ABC Ltd. is having a share capital of ₹35 Crore and XYZ Ltd. is having a share capital of ₹45 Crore. DNF Ltd. was formed to take over the business of ABC Ltd. and XYZ Ltd. at a purchase consideration of ₹45 Crore and ₹38

Since the purchase consideration is payable in shares of the transferee company and all the assets and liabilities are taken over at their carrying amounts, the amalgamation is in the nature of merger, i.e., pooling of interests' method. To compute the "Goodwill" or "Capital Reserve" for DNF Ltd., we need to compare the purchase consideration (the amount paid for acquiring the business) with the net assets (share capital) of the companies acquired, which in this case are ABC Ltd. and XYZ Ltd. 1. For ABC Ltd. Acquisition: Purchase consideration = ₹45 crores Share capital of ABC Ltd. = ₹35 crores Net Assets of ABC Ltd. = ₹35 crore (since assets and liabilities are taken over at their carrying amounts) Goodwill or Capital Reserves for ABC Ltd. acquisition = Purchase consideration less Net Assets i.e. ₹45 cr - ₹35 cr = ₹10 cr Since the purchase consideration is higher than Net Assets, Goodwill of ₹10 cr is created for ABC Limited. 2. XYZ Ltd Acquisition Purchase consideration for XYZ Ltd. = ₹38 cr Share capital of XYZ Ltd. = ₹45 cr Net Assets of XYZ Ltd. = ₹45 cr (again, assets and liabilities are taken over at their carrying amounts) Goodwill of Capital Reserves for XYZ Ltd = ₹38cr - ₹45 cr = -₹7 cr Since the purchase consideration is lower than the net assets, a Capital Reserve of ₹7 cr is to be created for XYZ Ltd. 3. Total Goodwill or Capital Reserves for DNF Ltd. Goodwill from ABC Ltd. = ₹10 cr Capital Reserve from XYZ Ltd. = ₹7 cr Thus, the net Goodwill or Capital Reserve for DNF Ltd. = ₹10 cr - ₹7 cr = ₹3 cr (Goodwill) Conclusion: Goodwill of ₹3 cr will be created for DNF Ltd. after taking over the businesses of ABC Ltd. and XYZ Ltd.