433 tank : OCTOBER 2015 t ETE Eee amalgamation includes ____ reconstruction. resolution is to be passed by shareholders for the approval of scheme of internal reconstruction. Underwriting commission cannot exceed Bills Payable are given in list. Buy back of shares is for Class of shares. Preliminary expenses are transferred to shareholders’ account. The difference in revaluation of asset is transferred to account. FacurTas aaeconia t© subsciiie thal shareaiin the aiiaiee'|h Gace under subscription is % of debenture. known as : Secured debentures are given in____jist, —— Paid up shares cannot be bought back, ES NATIT Directors can authorise 15% buy-back of capital, Directors are required to submit stater Total shares for which guarantee are "Ment of affairs on liquidation. given by each underwriter indivi Accounting in external and internal reconstruction is identical, only sick companies undertake capital reduction, Sub-division of shares results in gain for a company. The class of shares subjected to buy back cannot be issued immediately, as NOVEMBER | 2016) MULTIPLE CHOICE QUESTIONS, ithe XYZ Ltd. and PQR Ltd. are taken over bi {@) tis called absorption (¢)Itis called intemal reconstruction Amalgamation adjustment reserve is opened i (a) The assets of the transferor company (b) The liabilities of the transferor company (¢) The statutory reserves of the transferor company (6) None of the above Balance in Capital Reduction A/c is generally transferred to (@) General Reserve (b) Profit and Loss A/c () Capital Reserve (d) None of the above For Capital Reduction under internal reccnstruction, authorisation/approval is required from (2) Shareholders (b) Articles of Association © Court (d) All the above y a New company GST Ltd. (b) It is called external reconstruction (d) It is called amalgamation in the books of transferee company to incorporatea Financial Accounting « vepyy 7 5, Unmarkod applications rotor to (a) Firm underwriting (0) Applications bearing the stamp of underwriter (c) Applications issued by the company {@) Applications from the public received directly without bearing any stamp oy 6. B Ltd, issued shares of € 1000 each at £950 the underwriting commission wi yr!™tey (ay%50 (b) % 1,950 be pala ot (c) & 1,000 (a) 950 7. List C in Statement of affairs gives the list of (a) Preferential creditors (c) Debentureholders 8. Acompany can buy back (a) Equity shares (b) Secured creditors (d) Shareholders (b) Preference shares (d) None of the above (b) General Reserve (a) Profit and Loss A/c (d) Dividend Equalisation Reserve (c) Revaluation Reserve STATE WHETHER TRUE OR FALSE idation and one formation, 1. Under external reconstruction, there is one 2. AS-14 does not distinguish between the amalgamation and absorption. 3, Only sick companies undertake Internal Reconstruction. 4. The cost of re-organisation of the share capital is to be charged from capital reduction ace 5. Under firm underwriting, the underwriters do not agree to purchase any shares. = 6. The underwriting commission is payable in cash. 7. Only insolvent companies can be liquidated. 8. Local Taxes are an examples of secured creditors. 9. Capital redemption reserve account can be utilised for issuing partly paid bonus shares, 40. Buy back of shares decreases the earning per share (EPS) of the company. Persie s sae A. (1) external (2) Special (3) 2.50 (4) E (5) Equity (6) Equity (7) Capital Reduction (8) (9) B (10) Partly luction (8) Underwrite B. True: 1,3, 4,5, 6,8; False: 2,7,9 Dawsons A. 1. @) 2. (©) 3. (©) 4. (d) 5. Chana 7 (0) 8 (a) 2 © (@) (d) (b) B. Tru .4; False: 2, 3,5, 6,7, 8,9, 10,Paper Solutions (UPS) M35 UNIVERSITY PAPER SOLUTIONS (UPS) COG roe NOVEMBER ~- 2018 9 otal Marks : 75 Time : 2% Hours a.t (A): Rewrite sentence after selecting correct altemative 4. The underwriter is entitled to claim remuneration on (a) The issue price of shares underwritten (b) The face value of shares actually purchased (c) The face value of shares not purchased by him (d) None of the above 2. Accounting for amalgamation is governed by (a) Accounting Standard 1 (c) Accounting Standard 14 3. Intemal Reconstruction ___ (a) No company is liquidated (c) Two or more companies are liquidated 4, Amount of calls in advance is treated as (a) Secured creditor (c) Preferential creditor 5. Interest on debenture and unsecured loan is (a) if the company is solvent (b) if the company is insolvent (c) whether the company is solvent or insolvent (d) none of the above 6. Marked applications refer to. {a) Applications bearing the stamp of the underwriters (b) Applications carrying the signature of public who applied for shares (c) Applications carrying the stamp of company which offered the shares (d) None of the above 7. Buyback must be completed within {any eight) ; (8) (b) Accounting Standard 13 (d) Accounting Standard 11 (b) Only one company goes into liquidation (d) One or more companies go into liquidation (b) Asset not specifically pledged (4) Unsecured creditor Payable upto the date of actual payment from the date of passing the resolution. (a) 12 months (b) 3 months (©) 6 months (d) 2 months 8, The asset which is not taken under the Net Assets Method of calculating purchase consideration is - (a) Loose Tools (b) Bills Receivables (©) Machinery (@) Share Issue Expenses 9. Capital Redemption Reserve can be utilised only for (a) Issue of fully paid bonus shares to the members (b) Issue of partly paid bonus shares to the members (c) Writing off losses 10. See aieiaTnaer intemal reconstruction, authorisation/approvalis required from ——- (a) Shareholders (b) Articles of Association (c) Tribunal (d) Allof the above ru) Q.1 (B) : State whether given statements are True or False (any aw 5 1. The company is allowed to convert fully paid shares into stock. be 2. The balance is security premium account cannot be transferred to capi zapunting VTYWAR : SP Financial Ae fv, 436 3, Buyback of security Is qovornod by section 68 of Companios Act 4. Cancollation of contingont Hability is troated as profit to the company. 