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USEFUL FOR CA, CS, CMA
A PUBLICATION BY RAHUL SHIKHA ACADEMY (RSA)

Important Questions with 100% Authentic Answers
AMALGAMATION
Important Questions
(Must Do Before Exam)
CA RAHUL GARG
(TRG)
GOLD MEDALIST
ALL INDIA RANKHOLDER in CA CS CMA
Question 1
The Abridged Balance Sheet (Draft) of Cyber Ltd. as on 31st March, 2012 is as under :
Liabilities ₹ Assets ₹
24,000, Equity shares of ₹ 10 each 2,40,000 Goodwill 5,000
5000, 8% cumulative preference 50,000 Fixed Assets 2,57,000
shares of ₹ 10 each
8% Debentures 1,00,000 Inventories 50,000
Interest accrued on debentures 8,000 Trade receivables 60,000
Trade payables 1,00,000 Bank 1,000
Profit & Loss Account 1,25,000
4,98,000 4,98,000
The following scheme is passed and sanctioned by the court :
1. A new company Mahal Ltd is formed with ₹ 3,00,000, divided into 30,000 Equity shares of
₹ 10 each.
2. The new company will acquire the assets and liabilities of Cyber Ltd. on the following terms :
a. Old company's debentures are paid by similar debentures in new company and for outstanding
accrued interest, shares of equal amount are issued at par.
b. The trade payables are paid for every ₹ 100, ₹ 16 in cash and 10 shares issued at par.
c. Preference shareholders are to get equal number of equity shares at par. For arrears of
dividend amounting to ₹ 12,000, 5 shares are issued at par for each ₹ 100 in full
satisfaction.
d. Equity shareholders are issued one share at par for every three shares held.
e. Expenses of ₹ 8,000 are to be borne by the new company.
3. Current Assets are to be taken at book value (except Inventory, which is to be reduced by ₹
3,000). Goodwill is to be eliminated, balance of purchase consideration being attributed to
fixed assets.
4. Remaining shares of the new company are issued to public at par and are fully paid.
You are required to show :
(a) In the old company's books :
(i) Realisation Account
(ii) Equity Shareholder's Account
(b) In the new company's books :
(i) Bank Account
(ii) Summarised Balance Sheet as per the requirements of Revised Schedule-VI.
CA Rahul Garg Gold Medalist All India Rankholder in CA, CS, CMA (incl. Rank 1)
Copyright of these notes is with RSA. Buy Regular & Fast Track Lectures @ www.carahulgarg.com
Question 2
The following is the summarized Balance Sheet of ‘A’ Ltd. as on 31.3.2012 :
Liabilities ₹ Assets ₹
14,000 Equity shares of ₹ 100 14,00,000 Sundry assets 18,00,000
each fully paid
General reserve 10,000 Discount on issue of debentures 10,000
10% Debentures 2,00,000 P & L A/c 90,000
Sundry creditors 2,00,000
Bank overdraft 50,000
Bills payable 40,000
19,00,000 19,00,000
‘R’ Ltd. agreed to take over the business of ‘A’ Ltd. Calculate purchase consideration under Net
Assets method on the basis of the following :
The market value of 75% of the sundry assets is estimated to be 12% more than the book value
and that of the remaining 25% at 8% less than the book value. The liabilities are taken over at
book values. There is an unrecorded liability of ₹ 25,000.
Question 3
P Ltd. and Q Ltd. were carrying on the business of manufacturing of auto components. Both the
companies decided to amalgamate and a new company PQ Ltd. is to be formed with an Authorized
Capital of ₹ 10,00,000 divided into 1,00,000 equity shares of ₹ 10 each. The Balance Sheet of
the companies as on 31.03.2014 were as under :
P Ltd.
Particulars Amount (₹)
A. Equity and Liabilities
(1) Shareholders' Funds
Share Capital 1,40,000
Reserves and Surplus
Profit & Loss A/c 30,000
