Prob: 11 The following is the Balance Sheet of DT Ltd. as on 30th June, 2002.

Liabilities Rs. Assets Rs.

2,500, 8% Cumulative Goodwill 25,000
Preference Shares of Rs.100 each. 2,50,000 Fixed Assets 12,85,000
12,000 Equity shares of Rs.100 12,00,00 Stock 3,03,000
each 0 Debtors 2,50,000
9% Debentures 5,00,000 Banks Balance 7,000
Interest Accrued thereon 45,000 Preliminary Exps. 25,000
Creditors 5,00,000 Profit and Loss A/c 6,00,000

24,95,00 24,95,000
0
Note: Preference dividend was in arrears Rs.40,000.
The following scheme of Reconstruction is duly sanctioned:
1) A new company TD Ltd. is formed with Rs.15,00,000 as Authorised share capital divided into 1,50,000 Equity
shares of Rs.10 each.
2) The company will acquire DT Ltd. on the following conditions:
Old Companies Debentures will be paid by similar debentures in the new company, for the arrears of interest,
equivalent amount of equity shares will be issued.
The creditors will be paid for every Rs.100 for their claim, Rs. Sixteen cash and ten equity shares in the new
company.
Preference shareholders are paid ten equity shares in the new company for each shares held by them in the old
company. They will not press for their dividend arrears.
Equity shareholders will be given ten equity shares in the new company for three shares held in the old company.
Expenses of Rs.20,000 will be borne by the new company, as a part of purchase consideration.
3) The new company will take the current assets at their book value, except stock which will be reduced by
Rs.15,000. Intangible assets are not to appear in the new balance sheet, appropriate adjustment being made in the
values of fixed assets.
4) Remaining equity shares in the new company are issued to the public and are fully paid.

You are required to prepare:

A) In the books of DT Ltd.: 1) Realization Account 2) DT Equity shareholders A/c.
B) In the books of TD Ltd.: 1) Journal Entries 2) Balance Sheet.

Prob: 12 The Balance Sheet of Useless Limited as on 31st Dec. 2002 was as under:
Liabilities Rs. Assets Rs.
2,500, Equity shares of Rs.10 Fixed Assets:
each fully paid 2,50,000 Land and Building
Sundry Creditors 1,10,000 1,30,000 2,05,000
Preferential Creditors 15,000 Plant& Machinery 75,000
Current Assets :
Stock 50,000
Debtors 57,000 1,08,000
Cash 1,000 5,500
Preliminary Exps. 56,500
3,75,000 Profit and Loss A/c 3,75,000

The shareholder of the company resolved to take the company into voluntary liquidation and to form M/s.
Useful Limited, a new company with an authorized share capital of Rs. 10 lakhs to take over the business on
the following terms:
Preferential creditors of Rs.15,000 are to be paid in full.
Unsecured creditors to received 50 paise in a rupee in full settlement of their claims or par value of their claim 7%
debentures of useful limited.
2,500 Equity shares of Rs.100 each, Rs.60 paid to be distributed prorate to existing shareholders.
Five shareholders holding 200 shares dissented and their interest was purchased at Rs.50 per share by an assenting
shareholder to whom the shares were transferred.
Half the unsecured creditors opted to be paid in cash, and the funds for this purpose were procured by calling up the
balance of Rs.40 per share. Cost of liquidation amounting to Rs.3,500 paid by Useful Ltd. as part of purchase
consideration. Journalise the above transactions in the books of Useful Limited and prepare the Balance Sheet
thereafter assuming that plant and Machinery, stock and Debtors were acquired at their book values and land and
Building is to be taken at Rs. 68,000.