5. Equity shares can bo bought back out of frosh issue of shares only. 6. Undorwrting may be done by individuals, partnorship firms or joint stock companics, 7. Matked applications are also known as diract applications 8. Local Taxes aro an oxamplo of secured croditors. In the case of amalgamation there are two or more liquidations and one formation. 10.1 the company is insolvent, interest on debentures is payable upto the date of actual paymar, Q.2 : A Ltd. and B Ltd. wore carrying on the business of manufacturing of auto components. Bor, the companies decided toamalgamate and a new company AB Ltd. is formed with an Authorised Capital of ¥ 10,00,000 divided into 1,00,000 Equity Shares of ¥ 10 each. The Balance Sheet of th, companies as on 31-3-2018 were as under (15) Balance Sheet as at 31-3-2018 Particulars Alia (O[B Lia & 1. EQUITY AND LIABILITIES 1. Shareholders Funds a. Share Capital b. Reserves and Surplus Profit and Loss A/c ES 1,40,000] 2,50,000 30,000] 35,009 General Reserve . -| 1,20,000 2. Non-Current Liabilities 8% Secured Debentures 1,10,000 - 3. Current Liabilities Trade Payables Total I. ASSETS 1. Non-Current Assets Property, Plant and Equipment - Building - Plant and Machinery - Furniture and Fixture 54,000] 1,40,000 p— 50.000, 3,34,000| 5,45,000 14,00,000| 1,90,000 -| 80,000 ss 25,000] 25,000 2. Current Assets a. Inventories 1,35,000] 50,000 b. Trade Receivables 44,000 | 1,42,000 ¢. Cash at Bank 30,000} 58,000 Total 3,34,000| 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 A Ltd. was worth % 50,000 and B Ltd. worth & 1,50,000. 2. Fumiture and Fixture of B Ltd. was valued at = 35,000. 3. The debentures of A Ltd. are to be discharged by issue of 8% 11,000 debentures of AB Ltd. at premium of 10%. You are required to : 1. Compute Purchase consideration. 2. Pass opening entries in the books of AB Ltd. and draw a Balance Sheet of AB Ltd. as per Purchase Method. oR Q.2 : The following is the Summary Balance Sheet of Teena Ltd. : (15) Liabilities ante Assets [eee issued and Paid-up : Intangible Assets 50,000 Equity Share Capital of 10 each 5,00,000] Fixed Assets 4,20,000 Statutory Reserve (to be maintained Current Assets 4,10,000 for 3 more years) 10,000] Profit and Loss A/c 80,000[pobonti “Guoullors, “ 8.005 _——— [oon Ltd. noo to ae 1 Moone Lt. agrpd Tho ari ai MT) hihi, On” 6 A HK, () Loug Hons OF Monona La ho following is the #19 ha Balance Ghoet ot x27 14g YC 0 es Haney og __ Balance Shoot as 4 N40 sees! Liabiiitios Rel Share Capital: s a 1,000, 6% Protoronce Share ey, , CO Sharos of “os , 2100 each, fully ne a a 2,000 Equity Shinow ott 100 ach | aoyigna| BAS Oo ee caon | $0000) i PO a Share of 2 100 ongh, | 200.000 Pro 41 ae ae : Olt and Lows, hoc 3,00, “4 Loan from Bank (on eocurity of stocky) 1129000 on 00 9,00,000 following amounts aid out of cash The assets realised the amounting to & 5,000 p; Fixed Assets TDI } lallor all costs of realication nag in hin hand 2 ao salanoe She idators 100 38 per B, ye cornrtiesion ene lanes Shes) Stock 21,10,000 Book Debts 2 2,30.000 Calls on partly paid shares wero mado bot the inecoverable. amount dus on 200 Prepare the Liquidators’ Final Statement of Account, ‘hie was found to be oR ‘anasonic Ltd, as on 31% 3: Following is the Balance Sheet of p ot March, 2018, (15) Balance Sheet Liabilities | Assois 7 6,000 8% Preference Shares Goodwih 6,000 of 8 100 each 6,00,000) Patents 40,000 $0,000 Equity Shares of & 10 each | 5,00,000| Building 6,900,009 5% Debenture of @ 100 each 3,00,000| Furniture 1.90,000 Outstanding Debenture Interest 50,000} Stock +0900 Sundry Creditors 1,80,000| Sundry Debtors eae Bank ; Profit and Loss Alc 5,320,000 Ta30 000 30,000 16,30,000 16.30, Note : Preference dividend is in arrears for three years. Th * following scheme of reconstruction is approved by Court - barren ran thy " The Preference shares shall be converted into aval number 0 ®2ch and the Equity shares shall be reduced to % 3 each.Financial Accounting -V(TYBAF : 5p uy woes tT 7S each. The ceterture taiters agrees ot O% Of ther cams and te accent Eats stares tor? ig, 2 Oh, os Ciidend which is 2 {SC mein (c) Stock - # 7,00.000 (8) Sundry Debtors - z _ g. intangible end fieutious assets ere to be writen oH jen nd prepare Cente! 70.009 Ld. 0.4: Following is the Liabilities Shares € 10) Security Premium General Reserve Profit and Loss A/c 10% Debentures Bank Loans Sundry Creditors The company decided to buy back fs ey! steps: 4. Issued 3,000, 8% Pre’ 2. Issued 2,000, 10% Debentures of € 100 each at 2 premiu: 3. Sold 70% of investments at 2 prot of 107. Ascenzin: (2) Maximum Ni tty shares that cen be bought bacic (0) Maximum price it can offer for buy back igs in the books of t (¢) Pass Journal Q4: Spine Ld. i of €5 per share. The entire issue we 2 20% and 20% res; 7,000 and 1,000 shares respectiv pemnitted by law. The company received applications for 70.000 shares from public o: 19,000; 10,000; 21,000 end 8,000 shares were marked in favour of P, Calculate the liability of each of the underwriters when firm underwriti marked and unmarked applications. Q.5 (a): State the conditions for amalgemation in the nature of merger. @) Q5 (b) : What do you mean by Liquidation of a company ? Describe the ditterent modes of wincing @) up. OR Q.5 : Write any three short notes : {a) Overriding Commission (b) Purchase Consideration (c) Preferential Creditors (d) Need of intemal Reconstruction (e) Buy-back of Equity Sharesersity Paper Solutions (UPS) m9 tution 1 (a): Tho underwriter is entitlod t | Accounting for amalgama internal Reconstruction No company ie liquidated, © Amount of calls in © claim tomunoration on the isaue prico of shares undervritton, na, Governed by Accounting Standard 14, ‘alculating purchase