1.

Calculate purchase consideration from the following given

Balance Sheet by using Net Assets Method

Calculation of purchase consideration : ( Net assets methods )

Assets agreed to take over :
Good will 60000
Land building 120000
Plant 60000
Debtors 55000
Stock 75000
Total Asets 370000
Less Liabilities : creditirs 40000
Purchase consideration 330000

2. The A Company and B Company whose business are of similar

nature, decided to amalgamate and a new Company called AB
Company Ltd. is formed to take over their assets and
liabilities. ( Net Assets Method )

AGBS , HYD
The following are their Balance Sheets:

Assuming that the assets and liabilities are worth at their book
values except cash , what amount each Company will get? Pass
necessary journal entries in the books of the companies. Also
prepare the Balance Sheet of AB Company Ltd.

Calculation of purchase consideration :

Partriculars A co B co

Assets : Good will 30000 20000

Palnt 18300 13450

Land 10000 -

Stock 16000 11550

Debtors 7500 6000

Total assets 81800 51000

Liabilities : creditors (3300) (2000)

Purchase consideration assets – 78500 49000

liabilities

AGBS , HYD
 3. The purchasing company agrees to issue four shares of Rs. 10
each for every three shares of Rs. 10 each of the vendor
company. The total numbers of shares of the vendor company
are 10,000. The market price of each share of the purchasing
company is Rs. 15. Find out purchase price. ( share exchange
method )
Sol: no of sh in vendor co 10, 000
Agreed proportion of shares :

3 sh in vendor co----4 sh in purchasing co

10000 ------------------- ?
10000*4/3= 13333.3333shares in purchasing co

Shares value = 13333*15 = Rs 199995

Cash 1 share ---- Rs 15
0.333 ------ ? 15*.333= Rs 5
_______________
Purchase consideration 200000 Rs

4. A Ltd. had taken over B Ltd. and for that it agreed to pay Rs.5, 00,000 in
cash 4, 00,000 Equity Shares of Rs.10 each fully paid at an agreed value
of Rs.15 per share then calculate the P.C.
Purchase consideration :
Cash -------------------------------- 500000
Eq sh 400000*15 ---------=-------6000000
Total Purchase consideration ===== 65,00,000

5. A Ltd. takes over the business of B Ltd. for Rs.15, 00,000 here the
sum of the Rs.15, 00,000 is the Purchase Consideration.

AGBS , HYD
 Liabities Assets
Eq Capital F assets
Curret liabilities Current assets
Outsiders liabilioties
Prefe sh cap
G reserves
Undistrubted profits
P l A/c
Retairned profits

IN THE BOOKS OF TRANSFEROR COMPANY(SELLING COMPANY

Transfer to realization account

SL.NO PARTICULAR DEBIT CREDIT
1 Transfer all Assets at book value to
realization a/c ( except Miscellaneous)
   Realisation A/C           Dr XXX
          To Assets A/c XXX
2 Transfer all liabilities taken over purchasing
company(Except equity, preference and
reserves)
   Liabilities A/c           Dr XXX
         To Realisation A/c XXX
PURCHASE CONSIDERATION
  Purchase consideration represents consideration paid in cash, shares,        
debentures etc.

SL.NO PARTICULAR DEBIT CREDIT

1 Due entry for consideration
  Transferee company A/C           Dr XXX
          To Realisation A/c XXX
2 Receipt of consideration
Shares/Cash A/c           Dr XXX
     To Transferee company A/c XXX

SALE OF ASSETS NOT TAKEN OVER BY PURCHASING COMPANY

SL.NO PARTICULAR DEBIT CREDIT

1 Sale with assuming profit
  Bank A/C           Dr XXX

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        To Assets A/C(book value)      XXX
       To Realisation A/c(Profits) XXX
2 Sale with assuming loss
Bank A/c                  Dr XXX
Realisation A/c(loss)      Dr XXX
     To Assets A/c(Book Value) XXX

SETTLEMENT OF LIABILITIES NOT TAKEN OVER BY PURCHASING

COMPANY
SL.NO PARTICULAR DEBIT CREDIT
1 Settlement with assuming at discount)
  Liabilities A/C           Dr XXX
       To Bank A/C(book value)      XXX
       To Realisation A/c(Profits) XXX
2 Settlement with assuming at loss
Liabilities A/c                  Dr XXX
Realisation A/c(loss)      Dr XXX
     To Bank A/c(Book Value) XXX

