rs. 10/- each and 90,000 ordinary
shares of Rs. 10/- each. A Co., Ltd., purchased Z Co., Ltd., on the
following terms:
• Two shares of Rs.5 each fully paid in A Co., Ltd., to be issued for
every three shares in Z Co., Ltd.,
• Six shares of Rs. 5/- each fully paid in A Co., Ltd., to be issued for
every five preference shares in Z Co., Ltd.,
Calculate Purchase Consideration.

5. Small Co., Ltd., was taken over by Big Co., Ltd., and they agreed to
pay as follows:
• The allotment of 11, 5% preference shares of Rs. 10/- each fully
paid for each 10 preference shares.

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• 20 shares of Rs. 10/- each credited at Rs. 9/- for each 16 equity
shares held;
• The debentures holder to be satisfied at a premium of 5% by issue
of new debenture in the new company. The debenture of Small Co
amounted to Rs. 3,00,000;
• The capital of Small ltd., 12,000, 6% preference shares of Rs.
10 each, amounted to Rs. 1,20,000. Equity shares of Rs.10 each
amounted to Rs.80,000.
Calculate Purchase Consideration.

6. Going Co., Ltd., were purchased by the Surviving Co., Ltd., The
Purchase Consideration payable was as follows:
• Payment in cash at Rs. 40 for every share in Going Co.., ltd
• Further payment of cash Rs. 110 for every debentures
holders Rs.100 (No. of Debentures 1,000)
• An exchange of 4 shares in Surviving company ltd of Rs. 50 each
at the market value of Rs. 80 for every share in Going co, ltd. The
share capital of the Going company is 1,000 shares of Rs. 200
each. Calculate Purchase Consideration

7. ABC Company Ltd., has an equity share capital of Rs. 5, 00,000 that is
5,000 shares of Rs.100 each. XYZ Company purchased the business of
ABC Company Ltd., on the following terms:
• Five equity shares of Rs. 100 each in XYZ Co., ltd are issued to
equity shareholders at an agreed value of RS 125 per share for
every 4 shares held in ABC CO., LTD.
• 10% Debentures of Rs. 1,00,000 are discharged at 20% premium;
• In the form cash Rs 4 per share.
Calculate Purchased Consideration.

8. Godrej Co., Ltd., were purchased by the Super Co., Ltd., The Purchase
Consideration payable was as follows:
• Payment in cash at Rs. 20 for every share in Godrej Co.., ltd
• Further payment of cash Rs. 55 for every debentures
holders Rs.50 (No. of Debentures 1,000)
• An exchange of 3 shares in Super company ltd of Rs. 30 each at
the market value of Rs. 50 for every share in Godrej co, ltd. The
share capital of the Godrej company is 1,000 shares of Rs. 100
each. Calculate Purchase Consideration

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9. A Ltd. and B Ltd. agreed to amalgamate by transferring their undertakings to

a new company AB Ltd. formed for that purpose. On the date of amalgamation
balance sheet of the companies were as under:

‘A’ Ltd ‘B’ Ltd ‘A’ Ltd ‘B’ Ltd

Liabilities Assets
Amt.Rs Amt.Rs Amt.Rs Amt.Rs
Share
Sundry
capital(10 5,00,000 3,00,000 4,80,000 3,22,000
Assets
each)
Reserve Freehold
- 50,000 2,00,000 1,00,000
Property
P&L
30,000 20,000 Debtors 2,50,000 1,50,000
Account
5%
Investments 50,000 20,000
Debentures 2,00,000 1,00,000
1,00,000 1,00,000

Creditors
2,20,000 1,30,000 Preliminary 20,000 8,000
Expenses
Mortgage Loan
50,000 -

10,00,000 6,00,000 10,00,000 6,00,000

The purchase consideration consisted of:

• The discharge of debentures in A Ltd. and B Ltd. by the issue of

equivalent amount of 6% debentures in AB Ltd.
• The assumption of liabilities of both the companies.
• The issues of shares at a premium of Rs.2 per share of equity shares of
Rs.10 each in AB Ltd. for the purpose of amalgamation, the assets are to
be revalued as under:

A Ltd. B Ltd.
Particulars Rs. Rs

Goodwill 1,00,000 75,000

Sundry Assets 4,10,000 2,80,000

Freehold Property 2,60,000 1,40,000

Investments 51,000 20,000

Debtors 2,25,000 1,35,000

Journalise the above transaction in the books of A Ltd., B Ltd.

