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MACR Accounting for Amalgamation - Problems Kiran KVK, VVCE
1
Exercise 1 (VTU, Dec-2011, 10 Marks) (Books of Target Co)
On 31st March 2012, the Balance Sheet of M/s. Jaysheela Ltd stood as follows:
Liabilities Rs. Assets Rs.
Share Capital (Rs. 10 Each) 600000 Furniture 60000
Creditors 130000 Stock 415000
Debtors 115000
Cash at Bank 40000
Profit and Loss Account 100000
730000 730000
On this date, M/s. Girish Ltd took over the business of Jaysheela Ltd for Rs. 500000, payable
in the form of its equity shares of Rs. 10 each at par. Show the necessary ledger accounts in
the books of Jaysheela Ltd.
Exercise 2 (VTU, Dec-2011, 10 Marks) (Books of Target Co)
The following is the Balance Sheet of M/s. Chiranjeevi Ltd as on 31st March 2011:
Liabilities Rs. Assets Rs.
Equity Share Capital 1000000 Goodwill 190000
General Reserve 110000 Land and Buildings 200000
Workmen’s Accident
Compensation Reserve 50000 Plant and Machinery 440000
Profit and Loss Account 70000 Patents and Trademarks 30000
Sundry Creditors 160000 Stock 210000
Sundry Debtors 180000
Less: Provision for bad debts 12000 168000
Cash at Bank 132000
Preliminary Expenses 20000
1390000 1390000
Chiranjeevi Ltd is acquired by M/s. Madesh Ltd for Rs. 1400000, i.e., 120000 fully paid Rs. 10
shares and balance in cash. There was a contingent liability in respect of a claim for
compensation under the Workmen’s Compensation Act. The claim was not taken over by
Chiranjeevi Ltd.
Give journal entries in the books of Chiranjeevi Ltd
MACR Accounting for Amalgamation - Problems Kiran KVK, VVCE
2
Exercise 3 (VTU, Jul-2011, 15 Marks) (Books of Target Co)
The following is the Balance Sheet of M/s. Prajwal Ltd as on 31st March 2012:
Liabilities Rs. Assets Rs.
50000 equity shares of Rs. 10
each 500000 Buildings 150000
General Reserve 170000 Machinery 550000
Profit & Loss A/c 30000 Stock 80000
12% Debentures of Rs. 100 each 100000 Debtors 70000
Trade Creditors 50000 Cash 15000
Employee Provident Fund 15000
865000 865000
M/s. Chethan Ltd has agreed to purchase Prajwal Ltd at Rs. 661500 to be paid in fully paid
equity shares of Rs. 10 each.
Prepare Journal Entries to close the books of accounts of Prajwal Ltd and also prepare the
realization and equity share holders’ account.
Exercise 4 (VTU, Jan-2010, 10 Marks)(AS14)
M/s. Kushal Tours Ltd. is considering a merger to achieve further growth. The company has
decided to acquire M/s. Praveen Travelers Ltd. Kushal Tours Ltd. offers Rs. 1000000 for Rs.
600000 of Praveen Travelers Ltd.’s stock at book value. Praveen Travelers Ltd. has Rs. 200000
debt.
Calculate goodwill that may arise if Kushal Tours Ltd has Rs. 2000000 equity and Rs. 500000
debt itself.
Prepare a Combined Balance Sheet under:
i) Purchase Method
ii) Pooling of Interests Method
Exercise 4 (VTU, Jul-2009, 10 Marks)
The following is the abridged Balance Sheets of M/s. Raghavendra Ltd and M/s. Mubarak Ltd
as on 31st March 2012:
Liabilities Raghavendra
Rs.
Mubarak
Rs. Assets
Raghavendra
Rs.
Mubarak
Rs.
Equity Share Capital
Rs. 10 each) 8000 3000 Fixed Assets 11000 4730
10% Preference
Share Capital (Rs.
100 each)
- 1000 Current Assets 4000 1970
MACR Accounting for Amalgamation - Problems Kiran KVK, VVCE
3
General Reserve 4610 980
Statutory Reserve 390 125
Profit and Loss A/c 563 355
12% Debentures - 250
Current Liabilities 1437 990
15000 6700 15000 6700
On 1st April 2012, Raghavendra Ltd takes over Mubarak Ltd on the following terms:
i) Raghavendra Ltd will issue 350000 equity shares of Rs. 10 each at par to the equity
shareholders of Mubarak Ltd
ii) Raghavendra Ltd will issue 11000, 10% Preference Share of Rs. 100 each at par to
the Preference Shareholders of Mubarak Ltd
iii) The debentures of Mubarak Ltd will be converted into an equal number of 12.5%
debentures of same denomination
You are informed that the statutory reserves of Mubarak Ltd are to be maintained for two
more years. You are required to show the balance sheet of Raghavendra Ltd immediately after
the above-mentioned scheme of amalgamation has been implemented assuming that the
amalgamation is in the nature of merger.
