a. Internal Reconstruction

b.  Absorption.

B Ltd absorbs the business of A Ltd and agrees to discharge the purchase consideration as under:

a)      cash payment of Rs 2 per share

b)     issue of sufficient number of equity shares of Rs 10 each at a premium of 100% for the balance

Calculate the purchase consideration and state the number of equity shares issued assuming that fixed assets are valued at Rs 2,75,000 and current assets at Rs 45,000.

Rs 1, 00, 00,000.   Calculate the amount to be credited to the sinking fund during the year ending 31^st March 2014 by way of interest resulting from the above mentioned transactions?

On the same day Bharat Ltd declared dividend at 20% and as agreed between both the companies fixed assets were to be depreciated at 10% and investment to be taken at market value of Rs 30, 00,000. Calculate goodwill or capital reserve to be recorded in consolidated financial statements.

Additional information:

a)      Preference shareholders of Blue Ltd and Star Ltd have received same number of 15% preference shares of Rs 100 each in the new company.

b)     12% Debentures of Blue Ltd and Star Ltd are discharged by the new company by issuing adequate number of 16% debentures of Rs 100 each to ensure that they continue to receive the same amount of interest.

c)      Yellow Star ltd has issued 1.5 equity shares for each equity share of Blue Ltd and 1 equity share for each equity share of Star Ltd.

The face value of shares issued by Yellow Star is Rs 100 each.

You are required to prepare the Balance Sheet of Yellow Star Ltd as on 1/4/2012 after the amalgamation has been carried out using the ‘Pooling of interest method’.

In addition there was a contingent liability of Rs. 30,000 on account of a legal dispute. Savior Ltd. was incorporated on 1^st April, 2014 to take over the business of Shutdown Ltd. It agreed to take over the assets as follows:

• Buildings at 90% book value.
• Plant and machinery at 60% of book value.
• Inventories at 30% of book value.
• Sundry debtors at 60% of book value.

The purchase consideration was satisfied by issuing equal number of equity and preference shares in Savior Ltd., both having a face value of Rs. 10 per share. The contingent liability did materialize but for Rs. 20,000 only. It was taken over by Savior Ltd. and settles by issue of equity shares. The preference shareholders of Shutdown Ltd. accepted the preference shares received from Savior Ltd. in full settlement.

Prepare closing ledger accounts in the books of Shutdown Ltd, opening journal entries in the books of Savior Ltd.

Following scheme of reconstruction has been passed and approved by the court on 1.4.2015:

(i) The equity shares are to be reduced to shares of Rs. 6 each fully paid 8% Preference shares are to be reduced to 10% preference shares of Rs. 80 each fully paid. Number of shares to remain the same.

(ii) 9% debentures are to be reduced to 10% debentures of Rs. 80 each fully paid.

(iii) The amount so available will be used to write off loss and goodwill first, and there after fixed assets to the extent possible.

You are required to give journal entries and Balance Sheet in the books of Brand Ltd.

It was decided to redeem both the classes of preference shares on 30^th June, at a premium of 5%. In May, 2015, the company issued for cash so many equity shares of Rs. 10 each as were necessary to provide for redemption of both classes of preference shares which could not otherwise be redeemed. The issue was fully subscribed and all the amounts were received.

You are required to pass journal entries in the books of the company and draw up the amended balance sheet.

(b) A Ltd. acquired 80% share in B Ltd. for Rs. 15,00,000. The net assets of B Ltd. on that day are Rs. 22,00,000. During the year, A Ltd. sold the investments for Rs. 30,00,000 and the net assets of B Ltd. on the date of disposal was Rs. 35,00,000. Calculate profit or loss on disposal of the investment to be recognized in consolidated financial statements. Also find out if there will be a profit or loss on disposal if the cost of investment is Rs. 25,00,000.    (12 Marks)

SECTION – D

On 1^st April 2012, Sun Ltd was formed by amalgamating in the nature of purchase Star Ltd and Moon Ltd on the following terms:

(a)   Sun Ltd is to take over 8% Debentures and to convert these into 60- 10% debentures of Rs 1000 each.

(b) The Debenture holders of Moon Ltd insisted that they should be allotted equity shares in Sun Ltd accordingly they are allotted 7500 shares of Rs10 each @ Rs 12 per share.

(c) Preference share holders of star Ltd insisted for allotment of 900-11% redeemable preference shares of Rs 100 each.                                                                                                          (d) The equity share holders of Star Ltd are to be allotted 10 equity shares at par for 7 equity shares held by them. The shares of Sun Ltd are Rs 10 each.                                                 (e) The assets of star Ltd are taken over at book value except plant is taken over at Rs 2,90,000.                                                                                                                                           (f) The assets of Moon Ltd are valued as under:                                                                Goodwill Rs 30,000, Land – Rs 1,50,00; Building –Rs 45,000; Plant –Rs 1,20,000; Other fixed Assets- Rs 15,000; All current Assets –Rs 1,50,000; All current Liabilities’ –Rs 1,50,000 The balance of consideration is to be paid by allotment of equity shares at par to Moon Ltd. You are required to show:                                                                                                            (i) Purchase consideration to be paid to Star Ltd and Moon Ltd.                                          (ii) Balance sheet of Sun Ltd.