AS-14 – AMALGAMATION, ABSORPTION AND EXTERNAL

RECONSTRUCTION
Amalgamation
Q.1 The following are the Balance Sheets as on 31-07-2016 of Nisha Ltd. and Usha Ltd.
Liabilities Nisha Rs. Usha Rs. Assets Nisha Rs. Usha Rs.
Equity share capital Land & Building 70,000 ----
(Rs. 100 per share) 2,00,000 1,20,000 Plant & Machinery 2,20,000 1,00,000
15% Debentures 40,000 ---- Stock 35,000 18,000
Reserve Fund 76,000 5,000 Debtors 25,000 16,000
Employee’s provident fund 6,000 ---- Bank 6,000 2,000
Sundry Creditors 30,000 16,000 Debenture issue expenses ---- 5,000
Profit & Loss A/c 4,000 ---- (not written off)
3,56,000 1,41,000 3,56,000 1,41,000
The two companies agree to amalgamate and form a new company M/s. Ujala Ltd. which takes over the assets and
liabilities of both the companies.
1. The authorized capital of Ujala Ltd. is Rs. 20, 00,000 consisting of 2, 00,000 Equity shares of Rs. 10 each.
2. The assets of Nisha Ltd. are taken over at 90% of the book-value with the exception of land and building which are
accepted at book value.
3. Both the companies are to receive 10% of the net valuation of their respective business as Goodwill.
4. The purchase consideration is to be satisfied by Ujala Ltd. in its fully paid shares at 10% premium.
5. In return of Debentures of Nisha Ltd., Debentures of the same amount and denomination are to be issued by Ujala
Ltd.
Close the books of Nisha Ltd. and Usha Ltd. and show the Opening Balance Sheet of Ujala Ltd. under Purchase Method.

Q.2 BK Ltd. is formed to take over Bunty Ltd. and Kuber Ltd. Their Balance Sheets on the date of amalgamation are
as below: Balance Sheets as on 31-03-2017
Liabilities Bunty Ltd. Kuber Ltd. Assets Bunty Ltd. Kuber Ltd.
(Rs.) (Rs.) (Rs.) (Rs.)
Share Capital of Rs. 10 each: Goodwill ---- 25,000
Equity Shares 2,40,000 1,60,000 Buildings 1,50,000 1,40,000
11 % Pref. Shares 1,50,000 1,00,000 Machinery 80,000 60,000
General Reserve 45,000 40,000 Furniture 10,000 5,000
Profit & Loss A/c 30,000 21,000 Investments 1,40,000 80,000
9% Debentures 1,00,000 1,00,000 Debtors 1,65,000 60,000
Sundry Creditors 60,000 40,000 Stock 75,000 90,000
Other Liabilities 40,000 24,000 Cash & Bank 13,000 8,000
Other Current Assets 20,000 10,000
Preliminary Exp. 12,000 7,000
6,65000 4,85,000 6,65,000 4,85,000
BK Ltd. issued 10,000 equity shares of Rs. 10 each to the public at a premium of 10%. Bunty Ltd. and Kuber Ltd. were
taken over by BK Ltd. on the following terms.
Re: Bunty Ltd.
a) Equity Shareholders are to be issued 7 Equity Shares of Rs. 10 at par in BK Ltd. and are to be paid Rs. 5 in cash for
surrender of each 6 shares.
b) Preference shareholders are to be paid at 10% premium by 12.5% preference shares in BK Ltd. issued at par.
c) All Assets and liabilities are valued at book value except Machinery which is valued at 10% below book value and
Debtors are worth Rs. 1, 60,000.
d) Liquidation expenses of Rs. 12,500 are to be borne by BK Ltd.
e) Discharge the debentures of Bunty Ltd. at a discount of 10% by the issue of 13% Debentures of Rs. 100 each in BK
Ltd.
 Re: Kuber Ltd.
a) Cash Rs. 3,000 is to be retained for liquidation expenses.
b) Debtors and Investments are valued at 90% of cost.
c) Machinery and stock are valued at 10% above cost and other assets and liabilities are valued at book value except
Fictitious Assets.
d) Preference shareholders are to be paid at 10% premium by 12.5% preference shares in BK Ltd. issued at par.
e) Balance of Purchase consideration is payable in equity shares at par.
f) Discharge the debentures of Kuber Ltd. at par by the issue of 13% Debentures of Rs. 100 each in ‘BK’ Ltd.
The Face value of Equity shares and preference shares in BK Ltd. is Rs. 10 each. Show the necessary
Ledger Accounts in the books of ‘Bunty Ltd.’ and ‘Kuber Ltd.’ Also calculate purchase considerations.