consideration i's Share Issue Expenses. | jenecemption Reserve can be utilised only for Issue of fully paid bonu: members, 'S Shares to the ).For capital reduction under intemal r reconstruction, authorisation/approval ig Fequired from Shareholders, Articles of Association and Tribunal, olution 1 (b) : The company is allowed to convert fully paid shares into stock. « True The balance Count cannot be transferred to ca; False pital reduction account, - . Underwriting may be done by indivi . Marked applications are also know of shares only. - False iduals, partnership firms or joint stock companies, - True "as direct applications, - False ~ Local Taxes are an example of secured creditors, - False In the case of amalgamation there are two or more liquidations and one formation, - Tre Oui the company is insolvent, interest on debentures 'S Payable upto the date of actual payment. - False olution 2 = Calculation of Purchase Consideration ‘articulars Alta. (7B Lia. \. Assets taken over : Goodwill 50,000] 1,50,000 Building 1,00,000] 1/90,000 Plant and Machinery -| 80,000 Furniture 25,000] 38,000 laventories Trade Receivables Cash at Bank Total Less : Liabilities : % Debentures Trade Payables Total 1,35,000] 50,000 44,000} 1,42,000 30,000} 58,000 7,05,000 1,21,000 : os 54,000] 1,40,000 1,75,000| 1,40,000 5,65,000 Net Assets taken over - Purchase Consideration scan | 2108;000 £5,000 No.of Shares issued as Purchase Consideration 10 each) XFinancial Accounting = V(TYRAp. 440 Journal Entries in the Books of A Ltd. i Particulars r 7. | Business Purchase A/c Dr. | 7,74,000 To Liquidator of A Ltd. Ale To Liquidator of B Ltd. A/c 2. | Goodwill A/c Dr. | 2,00,000 Building A/c Dr. | 2:90:00 Plant and Machinery A/c Dr. | 'g0‘000 Furniture Ale Dr. | 60,000 Inventories A/c Dr. | 1,85,000 Trade Receivables A/c Dr. | 1,86,000 Cash at Bank A/c Dr. | 88,000 To 8% Debentures A/c 1.21.09 To Trade Payables Alc 1194009 To Business Purchase A/c 774000 3. | Liquidator of A Ltd. Alc Dr. | 2,09,000 Liquidator of B Ltd. A/c Dr. | 5,65,000 To Equity Share Capital A/c 7.74.00 4. | 8% Debentures Alc (A Ltd.) Dr. | 1,21,000 To 8% Debentures A/c (AB Ltd.) 1,10,000 To Securities Premium A/c 11,000 AB Ltd. Balance Sheet as at 1-4-2018 Particulars Note = 1. EQUITY AND LIABILITIES 1. Shareholders’ Funds a. Share Capital 1 | 7,74,000 b. Reserves and Surplus 2 11000 2. Non-Current Liabilities Long-term Borrowings 3° | 4,10,000 3. Current Liabilities Trade Payables (54,000 + 1,40,000) 1,94,000 Total 10,89,000 i, ASSETS 1. Non-current Assets Property, Plant and Equipment Tangible 4 | 4,30,000 = Intangible 5 | 2,00,000 2. Current Assets a. Inventories (1,35,000 + 50,000) 1,85,000 b. Trade Receivables (44,000 + 1,42,000) 1,86,000 ©. Cash at Bank (30,000 + 58,000) 88,000 Total [10,89,000 Notes to Accounts # 1. Share Capital Equity Share Capital Authorised Capital 1,00,000 Shares of 10 each ee 10,00,000 Issued and Subscribed : 77,400 Shares of 2 10 each uo on 7,74,000 2. Reserves and Surplus : “ Security Premium 11,000 3. Long Term Borrowings mnee 8% Debentures 1,10,0000 30 0 0 0 © 0° 1910 i paper stations (UPS) unil ial assole 11 a0" 1,00,000 + 1.90,000) + guild Machinery Mit 85 (25,000 + 35,000) woe 12! pte Assets intrivill es as i iua of Assets Fao ates taken over LoS5,pditors entre jar consideration pul Cc | purshasy /4 x 3,50,000) nash Gls X8.60.000) ia ‘onsideration discharged : res 10 be 19SU0d 10 the vendor : uw 200th 205th Lith 200800 os cane Purchase Consideration z | TEST 9.0% 1.06.06) No. — ipe paid is shares = % 2,62,500 “Aout ces = 262,500 / 12 = € 21,875 shares i. N In the Books of Teena Ltd, & Realisation Account c ies | Panicutars T intangible Assets 80,000] By Debentures | io arp esets 4,20,000| By Creditors | oF at Assets 1,10,000| By Meena Lr, “eearetexpenses) 300) By Equity Shareholders (Loss) | 160,300 ra Equity Shareholders Account emia %_| Pariculars Ee ealsation Alc 80,300 | By Equity Share Capital fo ewitand Loss Alc 80,000] By Statutory Reserve i y ‘aa 87,200 Jo Shares in Meena Ltd. 2,62,500 10,000 Meena Ltd, Account or. | Panicuars @_ | Panticutars jane “To Realisation Alc 3,50,000| By Bank Alc 7.500 | By Shares in Meena Ltd. 2,62,500 ' 350,000, 350,000 Ac Bank Account cr. Particulars | @ | Particulars ToMeena Lid. 87,500| By Realisation Ale By Equity Shareholders 87,500Hinanclal Accounting “VOVHAL, Kquity Sharos in Moona Ltd. Account Sena >————_—_—___ Particulara ORTON By Equity Shareholders 62,500 In tho Books of Meona Ltd, Journal Entrlos, No. Particulars ele z 1 | Businoss Purchase Ave Dr. To Liquidators of Toona Lid. Ale 2. | Fixed Assots Ale Dr. | 4,20,000 Curront Aasots A/c Dr. | 1,10,000 To Tado Croditors Ale To Debentures Ale sorve Ale si Purchaso Ale 3. | Liquidators of Toona Ltd. Ale Dr. | 3,50,000 To Equity Share Capital Alc To Socuuitios Promium Alc To Bank Ale 4, | Amalgamation Adjustment Ale Dr. | 10,000 ‘To Statutory Reserve Ale 8. | Debentures in Teona Ale Dr. | 1,00,000 To Bank A/c 3,50,000 |--——— HM, 3,50,009 50,009 1,00,009 30,000 350,000 2,18,759 43.750 87.500 10,000 Tutorial Note : Students should provide narration for Journal Entries as an exercise. Solution 3 : Refer Chapter 5, Illustration 18, oR Solution 3 : Journal Entries of Panasonic Ltd. 1,00,000 No. Particulars One [ore 1. | 8% Preference Share Capital Alc Dr. | 6,00,000 ‘To 9% Preference Share Capital A/c 3,00,000 To Capital Reduction A/c 3,00,000 2. | Equity Share Capital Ale © 10) Dr. | 5,00,000 To Equity Share Capital A/c (@ 3) 1,50,000 To Capital Reduction A/c 3,50,000 3. | 5% Debentures Ale @ 100) Dr. | 3,00,000 To 5% Debentures A/c (® 75) 2,25,000 To Capital Reduction A/c 75,000 Debentures Interest A/c Dr. | 25,000 To Capital Reduction A/c 25,000 5. | Capital Reduction (Preference Dividend) Ale Dr. | 48,000 To Bank Alc 48,000 6. | Creditors Ale Dr. | 84,000 To Equity Share Capital A/o 30,000 To Capital Reduction A/c 54,000 7. | Buildings Ave Dr. | 60,000 To Capital Reduction A/c 60,000perce = paper Sotuttons (OPS) wer eduction A/c yt anit ia and 1.056 Ale Ms | © Goodwill Ale Or 1 816.000 patont AC S200) ° rurniture Ve 000 qo siock Ae Mth) | fo Hopiors Nc 200 7 Capital Reserve Ale AO 7 Students should provide nan £000 “a :si © Rarration for Journal Entries a 1 “i Capital Reduetion ore" of z ~ Cr. flats. Particulars BE gana oss Ne 5:30,000] By 6% Prete f Pr duill 60,000] BY Eph 'forence Share Capital | 3.00.000 Go 40.000) By city Share Capital 5 & pat pret. OM) 48,000 ey 5% Debentures eee nk Ce ’ Interest on Di = 0 te 20,000| By Creditors eae ee on 1 cock 50,000| By Building 54,000 SFO serve 5,000! 