Prob: 13 Following is the Balance Sheet of Small Ltd. as on 31.12.1994:

Liabilities Rs. Assets Rs.
Equity Shares of Rs.10 each, Rs.8 paid 4,00,000 Goodwill 1,60,000
up 2,00,000 Land & Building 1,40,000
12% Preference Shares of Rs.100 each 12,000 Plant & Machinery 2,60,000
Gratuity Fund 80,000 Stock 1,40,000
General Reserve 20,000 Sundry Debtors 1,80,000
Insurance Fund 16,000 Less: R.D.D. 8,000 1,72,000
Workmen Compensation Fund 72,000 Bank Balance 1,28,000
Sundry Creditors 56,000 Preliminary Expenses 16,000
Workmen Profit Sharing Fund 1,60,000
Profit & Loss Account 10,16,000 10,16,000

Big Ltd. decided to absorb business of Small Ltd. at book values except Land and Building to be valued at
Rs.2,40,000. Plant and Machinery at Rs.2,00,000.
The assumption of trade liabilities at book value except Workmen Profit Sharing Fund was to be paid at 10%
premium by Big Ltd.
Liquidation expenses amounted to Rs.600 to be paid by Big Ltd.
Purchases consideration was to be discharged as under:
The issue of 10 Equity Shares of Rs.20 each for every 2 Preference Shares in Small Ltd. The issue of 1 Equity
Share of Rs.20 each for every 5 Equity Shares in Small Ltd. Payment of Rs.4 per Equity Share in Small Ltd
You are required to calculate purchase consideration & write journal entries in the books of Big Ltd and open
necessary ledger accounts in the books of Small Ltd.
Prob: 14 Following are the Balance Sheets of X Ltd. and Y Ltd.
Balance Sheets as on 31 st March, 2006
Liabilities X Ltd. Y Ltd. Assets X Ltd. Y Ltd.
Rs. Rs. Rs. Rs.
Equity Share Capital of Rs.10 each 45,00,000 Building 25,00,00 15,50,000
Export Profit Reserves 75,00,000 3,00,000 Machinery 0 17,00,000
Profit & Loss A/c 6,00,000 Stock 32,50,00 18,00,000
General Reserve 3,00,000 4,50,000 Debtors 0 10,00,000
12% Debentures of Rs.100 each 7,00,000 3,00,000 Bank 25,50,00 5,50,000
Sundry Creditors 2,00,000 5,50,000 Preliminary 0
Expenses 9,00,000 1,00,000
5,00,000 7,00,000
7,00,000
-

99,00,000 67,00,000 99,00,00 67,00,000

0
Z Ltd. was formed to acquire all assets and liabilities of X Ltd. and Y Ltd. on the following terms:
1) Z Ltd. to have an authorized share capital of Rs.5 crores divided into 5,00,000 equity shares of Rs.100 each
2) The business of both companies were taken over for a total price of Rs.1.2 crores to be discharged by Z Ltd. by
issue of equity shares of Rs.100 each at a premium of 20%.
3) The shareholders of X Ltd. & Y Ltd. to get shares in Z Ltd. in the ratio of net assets values of their respective
shares.
4) The Debenture of both the companies to be converted into equivalent number of 14% Debenture of Rs.100 each
in Z Ltd. at a discount of 10%
5) All the tangible assets of both the companies are taken over by Z Ltd. at book values except the following:
ASSETS X Ltd. Y Ltd.
Building 28, 00,000 18, 20,000
Machinery 31, 50,000 16, 00,000
6) Sundry creditors of X Ltd. & Y Ltd. are taken over at Rs.6,50,000 & Rs.5,00,000 respectively.
7) Statutory reserves are to be maintained for 3 years more.
You are required to:
i) Compute purchase consideration of X Ltd. & Y Ltd.
ii) Pass journal entries in the books of Z Ltd.
iii) Prepare balance sheet after amalgamation. Apply Purchase method. OCT 2007