Q.3 Josh Ltd. and Ashish Ltd. were amalgamated on and from 1st April, 2012. A new company namely Shilpa Ltd.
was formed to take over the business of Josh Ltd. and Ashish Ltd.
Liabilities Josh Ltd. Ashish Assets Josh Ltd. Ashish
(Rs.) Ltd. (Rs.) (Rs.) Ltd. (Rs.)
Equity Shares of Rs. 100 each fully paid 4,00,000 3,75,000 Land & Building 3,00,000 1,50,000
12% Preference Shares of Rs. 100 each Plant & Machinery 1,50,000 1,80,000
fully paid 1,50,000 1,00,000 Computer 75,000 20,000
General Reserve 85,000 75,000 Stock 2,00,000 1,00,000
Profit and Loss A/c Statutory 25,000 15,000 Debtors 1,25,000 2,00,000
Reserve 10% Debenture of Rs.100 1,00,000 75,000 Bills Receivable-Trade 90,000 20,000
each 30,000 15,000 Bank 60,000 80,000
Sundry Creditors 1,10,000 70,000
Bills Payable 1,00,000 25,000
10,00,000 7,50,000 10,00,000 7,50,000
Additional Information:
1. Shilpa Ltd. issued five equity shares, for each equity share of Josh Ltd. and four equity shares, for each equity share
Ashish Ltd.
2. Preference shareholders of both the companies are issued equivalent number of 15% Preference shares of New
Company at Rs. 150 per share (face value Rs. 100).
3. 10% Debenture holders of Josh Ltd. and Ashish Ltd. are discharged by Shilpa Ltd. by issuing such number of its 15%
Debentures of Rs. 100 each so as to maintain the same amount of Interest.
4. Shilpa Ltd. revalued following assets taken over from Josh Ltd. and Ashish Ltd.
Josh Ltd. (Rs.) Ashish Ltd. (Rs.)
Land & Building 4,00,000 2,00,000
Plant & Machinery 1,20,000 70,000 1,50,000
Computer 1,50,000 10,000
Stock 1,10,000 80,000
Debtors 1,90,000
You are required to:-
1. Compute purchase consideration and Pass journal entries in the books of Shilpa Ltd.
2. Prepare balance sheet after amalgamation. Apply purchase method.

Q4. Following are the Summary Balance Sheets of X Ltd. and Y Ltd.
Liabilities X Ltd ₹ Y Ltd ₹ Assets X Ltd ₹ Y Ltd ₹
Equity Share Capital @10 each 75,00,000 45,00,000 Building 25,00,000 15,50,000
Export Profit Reserves 3,00,000 3,00,000 Machinery 32,50,000 17,00,000
Profit And Loss A/C 7,00,000 6,00,000 Stock 25,50,000 18,00,000
General Reserve 2,00,000 4,50,000 Debtors 9,00,000 10,00,000
12% Debentures of ₹100 each 5,00,000 3,00,000 Bank 7,00,000 5,50,000
Sundry Creditors 7,00,000 5,50,000 Share issue Expenses _ 1,00,000
99,00,000 67,00,000 99,00,000 67,00,000
 Z Ltd. was formed to acquire all assets and liabilities of X Ltd. and Y Ltd. on the following terms:
(1) Z Ltd. to have an authorised share capital of 5 crores divided into 5,00,000 equity shares of 100 each.
(2) The business of both companies were taken over for a total price of 1.2 crores to be discharged by Z Ltd. by
issue of equity shares of 100 each at a premium of 20%.
(3) The shareholders of X Ltd. and Y Ltd. to get shares in Z Ltd. in the ratio of net assets values of their
respective shares.
(4) The Debentures of both the companies to be converted into equivalent number of 14% Debentures of 100
each in Z Ltd. at a discount of 10%.
(5) All the tangible assets of both the companies are taken over by Z Ltd. at book values except the following:
Assets X Ltd ₹ Y Ltd ₹
Building 28,00,000 18,20,000
Machinery 31,50,000 16,00,000
(6) Sundry creditors of X Ltd. and Y Ltd. are taken over at 6,50,000 and 5,00,000 respectively.
(7) Statutory reserves are to be maintained for 3 years more.
You are required to:-
1. Compute purchase consideration of X Ltd. and Y Ltd. And Pass journal entries in the books of Z Ltd.
2. Prepare balance sheet after amalgamation. Apply purchase method.