60,000 ‘0 Dthal Reser 1.11,000 i 8,64,000 0 TSS z urces 1 Beperal Reserve 2 aero oss Ale - . | 20,00,000 Profit an p. ities Premium 25,00,000 f Securite E0000 g,_ Reserves and Surplus 50,00,000 {2} 25% of Own Funds 2, Reserves and Surplus 50,00,000 |p. Equity Capital 50,00,000 ¢, Own Funds 1,00,00,000 4, 25% of Own Funds fos po onl [5] Minimum Own Funds ‘a. Own Funds 4,00,00,000 B Less : 50% of Debt (40,00,000 + 10,00,000) '25,00,000 Minimum Own Funds 75,00,000 ||] Maximum Possible Amount of Buy-Back ee 25,00,000 | [5] 25% of Paid-up Equity os 12,50,000 Maximum No. of Shares 4,25,000 [6] Maximum Possible Offer Price [Maximum Buy-Back / Maximum No. of Shares] _ 28,00,000 ; g 1,25,000 & Least Amountof1,2and3__ Max. No, of Equity Shares asin 4 Conclusion : Thus, Keeping in view all legal conditions, Satya 1d. can uy back 1,25,000 equity shares ata price of € 20 each including premium of < 10 Pet share. Naximum No. of shares that can be bought back = 25% of 50,00,000/ 10 ‘Maximum Price = 25,00,000 / 1,25,000 = € 20 per share = 1,25,000.| Financial Ac 444 anclal Accounting ~ V(TYRAL ; Journal of Satya Ltd, 1 SEM.y, Particulars 7. | Bank Ave To Investment Alc To Profit and Loss A/C 2. | Bank Ac = Ty a% Preference Share Capital Alc Jo Securities Premium A/c 3. | Bank A/c oe To 10% Debenture A/c ‘ To Securities Premium A/c 4. | Equity Capital A/c De Premium on Buy Back A/c Dr ‘To Equity Shareholders Alc . 5. | Securities Premium A/c De Dr. General Reserve Alc To Premium on Buyback A/c Dr. Equity Shareholders A/c To Bank A/c Dr. 6. 9,50,000 7. | General Reserve A/c : To Capital Redemption Reserve Alc Tutorial Note : Students ‘should provide narration for Journal Entries a OR 1s an exercise. Solution 4 : Refer Chapter 4, Mustration 32. Solution 5 : (a) CONDITIONS Refer Chapter 3, Pal NOFA COMPANY AND Tl Para 1, 2 and 3. FOR AMALGAMATION IN THE NATURE OF MERGER : ra 3.3. HE DIFFERENT MODES OF WINDING UP: (b) LIQUIDATIO! Refer Chapter 5, oR Solution 5 = (a) OVERRIDING COMMISSION : ON : Refer Chapter 3, Refer Chapter 5, Para 9g (b) PURCHASE CONSIDERATI! Para 4. ITORS : Refer Chapter 5, Para 7. (c) PREFERENTIAL CRED! NAL RECONSTRUCTION : Refer Chapter 4, Para 1.1. (d) NEED OF INTER K OF EQUITY SHARES : Refer Chapter 2, Para 1 (e) BUY-BACpasion O09 pill ) Ter “ ye oe Tre: Th tones ” 6-20 wanrsgon 10th got ‘rate 2 Ne gt ee ae Warehesters ty Eysty Chaser eiters bie 6 by ore creegany tn er a urmany in nee tenreeeuttr i vere, fp alone 10 OTHER ts fly gain sare 1 eng of Shao and debentures 6 ret en UP agation of compan tag steven Lr eteesir, te tee. OLE 25 Pe Me Weleteren tacnines on ity tlio head toh eens 1-2 y .or00e® the correct option from the ogtion provises ards wer py wack shall be Carpeted witin a yaress J e date Othe si ent ee pang sa veten (gmat from the dete of BEA eh so IVIL gat from the date of vat from the date of o ‘company purchases ers be transferred to Capital Rede (a) equal to the amount paid to the ip) equal to paid-up capital o fe) equal to the nominal valus of shares (gj none of the above 4, The payment of commission to underurt (a) he board of directors {g) the memorandum of assaciation 4, Amerchant banker can act as 2 und (@) Government of India (© SEBI OF 5, Acompany after the completion of a buyback of ts {@) cannot issue same kind of shares within one y ory (imo winere sah resnhsion Ot oh free reser (0) cannot issue same Kind of shares within 6 months (6) can issue same kind of shares within 6 mor (4) cannot issue bonus shares 6. Capital reduction scheme is worth considering (a) f the company is small (0) # the company has recovery prospects (c) if the company has no prospects (@) if the company is less capitalized 7. The company must apply for an order confirming the reduction {@) to the Supreme Court (b) to the High Court ; (6) to the Tribunal (6) to the Ligui Liquidation of Companies the payment schedule is 25 i Liquidator expenses, Outsider Lisbities, Prefers a oe Liabilties, Preferential Liabiit ne onpenses, Preferential Liabilities, Outs iquidator expenses, Outsider Liabilities, Owners, Pref jites, Owners Labi jes, Liquidator expenses, Owners jer Liabi Owners nal Liabilities i“6 Hinancial Accountiays- VANBAP : SEM, 9. Invostmont Allowance Rosorve Is (a) Capital Ronorve (c) Revenue Reserve. 10. For calculating Purchase Gonsidoration undor AS-14 (a) only paymont to equity sharoholdors are to bo tikon into consideration (b) only payment to shareholders aro takon Into consideration (6) only paymont to sharoholdors as woll as dabenture holders are takon Into consideration (d) paymont to All stakeholdors Is taken into consideration (b) Statutory Rosarvo, (dl) Allof tho abovo Q.2 : [SPAT India Ltd, « company which deals in ton and stool has suffarad heavy 109508 ‘nd took, ‘your advice as to how the balance shoot can be rostructiras, Mn A to restructure it ot. It sel Moss and how tho restructured balance shoot can bo made? (15) ag From tho below information aro provided : z ye 5,000, 0% Proteronco Sharos of @ 10 oach, € 8 palk-up 4,00,005 i 1,50,000 Equity Sharos of € 10 each 15,00,009 ia f 10% Debentures: 5,00,009 a4 Bank Loan 5,00,000 ‘quit Creditors 15,00,009 ‘not Cash Crodits 2,50,000 AA Goodwill 1,00,009 fost Land 2,00,000 fost Plant and Machinery 12,00,000 The Receivables : req + Good 5,00,000 oy = Doubtful 30,000 § Inventories 6,00,000 iolt Preliminary Expenses 70,000 ; The scheme of restructure was put in place as : 1. Allthe partly paid shares were called up and paid by all the shareholders. 