Rose Ltd. is taking over entire business of Lily Ltd. on the basis of following balance sheets as at 31st March, 2014: I. EQUITY AND LIABILITIES (1) Shareholders' funds (a) Share capital Equity shares of ₹10 each, fully

CS Executive · Company Accounts & Auditing Practices · PYQS · June 2015
Rose Ltd. is taking over entire business of Lily Ltd. on the basis of following balance sheets as at 31st March, 2014: I. EQUITY AND LIABILITIES (1) Shareholders' funds (a) Share capital Equity shares of ₹10 each, fully paid (Rose Ltd. ₹10,80,000, Lily Ltd. ₹8,06,600) (b) Reserves and surplus General reserve (Rose Ltd. ₹1,72,000, Lily Ltd. ₹1,09,980) Surplus (Rose Ltd. ₹1,32,000, Lily Ltd. ₹87,000) (2) Current liabilities Trade payables (Rose Ltd. ₹88,800, Lily Ltd. ₹1,16,400) TOTAL (Rose Ltd. ₹14,72,800, Lily Ltd. ₹11,19,980) II. ASSETS (1) Non-current Assets (a) Fixed assets (i) Tangible assets (Plant) (Rose Ltd. ₹4,20,000, Lily Ltd. ₹3,20,000) (ii) Intangible assets (Goodwill) (Rose Ltd. ₹1,00,000, Lily Ltd. ₹70,000) (2) Current Assets (a) Inventories (Rose Ltd. ₹1,83,000, Lily Ltd. ₹1,65,000) (b) Trade receivables (Rose Ltd. ₹5,73,800, Lily Ltd. ₹3,45,800) (c) Cash and cash equivalents (Rose Ltd. ₹1,96,000, Lily Ltd. ₹2,19,180) TOTAL (Rose Ltd. ₹14,72,800, Lily Ltd. ₹11,19,980) Further Information : (a) Plant of Rose Ltd. and Lily Ltd. is worth ₹3,90,000 and ₹3,50,000 respectively. (b) Goodwill of Rose Ltd. and Lily Ltd. is to be valued at ₹1,50,000 and ₹1,00,000 respectively. (c) Stock of Lily Ltd. is over-valued by 10% above its cost. (d) Rose Ltd. is taking over Lily Ltd. by issue of shares at the intrinsic value. (e) All the assets and liabilities of Lily Ltd. were incorporated in the books of Rose Ltd. at fair value and assets and liabilities of Rose Ltd. have been carried at carrying values only. You are required to prepare post absorption balance sheet of Rose Ltd.

Answer & Explanation:

Balance Sheet of Rose Ltd. as on 31st March 2014 Particulars Note No. Amount (₹) I EQUITIES AND LIABILITIES 1 Shareholders' funds (a) Share Capital (1) 18,86,600 (b) Reserve and surplus (2) 5,45,980 2 Non-current liabilities - 3 Current Liabilities (3) 2,05,200 TOTAL 26,37,780 II ASSETS 1 Non-current Assets (a) Fixed Assets Tangible Assets (3) 7,70,000 Intangible Assets (4) 2,00,000 (b) Current Assets Inventories 3,33,000 Trade Receivable 9,19,600 Cash and Cash Equivalents 4,15,180 TOTAL 26,37,780 Notes to Accounts (1) Share Capital ₹ Authorised, Issued subscribed and paid up capital 1,88,660 Equity shares of ₹10 each, fully paid up 18,86,600 (2) Reserves and Surplus ₹ General Reserves (Rose Ltd) 1,72,000 Surplus (Rose Ltd) 1,32,000 Securities Premium Reserves (3 x 80,660) 2,41,980 5,45,980 (3) Tangible Assets ₹ Plant (₹4,20,000 + ₹3,50,000) 7,70,000 (4) Intangible Assets ₹ Goodwill (₹1,00,000 + ₹1,00,000) 2,00,000 Calculation of shares on the basis of intrinsic value Particulars Rose Ltd. ₹ Lily Ltd. ₹ Goodwill 1,50,000 1,00,000 Plant 3,90,000 3,50,000 Debtors 5,73,800 3,45,800 Stock 1,83,000 1,50,000 Cash at bank 1,96,000 2,19,180 Total 14,92,800 11,64,980 Less: Sundry creditors 88,800 1,16,400 Net Assets 14,04,000 10,48,580 Number of shares 1,08,000 80,660 Intrinsic Value ₹13 ₹13 Hence Rose Ltd. will issue 80,660 shares of ₹10 each @ ₹13 to shareholders of Lily Ltd.

Topics: Amalgamation

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