Q5. Following are the Balance Sheets of Black Ltd. and White Ltd. as on 31st March 2015:
Liabilities Black Ltd White Ltd Assets Black Ltd White Ltd
₹ ₹ ₹ ₹
12% preferences shares of ₹100 4,50,000 -- Goodwill 75,000 --
Equity shares of ₹ 10 10,50,000 6,00,000 Land & Building -- 4,20,000
Security premium 62,500 15,000 Plant & Machinery 8,25,000 5,40,000
CRR A/c 2,00,000 _ Other Fixed Assets 6,50,000 1,20,000
General Reserves 2,00,000 3,00,000 Debtors 5,50,000 3,50,000
Profit & Loss A/c 97,500 -- Bank 3,50,000 1,50,000
14% Debenture of ₹ 100 3,00,000 3,50,000 Stock 5,00,000 2,20,000
Creditors 4,00,000 4,50,000 Discount on Debentures 10,000 5,000
Bills Payable 2,00,000 90,000
29,60,000 18,05,000 29,60,000 18,05,000
On 1-4-2015 they decided to amalgamate and to form a new company named Nitu Ltd. Terms of amalgamation are
as under:
a) Nitu Ltd. will issue 3,000, 15% Debentures of 100 each to the Debenture holders of Black Ltd.
b) The debenture holders of White Ltd. agreed to the allotment of Equity shares in Nitu Ltd. Accordingly, 30,000
Equity shares of 10 each are issued at par to them.
c) Preference shareholders of Black Ltd. were allotted 4,500, 15% Redeemable Preference Shares of 100 each in
Nitu Ltd.
d) Equity shareholders of Black Ltd. are allotted 10 Equity shares of 10 each in Nitu Ltd. for every 7 Equity shares
held in Black Ltd. at a premium of 2 per share.
e) Plant and Machinery of Black Ltd. were valued at 12,00,000. Other tangible assets and liabilities were to be
taken at book values.
f) Assets and Liabilities of White Ltd. were valued as under:
Assets: Goodwill 1,20,000; Land and Building 7,80,000; Plant and Machinery 4,50,000;
Other Fixed Assets 60,000; Stock was to be undervalued by 20,000 and Debtors were to be undervalued by 30,000.
Liabilities were accepted as under: Creditors at 10% discount and Bills payable at book value.
g) Nitu Ltd. was to issue necessary number of Equity shares of 10 each at par to White Ltd. for the Equity
shareholders.
You are requested to:
1. Calculate Purchase consideration of both the companies. Pass Journal Entries in Both the Books.
3. Also prepare Balance Sheet of New Company after giving Journal Entries.
 ABSORPTION
Q.6 ‘A’ Ltd. absorbed ‘B’ Ltd. w. e .f. 1st April, 2017 when their Balance Sheets were as under:
Balance Sheet as on 31st March, 2017
Liabilities ‘A’ Ltd. ‘B’ Ltd. Assets ‘A’ Ltd. ‘B’ Ltd.
Equity Shares of Rs.10 each fully paid up 10,00,000 4,00,000 Land & Building 4,40,000 2,80,000
10% Preference Share of Rs.100 each 4,00,000 4,00,000 Plant &Machinery 8,40,000 5,20,000
fully paid Stock 5,80,000 3,20,000
Revaluation Reserves 40,000 --- Sundry Debtors 2,40,000 2,80,000
General Reserve 3,00,000 1,00,000 Bills Receivables 2,60,000 1,80,000
Export Profits Reserves 80,000 40,000 Bank 40,000 20,000
Other Statutory Reserves 1,00,000 20,000
15 % Debentures 1,60,000 -----
10 % Debentures --- 2,40,000
Sundry Creditors 3,20,000 4,00,000
24,00,000 16,00,000 24,00,000 16,00,000
Terms of Absorption:
(a) ‘A’ Ltd. will issue Eight Equity shares for every Five Equity shares in ‘B’ Ltd. of Rs. 10 each at Rs. 11 per share.
(b) 11% Preference shareholders of ‘B’ Ltd. will be issued equal number of preference shares in A Ltd. of Rs. 100 each at
Rs. 105 per share.
(c) ‘A’ Ltd. agreed to take over the debentures of ‘B’ Ltd. at book value. Subsequently after absorption, 10% debenture
holders of ‘B’ Ltd. are discharged by ‘A’ Ltd. issuing such number of its 15% debentures of Rs. 100 each so as to
maintain the same of amount of interest.
(d) All the assets and liabilities of ‘B’ Ltd. were taken over at book values except the following which were revalued as
follows:
Assets Rs.
Land & Building 3, 00,000
Plant & Machinery 5, 00,000
Stock 3, 00,000
Sundry Debtors 2, 60,000
Bills Receivables 1, 60,000
Sundry Creditors 3, 80,000
(e) Cost of absorption amounting to Rs. 10,000 was paid by ‘A’ Ltd.
(f) Creditors of ‘B’ Ltd. include Rs. 10,000 payable to ‘A’ Ltd.
(g) It was decided by the directors of ‘A’ Ltd. to set off Goodwill and Capital Reserves mutually.
You are required to:
(1) Compute Purchase Consideration of ‘B’ Ltd.
(2) Pass Journal entries in the books of ‘A’ Ltd.
(3) Prepare Balance sheet after absorption of ‘A’ Ltd. Apply Purchase Method.