2. Preference shares were reduced by % 40 per share and Equity shares were reduced to @ 4 per share. Equity shares were split to ¥ 1 per share post the above reduction. Debentureholders agreed to reduce their claim by 40% if the the interest on debentures was raised to 11%. . Land was appreciated to % 6,00,000 whereas Plant and Machinery was depreciated by 40%, The market value of Inventories was ¥ 4,50,000 and it was brought to that level. All the fictitious, Intangible, doubtful and losses were to be written off. There was a claim against the company to the tune of ¥ 1,50,000 recorded under the Creditors ” which was settled by paying one-third of the amount due. 9. An unrecorded liability of & 1,50,000 came to light of the company on verification and it was settled by paying off € 50,000. 10. The Directors of the company decided to sell 4,00,000 Equity shares of the company at ¥ 1 per share at par for the working capital needs of the company. Allthe point put above were accepted. You are required to pass Journal Entries and prepare Revised 3. 4, Balance Sheet. oR he :IRCTC Ltd. a government company who files DRHP for its Initial Public Offer of 80,00,000 shares of ¥ 10 each at % 250 per share, appoints SBI Capital, Citi Bank Financial Services, JM Financial Services and Morgan Stanley as its lead manager for the IPO in the ratio of 4:3: 2:1. The lead manager agreed to the ratio and also took the following shares for themselves (Firm underwriting). (15) SBI Capital 2,00,000 shares CITI Bank Financial 1,00,000 shares JM Financial 1,00,000 shares Morgan Stanley 1,00,000 shares asters acm m 800 >I] Progions (UPS) 30,00,000 sharos 20,00,000 sharos 10,00,000 shares 5,00,000 shares aot Underwiting of Shares and also ca nest “one oro paid @ 5% On Issue price ofthe shares eT rentios in context to the underwriters, Sp LIABILITIES Za jee Funds » ya Se oni surplus 1 Reve8 Sod against Share Warrants i foe) Frain Money received Pening Allotment 5 a Bent Liaplities » porrowings en Ar iabilities ou ‘Borrowings * grote ables 1 a Goren Labs » ome 7 10 stamp of Yond manago .g tho stamp of fond managor (oxctuding the shares taken ty than) mas ring no stamp of the lead manager was 6,00,000 shares, iculate the Not Liability of Undorartars y jane balance sheet of M/s Sharp Lg, as on st March, 2019: (15) ae valance sheet of Ws Component Linited as at att March, 2019 Note z 1 | 25,00,000 2 | 37,50,000 3 | 57,50,000 13,00,000 40,00,000 10,00,000 1,53,00,000 wl 3 L ss arent Assets i ns d Asset 1 Fire agile Assets 4 | 93,00,000 won curent Investments » Gurrent Assets * Curent Investments ae * fqvertoies a » Frade Receivables 10,00,000 {cash and Cash Equivalents tenn Se 1,53,00,000 ‘Wes of Accounts — i. Share Capital Authorised Capital : 3,00,000 Equity Shares of € 10 each Issued, Subscribed and Paid-up Capital : 2,50,000 Equity Shares of % 10 each fully paid . Reserve and Surplus 1. Revenue Reserve Security Premium, Profit & Loss A/c Total ' Long Term Borrowings Secured Loans ~ 12% Debentures ~ Unsecured Loans Total 30,00,000 25,00,000 30,00,000 5,00,000 2,50,000 37,50,000 37 50,000 20,00,000 57,50,000V(TYBAF: SEM) Financial Accounting 53,00,000 30.00.00 10,00,009 10.00.0009 93,00,000 4. Fixed Assets - Tangible Assets a. Land and Bi b. Plant and Machinery Furniture and Fittings Total ach on 18t APH 2019 at € 20 poy ry rosolution passed by the e mado by the Company oUt of The company wants to buy b: share. Buy back of shares is duly authorised bY company towards this. The payment for buy’ Dé sufficient bank balance available Comment with your calculations, whether buy Companies Act, 2013. It yes, pass necessary journal a Balance sheet after a buyback of share! its articles and nec ck of shares will b pany is within provisions of the Jack of sharas by com s back of er rowards May back of ShAFOS ANd proparg OR Q3 : The following is the Balance Sheet of Suman Lt a which is in the hand of liquidator, (18) Balance Sheet as at 31-12-2019 Liabilities TT [Assets ‘ £ Share Capital = Fixed ASsots 7 00) 500 6% Preference Shares of € 100 Stock 1.20:000 each, tully paid 50,000] Book Debts SS oeae 1,000 Equity Shares of € 100 each, Gash 1.50.00 fully paid 4,00,000} Profit and Loss Beh 3,000 Equity Shares of £ 50 each. 25 paid 75,000 Loan from Bank (on Security of stock)} 50,000 Trade Creditors 1,75,000 ¥50,000 The assets realized the following amounts (atter all costs of re: (000 as per Balance Sheet) : amounting to 3,000 paid out of cash in hand ¢ 20, Fixed Assets 84,000 Stock 55,000 Book Debts 1,15,000 Prepare the Liquidators Final Statement of Account. mmarised Balance Sheets of A Lid. and B Ltd. as at 1st April, 2019 are as follows : (15) Q.4: The Sul Balance Sheets of A Ltd. and B Ltd. A Ltd, (2) [B Lid. (2) Particulars 3 1. EQUITY AND LIABILITIES 4. Shareholders’ Funds a. Share Capital — Equity Shares of € 10 each fully paid = 11% Preference Shares of = 10 each fully paid 6,00,000 | 5,00,000 -| 3,00,000 b. Reserves and Surplus = Profit and Loss A/c 2,00,000 : — Reserves 2,40,000 : 2. Share Application Money received Pending Allotment 3. Non-Current Liabilities Long-term Borrowings = 12% Debentures ,00,000 2,00,000 4, Current Liabilities = Trade Payables = Sundry Creditors 60,000 | 1,00,000 }12,00,000 [11,00,000 Totalsplutions (UPS) oy int papers ators ( wy 7,00,000 | #,00,000 2,000) 00,000 ors rd Oe Equivalents 2,50,000| 1,40,000 50,000] 1,00,000 112,00,000 |12,00,000 . 6 agree to amalgamate and form a new company AB Ltd. on the following ab very 5 equity shares, 6 shares of AB Ltd. of 8 10 each will be issued at premium of 50%. weir nolders wil be issued 12% debentures of AB Ld, of samo amount and denomination. 