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10. X ltd and Y ltd have decided amalgamate. A new company XY ltd. is
formed to take the two companies on 31st March 2019. The balance
sheets of the two companies were as under:

Liabilities ‘X’ Ltd ‘Y’ Ltd Assets ‘X’ Ltd ‘Y’ Ltd
Amt.Rs Amt.Rs Amt.Rs Amt.Rs

Shares of Rs 10 1,50,000 80,000 Land & 1,05,000 60,000

each Buildings

General Reserve 80,000 ------- Plant & 25,000 15,000

Machinery

Profit & Loss A/c 20,000 20,000 Motor Vehicle 10,000 ------

5% ---- 60,000 Stock 60,000 78,000

Debentures

Creditors 75,000 32,000 Cash 43,000 18,000

Debtors 82,000 21,000

3,25,000 1,92,000 3,25,000 1,92,000

The assets & liabilities are to be taken over at book value with the
following exceptions:
1. Good will of X company & Y company are to be valued at RS 80,000
& RS 30,000 respectively.
2. Motor Vehicle of X company are to be valued at RS 30,000.
3. Debentures of Y Company are to be discharged by the issue of 5%
debentures of XY company at a premium of 4%.
4. Debtors & Cash of Y ltd are to be retained by the liquidator and
creditors are to be paid out of the proceeds thereof.
Pass the closing journal entries in the books of the vendor company.

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11. P Ltd and Q ltd agreed to amalgamate by transferring their

undertakings to a New Company PQ Ltd. For that purpose, the
Balance Sheet of the two companies are as follows:

Liabilities ‘P’ Ltd ‘Q’ Ltd Assets ‘P’ Ltd ‘Q’ Ltd
Amt.Rs Amt.Rs Amt.Rs Amt.Rs

Eq. share of 7,50,000 2,50,000 Sundry 6,00,000 3,10,000

RS 10 each Assets

5% - 30,000 Free hold 30,000 -

Debentures property

Reserve - 20,000 Debtors 1,80,000 50,000

Mortgage 50,000 - Investments 1,30,000 30,000

Loan on
Freehold
property

Sundry 40,000 1,00,000 Bank 1,00,000 20,000

Creditors

P & L A/c 2,00,000 10,000

10,40,000 4,10,000 10,40,00 4,10,000

0

The purchase consideration consists of

1. The assumption of liabilities of both the companies
2. The discharge of Debentures in Q ltd by the issue of RS 35,000, 4%
debentures in PQ Ltd.
3. The issue at a premium of RS 5 per share of equity shares of RS 10 each
in P Ltd for the purpose of transfer the assets are to be revalued as under.

P Ltd Q Ltd
Sundry Assets 6,50,000 3,50,000
Freehold property 50,000 -
Debtors 1,71,000 45,000
Investments 1,49,000 40,000
Goodwill 1,10,000 40,000
Prepare the ledger accounts in the books the Vendor Company.

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12. On 1.04.2019 A Ltd. and B Ltd. were amalgamated into C Ltd. on the
basis of the following balance sheet.