Exercise 5 (VTU, Jul-2011, 7 Marks)
The following is the Balance Sheet of M/s. Saddam Ltd as on 31st March 2011:
Liabilities Rs. Assets Rs.
6000 equity shares of Rs. 100
each fully paid 600000 Goodwill 70000
General Reserve 250000 Plant and Machinery 460000
Profit & Loss Appropriation A/c 80000 Furniture 102000
Bills Payable 70000 Stock 436000
Sundry Creditors 245000 Debtors 134000
Cash at Bank 23000
Preliminary Expenses 20000
1245000 1245000
Suppose:
i) M/s Dastgir Ltd purchased the business of Saddam Ltd
ii) Goodwill is valued at Rs. 200000, while stock is valued at Rs. 416000, other assets
are considered worth their book value
iii) Dastgir Ltd does not take over cash at bank
iv) Consideration is to be discharged in the form of 90000 fully paid equity shares of
Rs. 10 each, valued at par and balance in cash
MACR Accounting for Amalgamation - Problems Kiran KVK, VVCE
4
From the above given information, calculate purchase consideration for Saddam Ltd
Exercise 7 (VTU, Jul-2011, 20 Marks)
The following is the Balance Sheet of M/s. Chandan Ltd as on 31st March 2012:
Liabilities Rs. Assets Rs.
40000, Equity Shares of Rs. 10
each 400000 Buildings 170000
General reserve 50000 Plant and Machinery 400000
Profit & Loss A/c 29600 Investment 50600
10% Debentures 250000 Debtors 140500
Creditors 128700 Stock 80700
Cash at Bank 16500
858300 858300
Chandan Ltd was absorbed by M/s Om Ltd on the above mentioned date on the following
terms and conditions:
Om Ltd should,
i) Assume liabilities and to acquire all assets except investments which are sold by
Chandan Ltd for Rs. 45000
ii) Discharge the debentures of Chandan Ltd at a discount of 5% by the issue of 12%
Debentures of Rs. 100 each in Om Ltd
iii) Issue two equity shares of Rs. 5 each in Om Ltd at Rs. 6 per share and also to pay
Rs. 2 per share in cash to the shareholders of Chandan Ltd in exchange of every
share in Chandan Ltd
iv) Pay the cost of absorption of Rs. 2500 as a part of purchase consideration.
Chandan Ltd sold in open market 1/4th of the shares received from Om Ltd at the
average rate of Rs. 5.50 per share
Show the necessary ledger accounts in the books of Chandan Ltd and the opening entries in
the books of Om Ltd
Exercise 8 (VTU, Jun-2010, 20 Marks)
M/s Sachin Ltd and M/s Aslam Ltd doing business in the same field, decided to amalgamate
to avoid unnecessary competition and secure economy in production and marketing. Following
were the Balance Sheets as on 31st December 2011:
Liabilities Sachin Ltd
Rs.
Aslam Ltd
Rs. Assets
Sachin Ltd
Rs.
Aslam Ltd
Rs.
Equity Shares of Rs.
10 each 1000000 500000 Goodwill - 100000
MACR Accounting for Amalgamation - Problems Kiran KVK, VVCE
5
Land and Buildings 1530000 810000
8% Preference
Shares of Rs. 10
each
500000 300000 Plant and Machinery 480000 240000
10% Debentures of
Rs. 100 each 500000 - Furniture and Fixtures 30000 26000
8% Debentures of Rs.
100 each - 250000 Investments 20000 10000
Reserve Fund 160000 110000 Stock 305000 187000
P & L A/c 70000 50000 Sundry Debtors 125000 69000
Workmen’s SB A/c 130000 - Bills Receivable 19000 11000
Other Liabilities 286000 314000 Cash at Bank 74000 38000
Miscellaneous Expenses 63000 33000
2646000 1524000 2646000 1524000
The Amalgamation was effected on 1st January 2012. The purchase consideration payable by
the new company named, M/s. Saclam Ltd was as follows:
For Sachin Ltd:
i) Equity shareholders to get one equity share of Rs. 10 each in Saclam Ltd valued at
Rs. 12 per share for every equity shares in Sachin Ltd
ii) 8% Preference shareholders to get 10% preference shares in Saclam Ltd equal to
their claim
iii) 10% debenture holders to get sufficient 12.5% debentures of Saclam Ltd so as to
get the same amount of interest as they were getting in Sachin Ltd
For Aslam Ltd:
i) 4 equity shares of Rs. 10 each in Saclam Ltd valued at Rs. 12 per share for every 5
equity shares in Aslam Ltd
ii) 8% preference shareholders to get 90% of their claim in 10% preference shares in
Saclam Ltd in full satisfaction
iii) 8% debenture holders to get sufficient 12.5% debentures of Saclam Ltd so as to
get the same amount of interest as they were getting in Aslam Ltd
Saclam Ltd took over all the assets and liabilities of both the companies at their book values
except land and buildings, plant and machinery and stock of Sachin Ltd, which were taken over
at Rs. 1850000, Rs. 320000 and Rs. 280000 respectively and investments of Aslam Ltd at Rs.