Prob: 15 BK Ltd. is formed to take over Bunty Ltd. & Kuber Ltd. Their Balance Sheets on the date of
amalgamation are as below:
Balance Sheets as on 31st March, 2006
Liabilities Bunty Kuber Assets Bunty Kuber
Ltd. Ltd. Rs. Ltd. Rs. Ltd. Rs.
Rs.
Share Capital of Rs.10each Goodwill ------ 25,000
Equity Share 2,40,000 1,60,000 Building 1,50,000 1,40,000
11% Preference Shares 1,50,000 1,00,000 Machinery 80,000 60,000
General Reserve 45,000 40,000 Furniture 10,000 5,000
Profit & Loss A/c 30,000 21,000 Investments 1,40,000 80,000
9% Debentures 1,00,000 1,00,000 Debtors 1,65,000 80,000
Sundry Creditors 60,000 40,000 Stock 75,000 90,000
Other Liabilities 40,000 24,000 Cash & Bank 13,000 8,000
Other Current Assets 20,000 10,000
Preliminary Expenses 12,000 7,000
6,65,000 4,85,000 4,85,000
6,65,000
BK Ltd. issued 10,000 equity shares of Rs.10 each to the public at a premium of 10%. Bunty Ltd. & Kuber Ltd.
were taken over by BK Ltd. on the following terms.
Re: Bunty Ltd.
1) Equity shareholders are to be issued 7 equity shares of Rs.10 at par in BK Ltd. & are to be paid Rs.5 in cash for
surrender of each 6 shares.
2) Preference shareholders are to be paid at 10% premium by 12.5% preference shares in BK Ltd. issued at par. 3)
All assets and liabilities are valued at book value except Machinery which is valued at 10% below book value and
Debtors are worth Rs.1,60,000.
4) Liquidation expenses of Rs.12,500 are to be borne by BK Ltd.
5) Discharge the debentures of Bunty Ltd. at a discount of 10% by the issue of 13% Debentures of Rs.100 each in
BK Ltd.
Re: Kuber Ltd.
1) Cash Rs.3,000 is to be retained for liquidation expenses.
2) Debtors & Investments are valued at 90% of cost
3) Machinery & Stock are valued at 10% above cost & other assets & liabilities are valued at book value except
Fictitious Assets.
4) Preference shareholders are to be paid at 10% premium by 12.5% preference shares in BK Ltd. issued at par.
5) Balance of Purchase consideration is payable in equity shares at par.
6) Discharge the debentures of Kuber LTd. at par by the issue of 13% Debentures of Rs.100 each in BK Ltd. The
face value of equity shares & Preference shares in BK Ltd. is Rs.10 each.
Show the necessary Ledger Accounts in the books of “Bunty Ltd.” & “Kuber Ltd.” Also calculate purchase
considerations. APRIL 2007

Prob: 16 Shubha Ltd. absorbed Sushma Ltd. with effect from 1st April, 2005 when their Balance Sheets as on 31-
03-2005 were as under:-

Liabilities Shubha Sushma Assets Shubha Sushma

Ltd Ltd Ltd Ltd
Rs Rs Rs Rs
Share Capital Fixed Assets:
11% Preference Shares of Rs 100 Land& Building 2,20,000 1,40,000
each 2,00,000 2,00,000 Plant & Machinery 4,20,000 2,60,000
Equity Shares of Rs 100 each 5,00,000 2,00,000 Current Assets
Reserves & Surplus Loans and
Revaluation Reserves 20,000 -- Advances:
Export Profit Reserves 40,000 20,000 Stock 2,90,000 1,60,000
General Reserves 2,00,000 60,000 Sundry Debtors 1,20,000 1,40,000
Secured Loans Bills Receivables 1,30,000 90,000
10% Debentures of Rs 100 -- 1,20,000 Bank 20,000 10,000
15% Debentures of Rs 100 80,000 --
Current Liabilities
Sundry Creditors 1,60,000 2,00,000

12,00,000 8,00,000 12,00,000 8,00,000

Terms of Amalgamation:-
(1) Shubha Ltd. will issue eight equity shares for five equity shares in Sushma Ltd.
(2) 11% Preference Shareholders of Sushma Ltd. will be issued equal number of equity shares in Shubha Ltd.
(3) 10% Debentures of Sushma Ltd are discharged by Shubha Ltd by issuing equal number of its 15% Debentures
of Rs100 each.
(4) All the Assets and Liabilities of Sushma Ltd are taken over at book values except the following:-

(i) Fixed Assets at 10% more than book values.