Realisation Expense
SL.NO PARTICULAR DEBIT CREDIT
1 Incurred by transferor(Selling Co.)
company XXX
Realisation A/c XXX
     To Bank A/c

AMOUNT DUE TO EQUITY SHAREHOLDERS

SL.NO PARTICULAR DEBIT CREDIT
1 Transfer of share capital and reverse
to shareholders account
Equity Share capital   A/c     Dr XXX
Reserves   A/c                Dr XXX
        To Shareholders A/c XXX
2 Transfer of balances in realization account
Realisation A/c (Profit)        Dr XXX
     To shareholders A/c XXX
In Case of loss
 Shareholders A/c           Dr XXX
        To Realisation A/c (Loss) XXX

  SETTLEMENT TO SHAREHOLDERS BY TRANSFER OF CONSIDERATION

RECCEIVED
SL.NO PARTICULAR DEBIT CREDIT
1 Shareholders A/c       Dr XXX
     To shares of transferee company A/c XXX
     To Bank   A/c XXX

AGBS , HYD
IN THE BOOKS OF TRANSFEREE COMPANY(PURCHASING COMPANY)

Due entry for business purchase

SL PARTICULAR DEBIT CREDIT
.NO
1 Business Purchase A/c       Dr XXX
     To Liquidator transferor company A/c XXX

 Incorporation of assets and liabilities taken over

SL.NO PARTICULAR DEBIT CREDIT
1 Sale consideration more than net assets
of selling company.
Assets A/c       Dr XXX 10
Goodwill A/c     Dr(Bal.Fig) XXX 3
     To Liabilities A/c XXX2
     To Business Purchase A/c XXX11
2 Sale consideration less than net assets of
selling company.
Assets A/c       Dr XXX
     To Liabilities A/c XXX
     To Business Purchase A/c XXX
     To Capital Reserve A/c (Bal.Fig) XXX

Sale consideration - net assets of selling company = positive amount =        

Goodwill (loss to purchasing Company)
  Sale consideration - net assets of selling company = Negative amount =    
Capital Reserve (profit to Purchasing company)

DISCHARGE OF PURCHASE CONSIDERATION

SL.NO PARTICULAR DEBIT CREDIT
1 Liquidator of transferor company A/c XXX
Dr XXX
     To Share capital A/c XXX 10
     To Securities premium A/c XXX5
     To Bank A/c        10

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 Date Particulars Dr Amt Cr Amt
1 Realisation A/c ----Dr 2542430 820100
To Various assets 2542430 820100
2 B/P A/c --------------Dr 189360
Creditors A/c ------------Dr 233070 101630
To Realisation 422430 101630
3 Z Ltd A/c -------------Dr 21,00,000 450000
To realisaton 21,00,000 450000
4 EQ sha inZ ltd A/c------Dr 21,00,000 450000
To Z Ltd 21,00,000 450000
10% Debentures A/c __Dr 200000
To 11% Deb in Z ltd 200000
5 Eq sh holders A/c------Dr 20,000 268470
To Realisatio loss 20,000 268470
6 Sh capi A/c --------------Dr 15,00,000 600000
Premium A/c -----------Dr 1,50,000 15000
Reserves A/c ______Dr 4,70,000
To eq sh holders 21,20,000 615000
7 Eq sh holders A/c -----Dr 2100000 450000
To sh in Z 2100000 450000

Realisation A/c
Particulars Amt Particulars Amt
To Assetsv 2542430 By liabilities 422430
By PC 21,00,000
By loss 20000
2542430 2542430

EQ sh holders A//c
To realisation loss 20000 By capital funs 2120000
To sh in Z 21,00,000
2120000 2120000

YY-----------EQ sh holders A//c

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 To realisation loss 268470 By capital funs 615000
To sh in Z 450000 By profit on liq 103470
718470 718470

Z Ltd 1

1 B P A/c --------------dr 2550000

To X 2100000
To Y 450000
2 Assets .X --------------Dr 2542430
Assets Y -----------Dr 820100
Good will A/c ----Dr 88470
To Liabi X 422430
To Liabili Y 101630
To 11% Deb 200000
To PC 2550000
3 X -----Dr 2100000
Y --------Dr 450000
To eq sh 2550000

Eq sh 2550000
Deb 200000 Assers 2542430
820100
Cr 334700 gwill 88470
Bp 189360 3451000

3451000

AGBS , HYD