Choti Ltd. is absorbed by Moti Ltd. The following are the Balance Sheets of both the companies as on 31st March, 2018: Choti Ltd. (₹) Moti Ltd. (₹) I. EQUITY & LIABILITIES (1) Shareholders' Funds (a) Share Capital :

CS Executive · Company Accounts & Auditing Practices · PYQS · June 2018
Choti Ltd. is absorbed by Moti Ltd. The following are the Balance Sheets of both the companies as on 31st March, 2018: Choti Ltd. (₹) Moti Ltd. (₹) I. EQUITY & LIABILITIES (1) Shareholders' Funds (a) Share Capital : Equity Share Capital of ₹100 each, fully paid up 5,00,000 50,00,000 (b) Reserves & Surplus : General Reserve 9,50,000 19,00,000 Statement of Profit & Loss 2,00,000 5,00,000 Total Reserves & Surplus 11,50,000 24,00,000 (2) Current Liabilities : Sundry Creditors 2,00,000 1,80,000 TOTAL 18,50,000 75,80,000 II. ASSETS (1) Non-Current Assets: Tangible Assets 10,00,000 50,00,000 (2) Current Assets Current Assets 8,50,000 25,80,000 TOTAL 18,50,000 75,80,000 It was mutually decided by companies that holder of every three shares of Choti Ltd. will be given six shares of Moti Ltd. plus as much cash as is necessary to adjust the rights of shareholders of both the companies, in accordance with the intrinsic value of shares as per respective balance sheets. Calculate amount of purchase consideration and show, how it will be discharged.

Answer & Explanation:

Intrinsic Value of Shares of Both the Companies Particulars Choti Ltd. Moti Ltd. Non-Current Assets 10,00,000 50,00,000 Current Assets 8,50,000 25,80,000 18,50,000 75,80,000 Less: Liabilities Sundry Creditors 2,00,000 1,80,000 Net Assets 16,50,000 74,00,000 No. of Shares 5000 50000 Intrinsic Value 330 148 Amount to be paid in Cash Value of 3 Shares of Choti Ltd. (330 * 3) = 990 Value of 6 Shares of Moti Ltd. (148 * 6) = 888 Amount to be paid in Cash for every three shares of Choti Ltd. = 102 Purchase Consideration (Net Payment Method) Shares of Moti Ltd. (5000 * 6 / 3) * 148 i.e. 10000 * 148 = ₹14,80,000 (since shares cannot be in fraction, fraction of share will be paid in cash) Cash (5000 / 3 * 102) = ₹1,70,000 Total I + II = ₹16,50,000 Discharge of Purchase Consideration 10000 shares of Moti Ltd. issued at ₹148 per shares = ₹14,80,000 In Cash = ₹1,70,000 Total = ₹16,50,000

Topics: Company Accounts

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