41% Preference shares will be oe rine I aares hat alloted 4, 13% Preference shares of & 10 each of Od '5 equity shares 6 shares of AB Ltd. of % 10 each will be issued at promium of 50%. 2, For even oiders willbe issued 12% debentures of AB Ltd. of same amount and denomination. eben woth 10,000 inthe balance shect of A Lid. ao fom the goods purchased by Bud. em _eauited 10 SHO | are Fgulation of Purchase Consideration cents in the Books of AB Ltd, under Purchase Method 7 1 Th 2 Spening Balance Sheet of AB Ltd, yo oR g is the summarised balance sheet of Hexza Ltd. as at 31st March, 2019 + (15) a: Fotowin Balance Sheet as at 31st March, 2019 Padua. z 1, equity AND LIABILITIES {, shareholders’ Funds a, Share Capital 60,00,000 & reserves and Surplus "General Reserve eer Profit and Loss Alc 415,20,000 = Workmen Profit Sharing Fund cecure », sare Application Money received Pending Allotment .. - 3, Non-Current Liabilities a 7 4 Current Liabilities Trade Payables = Creditors es 0,00,000 eal 7,01,20,000 ll. ASSETS Err 1, Non-Current Assets Fixed Assets - Tangible Assets Building a 14,00,000 Plant and Machinery 26,00,000 ~ Intangible Assets Good 16,00,000 2. Current Assets & Inventories 14,00,000 . b. Trade Receivables ~ Sundry Debtors 18,00,000FMAM TE” a Onal an Gant Equivalent 14.00,000 101,20,005 anh at Hanh YON HEHE TAG p6O10 Hany Jat Apa # PM nerd ab © 2A00,000 HEE PUKE sins total yoae of Haezi Ltd Ob ya hie ig whieh wae fenta Lidl decided te whoa Ab OO e TT Un Iie aqeegt beiiit values af anpete and tite Halil HMivotinery at © 20,00,000 Pirahnine conatinration van payables 46 filo ne tion Fagannon © 10,000 oe 10 enol filly 8 2A poor Equity shivite 10 646 won © 1,00,000 Hexen Lid, wine the ane (208%, On Bale rare Hipor share for every Equity shinre OA Norry sl nore due 10 Pen td I alook purchase (01 1. Payriont of Liquid! Po Ianie of Pquily Bhai: Hid nnd a payment of 4. Gundy Croditons of Hegzi Hd 4. Inventorios worth © 1,20,000 6F which The company oharges prof Ol Catonials the Purohiine considorntion, show the necessat Hicand opening Jonna! Paios in the books of Ponte Lit Pont 11d, on y innigor anctunt nthe books of Hora sonaidoration ar calculated: ts) 0.6 (a) : Give the methods under whieh Purchase C ont! 0.5 (bh): Give the conditions: laid down for Buy Back of Equly Sharon under Companions ACL, aoe on 6: Write short notes on : (Any 3) (15) (a) Capital eduction Alc (b) Firm Undorwiting (c) Liquidation of Companies (a) Undorwritors Commission undor Undorwriting of Sharon and Debentures (0) Typos of Amalgamation Solution 1 (a) : a now company is called absorption. - False ties are taken at book 1. Two or more companies combining to form 2. Undor purchase mothod of accounting for amalgamation, a valuos. - False Dobit balance of realisation account Is profit which is transferred to Equity Shareholders Ale under amalgamation of companies. - False Purchase consideration means tho amount paid by one company to another company in consideration for the assets and liabilities taken. - True ‘of external reconstruction and internal reconstruction is same. Stakeholders is not required for Internal reconstruction. - False ‘allowed to convert its fully paid shares into stock. - True pulsory as per the Companies Act, 2013. - ssets and liabi 3. > False The nature Approval of A company is Underwriting of shares and debentures is not comy exoo False 9. Under liquidation of companies, the preference shareholders are paid last after payment to all the other stakeholders. - False 10. Post buy back debt-equity ratio should not exceed 1 : 2. - False Solution 1 (c}: 4. Every buy back shall be completed within a period of 7 year from the date of passing of the special resolution. 2. Where a company purchases its own shares out of free re: serve or securities premium, a sum should be transferred to Capital Redemption Reserve which should be equal to the nominal value of shares so purchased. 3. The payment of commission to underwriter(s) is to be authorised by the articles of association.pe setae TINY yy nt Hi nl at a HHO ; oem aa tia 1 HANNON lanite oaine Kad Of shares Fe trig wn tin be Ye Cai an iy AE AE far an an manny on HEL Me gH Hy ea arent He AL RE Med PPT oo yall in : Lntevs ston send Oe WAY ae Imanvary prospacte hichion to Me Fltunal Nel Hiquidato i Mulator oxponses, Owtatdtor Ltabititios, wn il weal Aiwa HAGOI I MALY Ho A pace alter atte da V4 ANy payment ta shareholders are taken Halanen Bhaat (Hota Heconstuction) S ———— eats we BhAHHe Gan Ch 1,090,000 t 200,000 12,090,000 6,600,000, von OEE 10 ba0h Houlatul oo000 #,00,000) Pratininary £ FNONSES, 70,000 Profit and Loss (al, Fig.) 19,50,000 4i,60,000 _ }46,50,000, WW the Hooks of SPAT India Lid, Journal Entrlas ee o FLITE SS OPA I PW Is ank Aa (8,000 20) saan / Han 1 eee ateranoe Share Capital Alo De Foo 000 > Prratoranoe Bhan Capital Ale (6,000 x 100) De | 6,04 " “ fo Pafaroniee Sluts Capital A/e (5,000 x 60) | 600,000) a0 fo Capital Hodtetion Afi (6,000 4 A0) 2.00/00 Tapaity Sle Capital Ale (150,000 5 10) Dr |15,00,000 ; To Equity Share Capital Ale (150,000 4) " 6,00,000 |__ to Gap Hrocuction Ae (1450.00.09) 9,00,000 a, [Eanaly Stare Ale (@ 10) (1,60,000 « 4) Dr. | 6,00,000 ‘fo Equity Sharon Ale & 1) (6,00,000 x 1) 6,00,000 5, | 10% Dobonturon Ale Dr. | 5,00,000 To 11% Dobontures A/c (60%) 3,00,000 fo Cupital Reduction Alc (40%) 210,000 6. | Land We Dr. | 4,00,000 To Capital Reduction Ale 4,00,000 7. | Capital Reduction Alc Dr. |27,80,000 To Plant and Machinory A/c (12,00,000 x 40%) 4,80,000 To Stock A/c (6,00,000 ~ 4,50,000) 1,50,000 To Goodwill Alc. 1,00,000 To Roceivablos A/c (Doutlul) 30,000 To Prolit and Loss A/c (BS) 19,50,000 To Proliminary Expenses Alc 70,000 8. | Croditors A/c Dr. | 1,50,000 To Cash / Bank Alc (1/3) 50,000 ‘To Capital Reduction A/c (2/3) 1,00,000 