Page 77 - DCOM205_ACCOUNTING_FOR_COMPANIES_II

Accounting for Companies – II

notes Solution

calculation of intrinsic value of moon ltd., and sun ltd.
Particulars Moon Ltd. Sun Ltd.
` ` `
Fixed Assets 6,00,000 — — 12,00,000
Less: Depreciation 30,000 5,70,000
Current Assets — 6,75,000 — 4,95,000
Bank Balance — 1,50,000
Total Assets 12,45,000 18,45,000
Less Liabilities:
Secured Loans — 3,75,000
Unsecured Loans 1,50,000 —
Sundry Creditors 2,32,500 3,82,500 2,70,000 6,45,000
Net Assets 8,62,500 12,00,000
No. of Shares = 7,500 = 60,000
Intrinsic value of each share = ` 115 = ` 20
As per amalgamation scheme a shareholder of every 2 shares in the Moon Ltd. will get 10 shares
in the Sun Ltd., and the difference will be paid in cash.
`
Intrinsic value of 2 shares in
Moon Ltd., (2×115) (calculation above) 230
Intrinsic value of 10 shares in Sun Ltd. (10×20) 200
Difference (which will be paid in cash) 30
Thus, a shareholder of every 2 shares in the Moon Ltd. will get 10 shares in Sun Ltd. and cash of
` 30.
Now, 7,500 Shares in Moon Ltd. will get as follows:
Share in Sun Ltd.
Intrinsic value of 37,500 shares in Moon Ltd. @ ` 20 7,50,000

Cash payment for 7,500 shares @ ` 30
for every 2 shares 7,500×30/2 1,12,500
8,62,500
The intrinsic value of a share in Sun Ltd. is ` 20 while it is being issued at ` 10. It means the Sun
Ltd. is issuing the shares at a premium of ` 10.

Balance sheet of sun ltd.
as on 31 march, 2011
st
liabilities ` assets `
share capital: Fixed Assets 17,70,000
Authorised: 1,50,000 shares of Investments –
` 10 each fully Paid 15,00,000

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