Q7. Following is the Summary Balance Sheet of Jay Ltd. and Vijay Ltd. as on 31st March, 2012.
Liabilities Jay Ltd. Vijay Ltd. Assets Jay Ltd. Vijay Ltd.
Equity Shares of Rs. 10 5,50,000 3,00,000 Land & Building 2,50,000 3,50,000
General Reserve 40,000 60,000 Furniture & Fitting 1,20,000 80,000
Profit and Loss A/c 55,000 75,000 Investment 25,000 -
Export Profit Reserve 90,000 60,000 Stock 65,000 40,000
Dividend Equalization Reserve 75,000 85,000 Trade Receivable 1,25,000 1,10,000
Trade Payable 1,10,000 95,000 Cash & Bank balance 3,35,000 90,000
9,20,000 6,70,000 9,20,000 6,70,000
On the above date, Jay Ltd. takes over the business of Vijay Ltd. (including Cash & Bank balance), on the following terms
and conditions:
1. All the assets and liabilities are takes over at book value except the following assets which were revalued and take over
as follows: Land & Building Rs. 6, 00,000 and Furniture & Fitting Rs. 50,000.
2. Statutory Reserves are to be maintained for next 3 years.
3. Sundry Receivable of Jay Ltd. included Rs. 3,000, Receivable of Vijay Ltd.
4. Purchase consideration is settled by issuing 60,000 equity shares in Jay Ltd. of Rs. 10 each at Rs. 15 each, to the equity
shareholders of Vijay Ltd. Rs. 3,00,000 of purchase consideration is paid in cash.
5. Stock of Vijay Ltd. includes goods of the Sales price of Rs. 5,000 sold by Jay Ltd. to Vijay Ltd. at a profit of 25% on
cost.
You are required to:
1. Compute Purchase Consideration of ‘B’ Ltd.
2. Prepare Balance sheet of ‘Jay’ Ltd. Apply Purchase Method.