16000. The liquidation expenses of Sachin Ltd came to Rs. 13000 and that of Aslam Ltd to Rs.
9000. Balance of Cash and bank was transferred to Saclam Ltd. The authorized capital of
Saclam Ltd is 250000equity shares of Rs. 10 each and 100000, 10% preference shares of Rs.
10 each.
Prepare purchase consideration statements, close the books of Sachin Ltd and Aslam Ltd and
prepare opening balance sheet of Saclam Ltd
MACR Accounting for Amalgamation - Problems Kiran KVK, VVCE
6
Exercise 9
The following are the Balance Sheets of P Ltd and S Ltd as on 31st March 2010:
P Ltd
Rs. ‘000
S Ltd
Rs. ‘000
Liabilities:
Equity Share Capital, Rs. 10 each,
fully paid 72000 30000
11% Preference Share Capital 17000
General Reserve 8000 4500
Export Profit Reserve 2000
Profit and Loss Account 7500 4000
9% Debentures, Rs. 100 each, fully
paid 5000
Creditors 11500 3500
99000 66000
Assets:
Land and Buildings 25000
Plant and Machinery 32500 29000
Furniture and Fittings 5750 9410
Stock 21500 17390
Debtors 7250 5200
Cash at Bank 7000 5000
99000 66000
P Ltd takes over S Ltd on 1st April 2010 and discharges consideration for the business as
follows:
(i) Issued 35 lac fully paid equity shares of Rs. 10 each at par to the equity
shareholders of S Ltd
(ii) Issued fully paid 12% preference shares of Rs. 100 each to discharge the preference
shareholders of S ltd at a premium of 10%
It is agreed that the debentures of S Ltd will be converted into equal number and amount of
10% debentures of P Ltd. The statutory reserve if S Ltd is to be maintained for two more
years.
You are required to show the Balance Sheet of P Ltd assuming that:
(a) The amalgamation is in the nature of merger, and
(b) The amalgamation is in the nature of purchase
Exercise 10
P Ltd, for business taken over from S Ltd agrees to pay Rs. 500000 in cash and allot to S Lt
400000 equity shares of Rs. 10 each fully paid at an agreed value of Rs. 15 per share.
Calculate the purchase consideration under Net Payments Method
MACR Accounting for Amalgamation - Problems Kiran KVK, VVCE
7
Exercise 11
Following is the Balance Sheet of S Ltd:
Liabilities Rs. Assets Rs.
Share Capital: 20000 11%
preference shares of Rs. 100
each fully paid up
2000000 Sundry Assets 21000000
800000 Equity shares of Rs. 10
each fully paid up 8000000
Reserves 5000000
Sundry Liabilities 6000000
21000000 21000000
P Ltd takes over the business of S Ltd and agrees to give for each 11% preference share in S
Ltd, ten 12% preference shares of Rs. 10 fully paid up at par and for each equity share in S
Ltd Re.1 in cash and one fully paid equity share in P Ltd of Rs. 10 valued at Rs. 15. Calculate
the consideration.
Exercise 12 (CS-Inter, Dec 1998)
On 31st March, 2010 the Balance Sheet of X Ltd stood as follows:
Liabilities Rs. Assets Rs.
Share Capital, 150000 equity
shares of Rs. 10 each fully paid 1500000 Plant and Machinery 1610000
Securities Premium 150000 Furniture and Fixtures 194400
General Reserve 625500 Stock 705500
Profit and Loss Account 185300 Debtors 198440
Creditors 360740 Cash at Bank 113200
2821540 2821540
On this date, X Ltd took over the business of Y Ltd for Rs. 660000 payable in the form of its
fully paid equity shares of Rs. 10 each at par, shareholders of Y Ltd getting 110 shares of X
Ltd for every 100 shares held in Y Ltd. The scheme of amalgamation also provided that 3000
11% debentures of Y Ltd would be converted into equal number of 12% debentures of X Ltd
of Rs. 100 each. The Balance Sheet of Y Ltd on the date of amalgamation was as follows:
Liabilities Rs. Assets Rs.
Share Capital, 60000 equity
shares of Rs. 10 each fully paid 600000 Machinery 550000
Capital Reserve 13000 Furniture 135200
Foreign Project Reserve
(Statutory Reserve) 9700 Stock 315800
General Reserve 75350 Debtors 129300
Profit and Loss Account 24130 Cash at Bank 68260
3000, 11% debentures of Rs.
100 each 300000 Preliminary Expenses 6100
MACR Accounting for Amalgamation - Problems Kiran KVK, VVCE
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Creditors 182480
1204660 1204660
You are required to:
(i) Pass Journal Entries in the books of X Ltd and draw X Ltd’s Balance Sheet
immediately after the takeover, assuming (a) the amalgamation is in the nature of
merger, (b) the amalgamation is in the nature of purchase;
(ii) Show journal entries and prepare important ledger account in the books of Y Ltd