9. | Capital Reduction A/c Dr. | 50,000 ‘To Gash / Bank A/c (Unrecorded Liabilities) 50,000id Vinanelat Accounting VTYBAE : SEM, 42 Pr | 4,00,000 10. | Cann / Bank No (4 00,000 1) 4,00,000 To Equity Sharon A/o raha assets 1. [ Goodwit At rs 10,20,000 Note : Studonts should provide narrations for Journal Entries as an exorcise, Dr. Capital Reduction Account Particulars © __| Particulars To Plant and Machinory 4,60,000| By Proference Share To Stock 1,50,000| By Equity Share Capital To Goodwill 1,00,000] By 10% Debentures To Receivables (Doubttul) 30,000] By Land To Profit and Loss 19,50,000] By Creditors To Cash / Bank 50,000] By Goodwill (Bal. Fig.) 28,30,000 ISPAT India Ltd. Balance Sheet (After Reconstruction) Particulars Note v 1. EQUITY AND LIABILITIES 1. Shareholders’ Funds a! Share Capital 1 |13,00,000 b. Reserves and Surplus 2 - 2. Non-Current Liabilities Long-term Borrowings 3 | 8,00,000 3. Current Liabilities a. Short-term Borrowings 2,50,000 b. Trade Payables e 13,50,000 Total ae [37,00,000 Il. ASSETS 1. Non-current Assets Property, Plant and Equipment - Tangible 13,20,000 —. Intangible 4 10,30,000 2. Current Assets a. Inventories 4,50,000 b. Trade Receivables 5,00,000 ¢. Cash and Cash Equivalents 4,00,000 Total 37,00,000 Notes to Accounts is 1. Share Capital @. 10,00,000 Equity Shares of € 1 each 10,00,000 5. 5,000 Preference Shares of % 100 each & 60 paid 3,00,000 Total 13,00,000 2. Reserves and Surplus [ Profit and Loss A/c (Balance b/f) (19,50,000) Less : W/o on Capital Reduction /19,50,000 Total ir 3. Long Term Borrowings 2. 11% Debentures 3,00,000 y oan Loan 5,00,000 . | $:00,000_ 1. Intangible Assets [£00,000 Goodwill [1e.30,000.454 LIABI ILITY OF UNDERWRITERS (No. of s = = - Of Securition) u JM Morgan Total Financial Stanto; 32,00.000] aa 7 Ze ¢ SS Marked Actuan 00,000 16,00,000 8.00,000 80,00,000 Leseations | Actual — |(30,00,099 é potest ci a = {20.00.000) |(10,00,000)| ¢s 00,000) |(65,00,000) «. |B aned . 4.00,000]"6,00,0001 3,00,000 15,00,000 s | 4:3:2:4] (2400 D- | application: ( i (1,80,000) (1.20,000)| (60,000) (6,00,000) ‘ galance 00)) 2.20,000 4,80,000] 2,40,000| 9,00,000 | Less? f underwriting 40,000 20,000 13,333 6,667 ms g. {B27 “| 2:00.00] “4,66,667] 2,33,23| ~9.00,000 * | Less: Fier H undemriting (2,00,000) (1,00,000) (4,00,000) (1,00,000) (5,00,000) L ae i [G-H) (2,00,000)|7,00,000 3,66,667| 1,33,333| 4,00,000 i, | Less: + | agjusted 2,00,000 | (100,000) (86,667) (33,333) - x. | Balance tJ) SI ~| 3:00,000] 4,00,000]” 4,00,000 | add : Firm oo Underwriting 2,00,000 1,00,000 1,00,000 1,00,000| . 5,00,000 my. | Net Liability} (K +L} 2,00,000) 1,00,000| 4,00,000 2,00,000| 9,00,000 n. | Issue Price 250 250 250 250 250 5,00,00,000 2,50,00,000 '0,00,00,000 | 5,00,00,000 22,50,00,000 ©. Commission (32,00,000 x (24,00,000 x|(4,60,000 x (8,00,000 x }10,00,00,000 : 9 250 x 5%) | (250 x 5%)| 250 x 5%)| 250 x 5%) |4,00,00,000 {3,00,00,000 |2,00,00,000 |1,00,00,000 PB. 11,00,00,000. |(50,00,000) |8,00,00,000 \4,00,00,000 “ Receivable Payable | Receivable | Receivable in the Books of IRCTC Ltd. Journal Entries 7 Particulars = = Dr. | 5,00,00,000 | Sera Dr. | 250,00,000 M. Dr. }10,00,00,000 ee Dr. | 5,00,00,000 Morgan Stanley Alc * """ \99.50,00,000 To Equity Share Capital Alc arene ae 5 ),00,00,000 2. | Underwriting Commission A/c Dr. {10.00.01 4,00,00,000 To SBI A/c 3,00,00,000 To Citi A/c 2,00,00,000 To JM Financial A/c 1,00,00,000 Stanley A/c . To Morgan Stanley. Dr. |13,00,00,000 3. | Cash/ Bank Ale 1,00,00;000 To SBI Alc 8,00,00,000 To JM Financial A/c 4,00,00,000: ley A/c To Morgan Stanley oF 50,00,000 4. | Citi Ale To Cash / Bank A/c 50,00,000 Note : Students should provide narrations for Journal Entries as an exercise.Financial Accounting; - V TYBAF 454 Suen ss Ascertain Maximum Buy-Back Amound) -BACK (Asc: |. CONDITIONS FOR BUY-BACK ( > ‘Step_ Condition (1) Sources °9,00,000 a. Revenue Reserve 50,000 b. Profit and Loss A/c 5,00,000 © Security Premium 37,50,000 a. Reserves and Surplus pS [2] 25% of Own Funds 25,00,000 a. Paid up Capital 87,50,000 b. Free Reserves 62.50.00 ©. Own Funds 15.62.509 a. 25% of Own Funds pS [3] Excess of Equity Over Debt 162,50,000 a. Equity b. Debt (Secured Loans + Unsecured Loans) / 2 t28.75,c00 (87,50,000 + 20,00,000) / 2 : 53.750 E 10 Maximum amount of Buy back 1, 2 and 3 whichever is less = © cee I. MAXIMUM NO. OF EQUITY SHARES TO BE BOUGHT-BACI ee 25% of Equity Share Capital = 6,25,000 / 10 = 62,500 Equity Shares Since company has to buy-back 50,000 Equity shares which is lesser than maximum no, of ‘shares which can be bought back 80 it is allowed to buy-back shares. In the Books of M/s Sharp Ltd. Journal Entries No. Particulars fa z 1. | Revenue Reserve Ac Dr. | 5,00,000 To CRR A/c 5,00,000 2. | Equity Share Capital Ave Dr. | 5,00,000 Premium on Buy-back A/é : Dr. | 5,00,000 To Equity Shareholders A/c 10,00,000 3. | Equity Shareholders Ave Dr. ]10,00,000 To Cash/ Bank A/c 10,00,000 4. | Security Premium Af Dr. | 5,00,000 To Premium on Buy-back A/c vy 5,00,000 Note : Students should provide narrations for Journal Ent S as an exercise, Balance Sheet (After Buy-back) Particulars Note e 1. Equity AND LIABILITIES 1 Shareholders’ Funds a. Share Capital ,000 b. Reserves and Surplus 2 32.80.00 2. Non-Current Liabilities ms Long-term Borrowings 3. Current Liabilities 3 57,50,000 2: Short-term Borrowings b. Trade Payablos 10100,000 ©. Other Current Liabilities 10/00000, Total ["743,00,000 1,43,00,000gr SOMMMOUS (CUES) 18 stTS a assots. + Nome pant ‘and Equipmont m nae ots Gate iqvostimonts % cation 8 we ocoivables v. Yad hg Cash Equivalents Gast é ‘ott jp mecounls 93,00,000 10,90,000 10,09,000 10,00,090 20,900,000 1,43,00,000, (ee Capital i. Stay Share Capital Eat orised Capital : Autres Equily Shares of € 10 each 3,000? subscribed and Paid-up Capital lsste%G9 Equity Shares of € 10 each fully paid 269Siyes and Surplus , Reser Reserve ever’ Redemption