Q8. The Balance Sheet Of Bhanu Ltd and Akash Ltd are as under: As on 31st March, 2023
Liabilities ₹ ₹ Assets ₹ ₹
Equity Share Capital ₹10 Each 6,00,000 8,00,000 Land and Building 8,00,000 7,00,000
General Reserve 1,00,000 1,00,000 Plant and Machinery 3,00,000 2,00,000
Statutory Reserve 1,25,000 75,000 Inventories 4,75,000 3,25,000
Profit And Loss Account 1,75,000 1,25,000 Sundry Debtors 2,25,000 2,50,000
9% Debentures ₹100 Each 3,00,000 2,50,000 Cash 1,25,000 2,25,000
Sundry Creditors 4,50,000 3,50,000 Bank 50,000 1,75,000
Bills Payable 3,25,000 2,75,000 Preliminary Expenses 1,00,000 1,00,000
20,75,000 19,75,000 20,75,000 19,75,000
Bhanu Ltd. purchases Aakash Ltd w. e. f. 1st April, 2023 with the following terms and condition
1) Bhanu Ltd Takes over all assets and liabilities of Aakash Ltd. at book values with the following
exceptions.
Land And Building ₹10,00,000
Plant And Machinery ₹ 3,50,000
2) Purchase consideration is discharged by issue of equity share of ₹10 each at a premium of ₹10 per share
3) Debenture of Aakash Ltd to be converted to equivalent number of 10% debentures of Bhanu Ltd of ₹100
4) Statutory Reserve is to be maintained for 4 more year
Prepare ledger Account to close the books of Aakash Ltd and show opening journal entries in the books of
Bhanu Ltd.

Q9. Sunil Ltd. agreed to take over the business of Anil Ltd. as on 31st March, 2018. Following are the balance
Sheet of Anil Ltd as on 31st March, 2018
Liabilities Anil Ltd. Sunil Ltd. Assets Anil Ltd. Sunil Ltd.
Equity Shares of ₹10 each 9,00,000 13,00,000 Fixed Assets 5,95,000 8,50,000
Profit and Loss A/C 32,000 1,75,000 Sundry Debtors 2,00,000 3,40,000
Export Profit Reserve 20,000 30,000 Stock 2,40,000 4,90,000
8% Debentures 1,50,000 2,00,000 Bank Balance 1,57,000 1,50,000
Sundry Creditors 90,000 1,25,000
11,92,000 18,30,000 11,92,000 18,30,000
1) Sunil Ltd. issued 1,00,000 Equity Shares of 10 each at a premium of 10% for the Equity shareholders of Anil
Ltd. and also paid them cash of 5 for every 3 shares held.
2) All the assets and liabilities of Anil Ltd. are taken over at book value except Fixed Assets revalued a at
6,70,000 and Sundry Debtors subject to 5% provision for bad debts.
3) Cost of absorption amounting to ₹ 5,000/- was paid by Anil Ltd.
4) The debentures of Anil Ltd. to be converted into equivalent number of 8% debentures of Sunil Ltd.
You are required to:
1. Calculate Purchase consideration & Prepare Ledger Accounts to close the Books of Anil Ltd.
2. Prepare Balance sheet of Sunil Ltd
 External Reconstruction
Q10. Following is the Balance Sheet of Maharaja Ltd. As on 31st March, 2023
Liabilities ₹ Assets ₹
8% Preference Share Capital 10,00,000 Goodwill 3,25,000
(₹100 each) Land and Building 14,60,000
Equity Shares Capital (₹10 each) 10,00,000 Plant and Machinery 5,10,000
General Reserve 4,00,000 Investments 4,18,000
Statutory Reserve 1,75,000 Inventories 2,25,000
Profit and Loss Account 2,40,000 Sundry Debtors 3,26,000
9% Debenture 8,00,000 Bill Receivable 3,91,000
Sundry Creditors 3,60,000 Cash and Bank 3,56,000
Bill Payable 1,05,000 Preliminary Expenses 1,44,000
Provision for Tax 75,000
41,55,000 41,55,000
Chakravarti Ltd. is formed with an authorized capital of 6,00,000 Equity share of ₹10 each to takeover all the
assets and liabilities of Maharaja Ltd. with the following terms and conditions.
(a) The assets are to be taken over at 10% more than the book value
(b) Goodwill of maharaja Ltd. is valued at ₹5,40,000.
(c) Cost of formation of new company amounted to ₹38,000
(d) Debentures of maharaja Ltd is to be converted into equivalent number of debentures of Chakravarti Ltd.
(e) The purchase consideration is discharged by issue of equity share of ₹10 each.
Calculate purchase consideration, Closing Ledger in Maharaja Ltd & Opening Ledger in Chakravarti Ltd.

