Here is a compilation of top five accounting problems on amalgamation, absorption and reconstruction with its relevant solutions.
The Balance Sheet of Z Ltd. and A ltd. as on September 30, 2006 are given below:
A Ltd. propose to take over Z Ltd. on the following terms:
(1) A Ltd. will issue a sufficient number of its shares @ Rs. II each and pay Re. 0.50 cash per share held by members of Z Ltd.
(2) 9% debentures of Z Ltd. are to be paid at 8% premium by issue of a sufficient number of 10% debentures of A Ltd. @ Rs. 90.
Assuming that the take-over has been complete, show Journal entries and ledger accounts in the books of the Companies and draft the Balance Sheet in the books of A Ltd.
The following are the summarized Balance Sheet of X Ltd. and Y Ltd. as on 31st March, 2006:
A new company, XY Ltd., is formed to a acquire the entire business of X Ltd. and Y Ltd. For this purpose, sundry assets of X Ltd. were valued at Rs. 30,000 and sundry assets of Y Ltd. at Rs. 20,000. The consideration is to be discharged in shares of the new company. Close the books of X Ltd. and Y Ltd.
Also give journal entries in the books of XY Ltd. for the purchase of business.
Illustration 4 (Calculation of intrinsic values):
The following are the balance sheets of Pratiksha Ltd. and Nidhi Ltd. as on 1st March, 2006:
Pratiksha Ltd. agrees to take over Nidhi Ltd. Find out the ratio of exchange of shares on the basis of book values.
Illustration 5 (Reconstruction):
Moon Company Ltd. decided to reconstruct and consequently went into voluntary liquidation.
The Balance Sheet of the Company on 31st March 2006 was as follows:
A new company called New Moon Co. Ltd. was formed to acquire the following assets of Moon Co. at the values stated: Buildings Rs. 20,000, Plant Rs. 12,000, Furniture Rs. 2,000 and Stock Rs. 6,000.
The purchase consideration was to be satisfied by the allotment of 20,000 10% preference shares of Rs. 15 each, credited with Rs. 10 paid-up.
The preference shareholders in the old company accepted the preference shares in the new company in full satisfaction of the amount due to them.
The book debts realised Rs. 12,275 and creditors were discharged by the payment of Rs. 8,134. Bank Loan and Bills Payable were paid in full. Cost of winding up came to Rs. 1,071.
Show the ledger accounts in the books of the old company and journal entries in the books of the new company. Also give the Balance Sheet of the new company assuming that a call of Rs. 5 per share was made on equity shares and paid in full, and preliminary expenses amounted to Rs. 1,000.