‘A’ Ltd ‘B’ Ltd ‘A’ Ltd ‘B’ Ltd

Liabilities Assets
Amt.Rs Amt.Rs Amt.Rs Amt.Rs

Paid up Fixed
1,00,000 1,40,000 1,20,000 1,80,000
capital Assets

Reserve 1,70,000 1,00,000 Stock 60,000 1,10,000

Sundry
40,000 90,000 Debtors 80,000 1,30,000
Creditors

Bank Loan - 90,000 Cash 50,000 -

3,10,000 4,20,000 3,10,000 4,20,000

The consideration was to be based on the net assets of the company but
subject to an addition of Rs.90,000 to A Ltd., for its super profit. The Shares of
C Ltd., were to be issued to A Ltd., and to B Ltd., at a premium and in
proportion to the agreed Net Assets. C Ltd., proposed to issued shares of Rs.10
each at a price of Rs.15 per share.
i. Calculate the number of shares issued to A Ltd., and B Ltd.
ii. Pass the journal entries in the books of A Ltd., and B Ltd.

13. X ltd and Y ltd have decided amalgamate. A new company XY ltd. is formed to
take the two companies on 31st March 2019. The balance sheets of the two
companies were as under:

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Liabilities ‘X’ Ltd ‘Y’ Ltd Assets ‘X’ Ltd ‘Y’ Ltd
Amt.Rs Amt.Rs Amt.Rs Amt.Rs

Shares of RS 10 3,00,000 1,60,000 Land & 2,10,000 1,20,000

each Buildings

General Reserve 1,60,000 ------- Plant & 50,000 30,000

Machinery

Profit & Loss A/c 40,000 40,000 Motor Vehicle 20,000 ------

5% ---- 1,20,000 Stock 1,20,000 1,56,000

Debentures

Creditors 1,50,000 64,000 Cash Debtors 86,000 36,000

1,64,000 42,000

6,50,000 3,84,000 6,50,000 3,84,000

The assets & liabilities are to be taken over at book value with the following exceptions:
Good will of X company & Y company are to be valued at RS 1,60,000 & RS 60,000
respectively.
Motor Vehicle of X company are to be valued at RS 60,000.
Debentures of Y Company are to be discharged by the issue of 5% debentures of XY
company at a premium of 4%.
Debtors & Cash of Y ltd are to be retained by the liquidator and creditors are to be paid
out of the proceeds thereof.
Pass journal entries in the books of XY ltd.

14. Given below the Bangalore sheet of A Ltd & B Ltd as at 31.3.2019.

Liabilities A Ltd B Ltd Assets A Ltd B Ltd

Share capital – 1,50,000 1,00,000 Goodwill 10,000 5,000

shares of Rs.10
each

Share premium 4,500 2,000 Buildings 40,000 40,000

General Reserves 10,000 5,000 Plant & 60,000 30,000

Machinery

P & L A/c 1,500 1,000 Stock 18,000 8,000

Development Debtors 25,000 16,000

Rebate Reserve
6,000 3,000

12% Debentures 25,000 10,000 Cash 47,000 26,000

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Creditors 3,000 4,000

2,00,000 1,25,000 2,00,000 1,25,000

The two companies amalgamation and formed a new company called ‘AB’ Ltd on
the following terms:
• AB Ltd to assume liabilities of both the companies and continue to maintain
development rebate reserve for three more years.
• Authorized share capital of AB Ltd to be 75,000 equity shares of Rs.10 each.
• AB Ltd to issue 16,000 equity shares of Rs.10 each at a premium of 20% &
pay cash at Rs.3 per share to the share holders of A Ltd.
• AB Ltd to issue 14,000 equity shares of Rs.10 each at a premium of 20% &
pay cash at Rs.2 per share to the share holders of B Ltd.

Pass the opening journal entries & share balance sheet in the books of AB
Ltd.

15. X ltd. and Y Ltd. have decided to amalgamate. A New Company XY Ltd. is
formed to take the two companies on 31 March 2019. The Balance Sheets of
the two companies were as under:

Liabilities X Ltd. Y Ltd. Assets X Ltd. Y Ltd.