Q11. The following was the Balance Sheet of Vikrant Ltd.

Liabilities Rs. Assets Rs.
Issued and Paid – up: Intangible Assets 50,000
Equity Share Capital 5,00,000 Fixed Assets 4,20,000
Statutory Reserve( to be maintained for 10,000 Current Assets 1,10,000
more 3 yrs.) Profit and Loss A/c 80,000
Debentures 1,00,000
Creditors 50,000
6,60,000 6,60,000
Virat Ltd. agreed to absorb Vikrant Ltd. on the following terms:
1. Virat Ltd. agreed to take over all the assets and liabilities.
2. The assets of Vikrant Ltd. are to be considered to be worth Rs. 5, 00,000.
3. The purchase price is to be paid one-quarter in cash and the balance in shares which are issued at the market price.
4. Liquidation expenses amounted to Rs. 300 agreed to be paid by Vikrant Ltd.
5. Market value of share of Rs. 10 each of Virat Ltd. is Rs. 12 per share.
6. Debentures of Vikrant Ltd. were paid.
7. The amalgamation is in the nature of purchase.
You are required to show:
a. Purchase consideration
b. Ledger accounts in the books of Vikrant Ltd.
c. Opening entries in the books of Virat Ltd.
 Accounting for Limited Liability Partnership

Q1. Ishan & Amol are partners in M/s Glassdoor LLP sharing Profits & Losses equally. From the following Trial Balance
of LLP, prepare Balance sheet of LLP as at 31st March, 2023
Particulars Debit Particulars Credit
Stock on 31-03-2023 18,000 Capital Account
Trade Receivables 32,000 - Ishan 85,000
Computer 75,000 - Amol 65,000
Printer 15,000 Bills Payable 22,000
Prepaid Advertisement (for 4 years) 6,000 Outstanding Salary 5000
Investment in Equity shares of Reliance Ltd 10,000
Cash at bank with HDFC Bank 21,000
1,77,000 1,77,000

Q2. Prashant and Roshni are partners in M/s Carpenterwala LLP sharing profits and losses in the ratio 2:3. Following is
their Trial balance as on 31-03-2023
Particulars Debit Credit
Rs. Rs.
Stock (1-4-2022) 25,000
Prashant’s Capital 1,21,000
Roshni’s Capital 85,000
Bills payable 46,500
Carriage Outward 5,000
Purchases 2,25,000
Return Outward 15,000
Sales 4,07,000
Return inward 2,000
Bad debts 6,000
Sundry Debtors 51,500
Cash at bank of India 20,000
Cash in hand 5,000
General Repairs 5,000
Warehouse Rent 7,500
Motor insurance 6,000
Discount 6,500
Manager’s Remuneration 60,000
Vacant Land at Nashik 1,50,000
Motor Car 80,000
Laptop 20,000
TOTAL 6,74,500 6,74,500
Adjustment:
I. Goods worth Rs. ₹ 6,000 taken over by Prashant for personal use were not entered in the books of account.
II. On 31-3-2023 the cost price of closing stock was ₹ 30,000 and its market price was ₹ 28,000.
III. Provide ₹ 1,500 for Reserve for doubtful debts on debtors.
IV. Outstanding expenses as on 31st March 2023: Rent ₹ 2,500 and Manager's Remuneration ₹5,000
V. Provide depreciation @ 10% p.a. on Motor Car and @ 5% p.a. on Laptop
VI. Goods worth ₹12,000 were destroyed by fire & Insurance Co. agreed to pay ₹10,000 in full settlement of the claim.
You are required to prepare Profit and Loss Account for the year ending 31-3-2023 and the Balance Sheet as on that date
after considering the above adjustments.
Q3. Following is the Balance Sheet of Prem & Co. as at 31st March, 2019:
Liabilities ₹ Assets ₹
Capitals: Computers 10,000
-Prem 11,500 Furniture 5,000
-Anil 11,500 Inventory 9,000
Creditors 5,000 Debtors 6,000
Bills Payable 5,000 Bank 2,000
Cash 1,000
33,000 33,000
Prem & Co. was converted to Prem LLP from that date.
Terms of conversion were as follows:
(a) Computers were valued at ₹ 12,000.
(b) Furniture was not taken over by LLP.
(c) A reserve of 5% is to be created on debtors.
(d) Goodwill was valued at ₹ 10,000
(e) The LLP also assumed other Assets and Liabilities of old firm at book value. Show necessary Ledger accounts in the
books of old firm.