(ii) Stock at Rs 1,44,000.

(iii) Debtors at Rs 1,25,000

(iv) Bills Receivables at Rs 81,000.

You are required:-

(1) Compute Purchase consideration
(2) Prepare Ledger Accounts to close the books of Accounts of Sushma Ltd.
(3) Pass Journal Entries and Prepare Balance Sheet after Amalgamation in the books of Shubha Ltd. applying
Purchase Method
Prob: 17 Following are the Balance Sheets of Rohan Ltd and Sohan Ltd as on 31-3-2005:
Liabilities Rohan Sohan Assets Rohan Sohan
Rs Rs Rs Rs
Share Capital Fixed Assets:
9% Preference Shares of Goodwill 1,50,000 1,50,000
Rs 100 each 6,00,000 9,00,000 Land& Building 6,00,000 7,50,000
Equity Shares of Plant & Machinery 4,50,000 6,00,000
Rs 100 each 9,00,000 15,00,000 Computer 3,00,000 4,50,000
Reserves and Surplus: Investments 1,50,000 1,50,000
General Reserves 75,000 90,000 Current Assets
Revaluation Reserves 45,000 60,000 Loans and Advances:
Export Profit reserves 30,000 45,000 Stock 3,00,000 4,50,000
Profit and Loss Account 15,000 30,000 Sundry Debtors 1,50,000 3,00,000
Secured Loans Bills Receivables 75,000 1,50,000
12% Debentures of Bank 1,95,000 3,75,000
Rs 100 each 3,00,000 4,50,000
Unsecured Loans 1,50,000 75,000
Current Liabilities
and Provisions: 2,25,000 1,80,000
Sundry Creditors 30,000 45,000
Bills payables
23,70,000 33,75,000 23,70,000 33,75,000
Mohan Ltd. was formed to take over the business of Rohan Ltd. and Sohan Ltd. with an authorized share capital of
Rs 30,00,000 consisting of 20,000, 13% Preference Shares of 100 each and 1,00,000 Equity Share of Rs 10 each.
Terms of Amalgamation:-
(1) 9% Preference shareholders of both the companies are issued equal number of 13% Preference Share of Mohan
Ltd. at a price of Rs 125 each.
(2) Mohan Ltd will issue four equity shares for three equity shares of Rohan Ltd and four equity shares for five
equity shares of Sohan Ltd .The shares are to be issued at Rs 35 each
(3) 12% Debentures holders of both the companies are discharged by Mohan Ltd. by issuing such number of its
15% Debentures of each Rs 100 each so as to maintain the same amount of interest.
(4) Mohan Ltd. agrees to take over all assets and all liabilities at book values.
(a) Tangible fixed assets at 10% more than book values.
(b) Investments and Sundry Debtors at 90% of their book values.
(5) Export Profit Reserves are to be maintained for three more years.
You are required to:-
(1) Compute purchase consideration of Rohan Ltd. and Sohan Ltd.
(2) Pass Journal entries and Prepare Balance Sheet after Amalgamation in the books of Mohan Ltd. applying
Purchase Method APRIL 2006

Prob: 18 The following are the balance Sheets of A Ltd. & B Ltd. as on 31 st March, 2004:
Liabilities A Ltd. B Ltd. Assets A Ltd. B Ltd.
Rs. Rs. Rs. Rs.
Equity Share Capital (Rs.10 4,50,000 3,00,000 Land &Building 2,60,000 1,45,000
each) Plant & Machinery 3,15,000 1,80,000
13% Preference Share Capital 2,70,000 1,70,000 Furniture 59,500 35,000
(Rs.100 each) 50,000 25,000 Investments 1,23,000 97,000
General Reserve 30,000 20,000 Stock 85,000 88,000
Export Profit Reserves ----- 10,000 Debtors 77,500 67,000
Investment Allowance Reserves 75,000 50,000 Cash & Bank 50,000 38,000
Profit & Loss A/c 50,000 35,000
14% Debentures(Rs.100 each) 45,000 40,000
Current Liabilities 9,70,000 6,50,000 9,70,000 6,50,000
A Ltd. takes over B Ltd on 1 April, 2004.
st

