X Ltd. having a share capital of ` 20 lakhs and Y Ltd.having a share capital of `30 lakhs. Z Ltd. wasformed to take over the business of X Ltd and Y…

X Ltd. having a share capital of ` 20 lakhs and Y Ltd.having a share capital of `30 lakhs. Z Ltd. wasformed to take over the business of X Ltd and Y Ltd. at a purchase consideration of ` 25 lakhs and ` 28lakhs, payable in shares of Z Ltd. The assets and liabilities were taken at their carrying amounts.

Solution

Since the purchase consideration is payable in shares of the transferee company and all the assetsand liabilities are taken over at their carrying amounts, the amalgamation is in the nature of merger,i.e. pooling of interests method.

For X Ltd. Purchase consideration = ` 25 lakhs

Less: Share capital of X Ltd = ` 20 lakhs

Excess of purchase consideration = `5 lakhs. This shall have to be adjusted against the Reservesof Z Ltd

For Y Ltd. Purchase Consideration = `28 lakhs

Less: Share Capital of Y Ltd = `30 lakhs

since purchase consideration is less than share capital of the transferor company, `2 lakhs shall betreated as Capital Reserve.

Note: In case of amalgamation in the nature of purchase, goodwill shall have to be shown in theBalance Sheet of the Transferee company. Such goodwill shall have to be written off over a maximum period of 5 years

Order the answer to view it

Place this order or similar order and get an amazing discount. USE Discount code “GET20” for 20% discount

 

Posted in Uncategorized