Q4. AB & Co. is converted into AB LLP with effect from 1-4-2019. Their balance sheet as on 31-3-2019 was as under:
Liabilities ₹ Assets ₹
A’s Capital 1,00,000 Land and Building 2,80,000
B’s Capital 2,00,000 Stocks 3,00,000
General Reserve 1,00,000 Debtors 2,00,000
Creditors 7,50,000 Cash and Bank Balance 1,20,000
Investment Fluctuation Reserve 50,000 Investments 3,00,000
12,00,000 12,00,000
The conversion was subject to the following terms:
(1) All the assets and all the liabilities of the firm shall be taken over by the LLP.
(2) Land and Building shall be appreciated by 20%.
(3) Stock shall be increased by ₹ 50,000.
(4) Debtors shall be decreased by₹ 10,000.
(5) Goodwill of the firm shall be valued at ₹ 1,00,000.
(6) Investments shall be taken over at ₹ 2,80,000.
You required to prepare:
(1) Statement showing calculation of purchase consideration.
(2) Realization A/c and Partners' Capital A/c in the books of AB & Co.

Q5. M/s East decided to convert into LLP on the following terms and conditions on 1 st April, 2019, when their
Balance Sheet was as follows:
Liabilities Rs. Assets Rs.
Capital A/c: Land & Building 62,500
- East 66,000 Furniture 28,750
- South 84,000 Inventories 34,000
Creditors 53,750 Trade Receivable 80,000
Bank Loan 30,000 Cash at Bank 28,500
2,33,750 2,33,750
Terms of Amalgamation:
1. Provision for doubtful debts to be created at 10% on Sundry Debtors.
2. Inventories to be revalued at Rs. 31,500.
3. Building is to be taken over at Rs.150,000.
4. Partners took over Bank Loan.
5. Goodwill was valued at Rs. 50,000.
You are required to show necessary ledger accounts in the books of M/s East.
 Q6. Rudra and Kunal are partners sharing profit and loss in the ratio of 3:2. They decided to convert their business
into a LLP, RK LLP on 31-3-2019, when the balance sheet stood as under:
Liabilities ₹ Assets ₹
Capital Accounts : Land and Building 80,000
Rudra 70,000 Plant and Machinery 60,000
Kunal 50,000 1,20,000 Furniture 21,000
Reserve Fund 30,000 Patents 18,000
Loan Creditors 80,000 Stocks 24,000
Sundry Creditors 33,000 Bills Receivable 16,000
Sundry Debtors 28,000
Cash at Bank 16,000
2,63,000 2,63,000
In order to arrive at the purchase consideration, the following terms are agreed upon by the LLP:
a) The LLP will take over the loan creditors but will not take over Sundry Creditors.
b) Land and Building will be valued at ₹95,000, Machinery ₹72,000 and Stock ₹32,000 and all other assets taken (except
Cash and patents) at their book values. Patents are valued at ₹25,000 and realized in cash.
c) The goodwill of the firm will be valued at 2 years purchase of the average profit of the last three years. The profits for
the last three years after setting aside ₹10,000 to Reserve Fund each year were as follows:
2012- ₹44,000; 2013- ₹52,000; 2014- ₹60,000
You are required to show the necessary accounts in the books of the firm assuming that all the transactions have been duly
completed and surplus cash, if any, was distributed equally and the balance was adjusted by the capitals in the new LLP.