(2) Non-current Liabilities
8% Secured Debentures 1,10,000
(3) Current Liabilities
Trade Payables 54,000
Total 3,34,000
B. Assets
(1) Non-current Assets
Fixed Assets
Building at cost less Depreciation 1,00,000
Plant & Machinery at cost less Depreciation 25,000
(2) Current Assets
Inventories 1,35,000
Trade Receivables 44,000
Cash and Cash equivalents 30,000
Total 3,34,000
Q Ltd.
Particulars Amount (₹)
A. Equity and Liabilities
(1) Shareholders' Funds
Share Capital 2,50,000
Reserves and Surplus
General Reserve 1,20,000
Profit & Loss A/c 35,000
(2) Current Liabilities
Trade Payables 1,40,000
Total 5,45,000
B. Assets
(1) Non-current Assets
Fixed Assets
Building at cost less Depreciation 1,90,000
Plant & Machinery at cost less Depreciation 80,000
Furniture & Fixture at cost less depreciation 25,000
(2) Current Assets
Inventories 50,000
Trade Receivables 1,42,000
Cash and Cash equivalents 58,000
Total 5,45,000
The assets and liabilities of the existing companies are to be transferred at book value with the
exception of some items detailed below :
1. Goodwill of P Ltd. was worth ₹ 50,000 and of Q Ltd. was worth ₹ 1,50,000.
2. Furniture & Fixture of Q Ltd. was valued at ₹ 35,000.
3. The debtors of P Ltd. are realized fully and bank balance of P Ltd. are to be retained by the
liquidator and the sundry creditors are to be paid out of the proceeds thereof.
4. Debentures of P Ltd. are to be discharged by issue of 8% debentures of PQ Ltd. at a premium
of 10%.
You are required to :
a. Compute the basis on which shares in PQ Ltd. will be issued at par to the shareholders of the
existing companies.
b. Draw up a Balance Sheet of PQ Ltd. as at 1st April, 2014, the date of completion of
amalgamation,
c. Write up journal entries including bank entries for closing the books of P Ltd.
Question 4
Following are the summarised Balance Sheets of A Ltd. and B Ltd. as at 31.3.2012 :
A Ltd. B Ltd.
Share capital: Equity shares 10 each (fully paid up) 10,00,000 6,00,000
Securities premium 2,00,000 -
General reserve 3,00,000 2,50,000
Profit and loss account 1,80,000 1,60,000
10% Debentures 5,00,000 -
Secured loan - 3,00,000
Trade payables 2,60,000 1,70,000
24,40,000 14,80,000
Land and building 9,00,000 4,50,000
Plant and machinery 5,00,000 3,80,000
Investment 80,000 -
Inventory 5,20,000 3,50,000
Trade receivables 4,10,000 2,60,000
Cash at bank 30,000 40,000
24,40,000 14,80,000
The companies agree on a scheme of amalgamation on the following terms :
1. A new company is to be formed by name AB Ltd.
2. AB Ltd. to take over all the assets and liabilities of the existing companies.
3. For the purpose of amalgamation, the shares of the existing companies are to be valued as
under:
A Ltd. = ₹ 18 per share
B Ltd. = ₹ 20 per share
4. A contingent liability of A Ltd. of ₹ 60,000 is to be treated as actual existing liability.
5. The shareholders of A Ltd. and B Ltd. are to be paid by issuing sufficient number of shares of
AB Ltd. at a premium of ₹ 6 per share.
6. The face value of shares of AB Ltd. are to be of ₹ 10 each.
You are required to :
a. Calculate purchase consideration (i.e., number of shares to be issued to A Ltd. and B Ltd.).
b. Pass journal entries in the books of A Ltd. for the transfer of assets and liabilities.
c. Pass journal entries in the books of AB Ltd. for acquisition of A Ltd. and B Ltd.
d. Prepare the Balance Sheet of AB Ltd.

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USEFUL FOR CA, CS, CMA

A PUBLICATION BY RAHUL SHIKHA ACADEMY (RSA)

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