Reserve r Crert and Loss Alc ro Term Borrowings Secured Loans 2% Debentures Unsecured Loans Total Tangible Assets Land and Building Plant and Machinery Furniture and Fittings Total oR Solution 3 : [30,00,000 [20,00,000 Liquidator’s Final Statement of Account {25,00,000 5,00,000 2,50,000 [92,50,000 '37,50,000 120,00,000 [57,50,000 153,00,000 130,00,000 10,00,000 \93,00,000 Receipts = Payments To Assets = + Cash in Hand + Trade Debtors = Fixed Assets To Surplus from Securities - Assets Realised Less : Bank Loan To Proceeds of Call ~ Receipts from Call on. Contributories = Equity Shares (WN) 20,000 4,15,000 84,000 55,000 (50,000 5,000 By Liquidation Expenses By Unsecured Creditors By Returns to Contributories ~ Preference Share Capital By Retums to Equity Shareholders ~~ Equity Share Capital 2,56,400 | Working Notes : (1) Amount Required : Preference Share Capital Equity Share fully paid = 3,000 1,75,000 50,000 28,400 2,56,400 z 50,000 4,00,000on Financial Accounting VOVIAE SIM Vy Equity Share partly paid a ie oe Lose Available Gash [20,000 + 1,18,000 + 4,000 + 6,000 ~ (9,000 4 1,75,000)) an ney, (2) Denictency 1,79,000 Total Deficiency = 1.78.00 (2) Thovetare nah oF sono {a 80 76.00) vl bo mado on 9,000 Baran = & ary, 2 and 9 rotum of £28.40 (100.00 ~ 71.60) will be made on 1,000 shares = 7 26,400, Solution 4: Purchase Consideration Particulars Te ; i Ald. _ Equity Shareholders of A Ltd. (72,000 x 15) semen 0.80.06 B Ltda, ity Shareholders of B Ltd. (60,000 x 15) “ Preference Shareholders of B Ltd. (24,000 x 10) 9.00.05 2.40.00, In the Books of AB Ltd. Journal Entries No. Particulars As z 1. | Business Purchase Ale Dr. [22.20,000 To Liquidator of A A/c 10,20,009 To Liquidator of B A/c 11,40,009, 2. | Plant and Machinery Alc Or. [18,00,000 Inventories Alc Dr. | 2,60,000 Debtors A/c Dr. | 3,90,000 Cash / Bank A/c Or. | 1,50,000 Goodwill A/c Dr. | 3,80,000 To 12% Debentures Alc 3,00,000 To Security Premium A/c 1,60,000 To Business Purchase A/c [22.20.00 3. | Liquidator of A A/c Dr. |10,80,000 Liquidator of B A/c Dr. |11,40,000 To Equity Share Capital A/c 13,20,000, To Security Premium A/c 6,60,000 To Preference Share Capital A/c 2.401009 4, | 12% Debentures A/c Dr. | 3,00,000 To 12% Debentures A/c 3;00,000 5. | Creditors Ale Dr. | 10,000 To Debtors A/c 10,000 Note : Students should provide narrations for Journal Entries as an exercise. Balance Sheet of AB Ltd. Particulars Note z |. EQUITY AND LIABILITIES 1. Shareholders’ Funds a. Share Capital 1 [15,560,000 b. Reserves and Surplus 2 | 6,60,000 2. Non-Current Liabilities Long-term Borrowings . 3 | 3,00,000 3. Current Liabilities Trade Payables Totalyr Paper Solutions (UPS) pavers” 487 18 AsseTrront Assets {none plant and Equipment Prof sngible . = tangible 5 |15,00,000 Syren Assets 6 3,80,000 2, Cup ntories we ivables 2,60,000 a. tg Recel Bie ish Equivalents 7 | 380,000 gestae co 8 |_1\50,000 total |26,70,000 Sesto teow = share capital + Bruty Shares of & 10 each fully paid ae ‘fa, Preference Shares of 10 each fully paid eon Total p, poserves and Surplus [15:60,000" ‘ourity Premium 4, tong Term Borrowings | 6:60.00. * 42% Debentures AO 4, Trade Payables a Sundry Creditors noon 5, Tangible Assets eer Plant and Machinery 15,00,000 6. Intangible Assets EEE Goodwill 17, Trade Receivables | 3:80.00. Sundry Debtors ies 3,80,000 8. Cash and Cash Equivalents . |_3,80,000_ Cash and Bank i 1,50,000 Ee OR Solution 4: Purchase Consideration Particulars = Equity Shareholders of Hexza Ltd. 6,00,000 x 11 66,00,000 6,00,000 x 4 In the Books of Penta Ltd, = Journal Entries . No. Particulars z = 1. | Business Purchase A/c Dr. |90,00,000 To Liquidator of Hexza A/c 190,00,000 2. | Building A/c Dr. |24,00,000 Plant and Machinery A/c Dr. 20,00,000 Inventories A/c Dr. |14,00,000 Sundry Debtors A/c Dr. |18,00,000 Cash / Bank A/c Dr. [13,20,000 Goodwill Alc Dr. |14,80,000 To Workmen Profit Sharing Fund A/c 6,00,000 To Trade Creditors A/c 8,00,000 To Business Purchase A/c |90,00,000oo, Financial Accounting - V (TYBAF : SEM-V) Dr. [90,00,000 Uquidator of Hoxza Alc 160,00,000 To Eauity ital Alc [24,00,000 To Sesh Ave 6,00,000 a. beat Promium Ale Deel coo To Dobtors Alc oo, 000 8. [ Goodwil Ale Dr | 24.000 aa To Inventories Ale 5 7 009 8: | Goodwill Alc (Liquidation Expenses) " oo To Cash Ale 10,000 Note : Students should provide narrations for Journal Entries as an exercise. Or. Equity Shareholders Account Cr, Particulars @_| Particulars = es To Equity Shares in Penta Ltd. 166,00,000] By Equity Share Capital 160,00,000 To Cash 24,00,000| By General Reserve H12,00,000 By Profit / Loss A/c 15,20,000 By Realisation 2,80,000 lsoa0000 190,00,000 eo Penta Ltd. Account cr. Particulars & | Particutars fe To Realisation 190,00,000] By Equity Shares in Penta Ltd. _|66,00,000 By Cash 124,00,000 {90,00,000 Dr. Equity Shares in Penta Ltd. Account Cr. Particulars & | Pantculars jExte: To Penta Ltd. [66,00,000| By Equity Shareholders 166,00,000 : [66,00,000 __|66,00,000 Dr. . Realisation Account cr. Particulars = Particulars = To Sundry Assets : By Workmen Profit Sharing Fund] 6,00,000 -_ Building 14,00,000] By Creditors 8,00,000 -" Plant and Machinery 26,00,000| By Penta Ltd. 90,00,000 = Goodwill 16,00,000 To Inventories 14,00,000 To Sundry Debtors 18,00,000 To Cash 13,20,000 To Equity Shareholders 2,80,000 | - : 1,14,00,000 : 7,14,00,000 Solution 5 : (a) THE METHODS UNDER WHICH PI Chapter 3, Para 4.1 44.2 (b) THE CONDITIONS LAID DOWN FOR BUY BACK OF Et ACT, 2018 : Refer Chapter 2, Paras oR Solution 5 : (a) CAPITAL REDUCTION AVC : Re: (©) FIRM UNDERWRITING : Refer Chapter 1, Para 4 (2) (c) LIQUIDATION OF COMPANIES : Refer Chapter 5, Para 1 (d) UNDERWRITERS COMMISSION Refer Chapter 1, Para 2 (©) TYPES OF AMALGAMATION : Refer Chapter 3, Para 1.1 fer Chapter 4, Para 5.3 URCHASE CONSIDERATION ARE CALCULATED : Refer ‘QUITY SHARES UNDER COMPANIES UNDER UNDERWRITING OF SHARES AND DEBENTURES: