Page 76 - DCOM205_ACCOUNTING_FOR_COMPANIES_II

Unit 4: Amalgamation: Accounting Treatment

Working Note: notes

`
10% Debentures of Ashutosh Ltd. 3,50,000
+ 20% Premium on Redemption 70,000
Total amount payable on redemption 4,20,000
Redemption will be by the issue of 8% Debentures in Kamal Jeet Ltd. at ` 96.
Thus, No. of 8% Debentures = ` 4,20,000/96=4,375

Face values of 4,375 debentures = ` 4,37,500
Amount of Discount @ 4% = ` 17,500
Net amount payable 4, 20,000
Illustration 7 (Intrinsic Value Method)
st
The Balance Sheets of Moon Limited and Sun Limited as on 31 March, 2011 are as follows:
liabilities moon ltd. sun ltd. assets moon ltd. sun ltd.
` ` ` `
Share Capital Goodwill 60,000 –
Authorised Capital Fixed Assets 6,00,000 12,00,000
(Shares of ` 100 each
and shares of ` 10 each) 7,50,000 15,00,000 Current Assets 6,75,000 4,95,000
Issued Capital Bank – 1,50,000
Fully Paid 7,50,000 6,00,000
Capital Reserve 1,50,000 –

General Reserve 52,500 6,00,000
Secured Loans – 3,75,000
Unsecured Loans 1,50,000 –
Sundry Creditors 2,32,500 2,70,000
13,35,000 18,45,000 13, 35,000 18, 45,000
It was proposed that Moon Ltd. should be taken over by Sun Ltd. The following arrangement
was proposed by both the companies:
(a) Goodwill of Moon Ltd. is considered valueless.

(b) Arrears of depreciation in Moon Ltd. amounted to ` 30,000.
(c) The holder of every 2 shares in Moon Ltd., was to receive:
(i) As fully paid at par, 10 shares in Sun Ltd., and
(ii) As much cash as is necessary to adjust the right of shareholders of both the companies
in accordance with the intrinsic value of the shares as per their Balance Sheets subject
to necessary adjustments with regard to goodwill and depreciation in Moon Ltd.’s
Balance Sheet.
You are required to:
(a) Determine the composite of purchase consideration and
(b) Show the Balance Sheet after absorption.

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