A Ltd discharges the purchase consideration as below:

1) Issued 35,000 Equity shares of Rs.10 each at par to the equity shareholders of B Ltd.
2) Issued 15% Preference Share of Rs.100 each to discharges the Preference Shareholders of B Ltd at 10%
premium.
The Debentures of B Ltd. will be converted into equivalent number of Debentures of A Ltd.
The Statutory Reserves of B Ltd (Export Profit Reserves & Investment Allowance Reserves) is to be maintained for
2 more years.
You are required to show the Balance Sheet of A Ltd assuming that:
a) The amalgamation is in nature of Merger
b) The amalgamation is in nature of Purchase. OCT 2005

Prob: 19 The following are the balance Sheets as on 31-12-2004 of Nisha Ltd. & Usha Ltd:
Liabilities Nisha Ltd. Usha Ltd. Assets Nisha Ltd. Usha Ltd.
Rs. Rs. Rs. Rs.
Equity Share Capital Land &Building 70,000 -----
(Rs.100 per share ) 2,00,000 1,20,000 Plant & Machinery 2,20,000 1,00,000
15% Debentures 40,000 ---- Stock 35,000 18,000
Reserve Fund 76,000 5,000 Debtors 25,000 16,000
Employee’s provident 6,000 ----- Bank 6,000 2,000
fund 30,000 16,000 MISC. Exp. not W/o:
Sundry Creditors 4,000 ---- Advertisement Exp. --- 5,000
Profit & Loss A/c 3,56,000 1,41,000 3,56,000 1,41,000

The two companies agree to amalgamate and form a new company M/s. Ujala Ltd. which takes over the assets and
liabilities of both the companies.
The authorized capital of Ujala Ltd is Rs.20,00,000 consisting of 2,00,000 Equity shares of RS.10 each.
The assets of Nisha Ltd are taken over at 90% of the book value with the exception of land and building which are
accepted at book value.
Both the companies are to receive 10% of the net valuation of their respective business as goodwill.
The purchase consideration is to be satisfied by Ujala Ltd in its fully paid shares at 10% premium. In return of
Debentures of Nisha Ltd. Debentures of the same amount and denomination are to be issued by Ujala Ltd.
Close the books of Nisha Ltd & Usha Ltd and show the opening Balance Sheet of Ujala Ltd under Purchase
Method APRIL
2005

Prob: 20 The following is the Balance Sheet of Vikrant Ltd:

Liabilities Rs. Assets Rs.
Issued & Paid up: Intangible Assets 50,000
Equity Share Capital 5,00,00 Fixed Assets 4,20,000
Statutory Reserve 0 Current Assets 1,10,000
(to be maintained for 3 more 10,000 Profit & Loss A/c 80,000
years)
Debentures 1,00,00
Creditors 0
50,000
6,60,00 6,60,000
0
Virat Ltd agreed to absorb Vikrant Ltd on the following terms:
1) Virat Ltd agreed to take over all the assets & liabilities
2) The assets of Vikrant Ltd are to be considered to be worth Rs.5,00,000
3) The purchase price is to be paid one-quarter in cash and the balance in shares which are issued at the market
price.
4) Liquidation expenses amounted to Rs.300 agreed to be paid by Vikrant Ltd.
5) Market value of shares of rs.10 each of Virat Ltd is Rs.12 per share
6) Debentures of Vikrant Ltd were paid
7) The amalgamation is in nature of Purchase.
You are required to show: a) Purchase consideration
b) Ledger A/c in the books of Vikrant Ltd
c) Opening entries in the books of Virat Ltd.