Q7. Ranjit, Manjit and Paramjit are equal partners of M/s. Hindal & Co. The Balance Sheet of the firm as on 31-03-2019
was as follows:
Liabilities ₹ Assets ₹
Capital Account: Fixed Assets:
Ranjit 50,000 Land 50,000
Manjit 1,00,000 Building 70,000
Paramjit (Dr.Bal.) (30,000) 1,20,000 Plant and machinery 2,00,000 3,20,000
Loan from Bank 5,00,000 Current Assets:
Creditors 1,00,000 Stock 3,00,000
Debtors 1,00,000 4,00,000
7,20,000 7,20,000
On the date, it is decided to convert the partnership into Hindal LLP on the following terms:
1. Land to be revalued at ₹ 1,50,000
2. Plant and Machinery to be revalued at ₹ 2,50,000.
3. Depreciation amounting to ₹ 20,000 to be written off on Building.
4. A provision of 10% of book value to be made for obsolete stocks.
5. A provision for doubtful debts to be made at 10% of the debtors.
6. A discount of 6% would be earned on creditors when paid out.
7. Each partner will have capital of ₹72,000 in the LLP as purchase consideration
Show the necessary Ledger Accounts to close the book of Hindal & Co. and show the opening Balance Sheet of the new
LLP. All partners are solvent and have sufficient cash resources as may be necessary to settle the respective accounts.

Q8. Julie and Lilly are partners who share profits and losses in the ratio of 2:3 in the business. It was agreed on 1st April
2018, the firm is to be converted into JL LLP as on 31st March, 2018, the Balance Sheets of the firm was under:
Liabilities ₹ Assets ₹
Capital Account: Land 1,95,000
- Julie 2,40,000 Furniture 1,14,000
- lily 3,60,000 Vehicle 75,000
Creditors 1,50,000 Stock 1,49,700
Investments 42,000
Debtors 1,57,500
Bank 16,800
7,50,000 7,50,000
 The JL LLP takes over the old firm’s assets as under:
Particular ₹
Stocks 1,35,000
Vehicles 60,000
Furniture 1,05,000
Land 3,75,000
Goodwill 1,20,000
Julie to take over Investment for ₹36,000. Other assets and liabilities at book values.
You are required to: a) Calculate the Purchase Consideration.
b) Prepare necessary Ledger Accounts in the books of M/s JL.

Q9. A, B & C were partners sharing Profits & Losses as 3:2:2. The following is the Balance Sheet as on 31-3-2019.
Liabilities ₹ Assets ₹
Capitals: Land and Building 1,44,000
- A 1,45,500 Machinery 42,000
- B 87,000 Stock 18,000
- C 37,500 2,70,000 Bills Receivable 36,000
Creditors 24,000 Debtors 54,000
Total 2,94,000 Total 2,94,000
The partners decided to convert the business into a LLP on 31st March, 2019 on the following terms:
1. LLP which consists of A, B and C as partners contributes ₹1,50,000 each.
2. The company took over all the assets except stock, which was taken by A for ₹ 15,000 and assumed all the liabilities.
3. It also agreed to pay ₹ 45,000 for goodwill.
4. The purchase consideration was paid in cash.
Prepare:
1. Realization A/c, Partners Capital A/c & Cash A/c
2. Journal Entries in the books of LLP & Statements of Assets and Liabilities.

Q10. R and K were equal partners in a firm. Their Balance Sheet as on 31st March, 2019 is as follows:
Liabilities ₹ Assets ₹
Capitals Accounts: Building 1,28,000
R 1,10,000 Furniture 12,000
K 40,000 Debtors 32,000
Sundry Creditors 50,000 Less: RDD 2,000 30,000
Loan on Mortgage 20,000 Stock 36,000
Cash 14,000
Total 2,20,000 Total 2,20,000
On the above date, they converted their business into LLP on the following terms:
1. To take over Debtors at ₹ 28,000, Stock at ₹ 44,000, Furniture at ₹ 8,000; Buildings at ₹ 1,40,000 and Goodwill at ₹
44,000.
2. To take over Sundry Creditors from whom a discount of ₹ 4,000 would be earned.
3. To take over Mortgage Loan along with unrecorded interest of ₹ 2,000.
4. Dissolution expenses were ₹ 4,000.
Calculate:
1. Statement of Purchase Consideration.
2. Open Realisation A/c, R and K's Capital A/c and LLP's A/c in the books of firm.