Share of Rs. 10 each 75000 40000 Land & Building 52500 30000
General Reserve 40000 ----- Plant & 12500 7500
Profit & Loss A/c 10000 10000 Machinery

5% Debentures ----- 30000 Motor Vehicles 5000 ---

Creditors 37500 16000 Stock 30000 39,000

Debtors 41,000 10,500

Cash 21,500 9,000

162500 96000 162500 96000

The assets and liabilities are to be taken over at book values with the following
exceptions:

• Goodwill of X Company and Y Company is to be valued at Rs.40000 and

Rs.15000 respectively.
• Motor vehicles of X Company are to be valued at Rs. 15000.

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• Debentures of Y Company are to be discharged by the issue of 5%

Debentures of XY Company at a premium of 4%.
• Debtors and Cash of Y Ltd. are to be retained by the liquidator and creditors
are to be paid out of the proceeds thereof.
Compute the basis on which shares in XY Company will be issued to shareholders
in the existing companies.

Pass Journal Entries in the books of XY Ltd.

16. The following are the Balance sheet of A company Ltd. and B

Balance Sheet of A company Ltd.

‘A’ Ltd ‘A’ Ltd

Liabilities Assets
Amt.Rs Amt.Rs

5,000 Equity Share(

50,000 Buildings 15,000
Rs. 10 each)

Reserve Fund 17,000 Machinery 55,000

Dividend
2,000 Debtors 7,000
Equalisation Fund

100, 6%
Debentures of 10,000 Stock 8,000
Rs.100 each.

Employees
1,500 Cash 1,500
Provident Fund

P&L Account 1,000

Trade Creditors 5,000

86,500 86,500

Balance Sheet of B Company Ltd.

‘B’ Ltd ‘B’ Ltd

Liabilities Assets
Amt.Rs Amt.Rs

1,500 Equity shares

30,000 Machinery 25,000
of Rs.20 each

Trade Creditors 4,000 Stock 4,000

Debtors
5,000

Less; Reserve
4,500
500

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Cash 500

34,000 34,000

The two companies agree to amalgamate and form a new company called
C Company Ltd., which takes over the assets and liabilities of both the
companies.

The assets of A Company Ltd. are taken over at a reduced valauation of

10% with the exception of building which is accepted at book value.

Both companies are to receive 5% of the net valuation of their respective

businesses as goodwill. The entire purchase price is to be paid by C Company
Ltd., in fully paid shares of Rs. 10 each. In return for debentures in A Company
Ltd., debentures of the same amount and denomination are to be issued by C
Company Ltd.,

Give Journal entries to close the books A Company Ltd., and show the
opening Balance Sheet of C Company Ltd., under business purchase method,
whose authorized capital is Rs.1,00,000 in Rs.10.

17. The following is the Balance Sheet of Eastern Sugar Co. Ltd

Liabilities Amt.Rs Assets Amt.Rs

Equity
Share( Rs. 3,00,000 Goodwill 70,000
10 each)

5%
70,000 Stock 1,80,000
Debentures

P&L Account 50,000 Debtors 2,00,000

Creditors 30,000

4,50,000 4,50,000

The following is the Balance Sheet of Western Sugar Co. Ltd.

Liabilities Amt.Rs Assets Amt.Rs

Equity Share( Rs.

2,00,000 Stock 80,000
10 each)

P&L Account 42,000 Debtors 2,20,000

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Creditors 58,000

3,00,000 3,00,000

The above two companies amalgamate and from a New Company Called East-
West Sugar Co. Ltd. The average profits of Eastern and Western Sugar
Companies have been Rs.30,000 and Rs.20,000 respectively. East – West Sugar
Co., Ltd agree to take over both the companies for a sum of Rs.6,00,000 and in
addition to discharge all liabilities; Rs.1,00,000 to be paid in cash and the
balance in shares at face value.

Debtors of the two companies to be written off by 10% The profit on conversion
to be divided between the shareholders of two companies in the same proportion
as to the profits previously earned by them Pass opening entries in the books of
East-West Sugar Co. Ltd.

18. X Ltd and Y Ltd are two companies carrying on business in the same line
of activity. Their balance sheet as on 31.12.2019 are given below:

‘X’ Ltd ‘Y’ Ltd ‘X’ Ltd ‘Y’ Ltd

Liabilities Assets
Amt.Rs Amt.Rs Amt.Rs Amt.Rs

Share
Land &
capital(10 3,00,000 1,00,000 50,000 nil
Buildings
each)

Reserve 2,00,000 1,00,000 Stock 4,50,000 2,00,000

14%
3,00,000 50,000 Debtors 1,50,000 50,000
Debentures

Current
3,00,000 2,00,000 Investment 50,000 nil
liabilities

Plant &
3,50,000 1,50,000
Machinery

Cash 50,000 50,000

11,00,000 4,50,000 11,00,000 4,50,000

The two companies decide to amalgamate into XY Ltd. The following

further information is given:

• All assets and liabilities of two companies except investments are

taken over by XY Ltd.

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• Each share in Y Ltd. Is valued at Rs.30 for the purpose of

Amalgamation.

• Each share in X Ltd. Is valued at Rs.20 for the purpose of

Amalgamation.

• Shareholders in X Ltd and Y Ltd are paid off by issuing to them

sufficient number of equity shares of Rs.10 each in XY Ltd as fully paid
up at par.

Show Journal Entries to close the books of both the companies

19. On 1.4.2019 A ltd and B ltd were amalgamated into C ltd. On the basis
of the following Balance sheet

‘A’ Ltd ‘B’ Ltd ‘A’ Ltd ‘B’ Ltd

Liabilities Assets
Amt.Rs Amt.Rs Amt.Rs Amt.Rs

Share capital(10
2,24,000 1,75,000 Goodwill 80,000 32,000
each)

Reserve 8,000 12,000 Buildings 50,000 60,000

P&L Account 11,000 14,000 Plant 41,000 10,000

Creditors 5,,000 6,000 Stock 42,000 33,000

Debtors 23,000 40,000

Cash 12,000 32,000

2,48,000 1,97,000 2,48,000 1,97,000

1. Buildings of both companies to be written down by 10%.

2. Provide 5% RDD on debtors of both the companies

3. Goodwill to be valued at 3 years purchase of last 2 years

average profits. The profits were:

A Ltd for the year 2018 is Rs.13,000 and for the year 2017 is
Rs.18,000

B Ltd for the year 2018 is Rs.4,000 and for the year 2017 is Rs.6,000

4. The entire amount of purchase consideration was discharged by the

allotment of equity shares in C Ltd.

5. C Ltd. Agrees to take over the remaining assets and liabilities at book
values.

Prepare necessary ledger accounts in the books of A Ltd and B Ltd

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20. X Ltd and Y Ltd are two companies carrying on business in the same
line of activity. Their balance sheet as on 31.12.2019 are given
below:

‘X’ Ltd ‘Y’ Ltd ‘X’ Ltd ‘Y’ Ltd

Liabilities Assets
Amt.Rs Amt.Rs Amt.Rs Amt.Rs

Share
Land &
capital(10 6,00,000 2,00,000 1,00,000 nil
Buildings
each)

Reserve 4,00,000 2,00,000 Stock 9,00,000 4,00,000

14%
6,00,000 1,00,000 Debtors 3,00,000 1,00,000
Debentures

Current
6,00,000 4,00,000 Investment 1,00,000 nil
liabilities

Plant &
7,00,000 3,00,000
Machinery

Cash 1,00,000 1,00,0000

22,00,000 9,00,000 22,00,000 9,00,000

The two companies decide to amalgamate into XY Ltd. The

following further information is given:

• All assets and liabilities of two companies except

investments are taken over by XY Ltd.

• Each share in Y Ltd. Is valued at Rs.25 for the

purpose of Amalgamation.

• Each share in X Ltd. Is valued at Rs.15 for the

purpose of Amalgamation.

• Shareholders in X Ltd and Y Ltd are paid off by issuing to them

sufficient number of equity shares of Rs.10 each in XY Ltd as fully
paid up at par.

Show the opening entries in the books of XY Ltd and balance

sheet after amalgamation.

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