Astha Ltd. is absorbed by Nistha Ltd.; the consideration being the takeover of liabilities, the payment of cost of absorption not exceeding - 10,000…

CA Intermediate · Advanced Accounting · RTP · January 2025
Astha Ltd. is absorbed by Nistha Ltd.; the consideration being the takeover of liabilities, the payment of cost of absorption not exceeding - 10,000 (actual cost - 9,000); the payment of the 9% debentures of 50,000 at a premium of 20% through 8% debentures issued at a premium of 25% of face value and the payment of 15 per share in cash and allotment of three 11% preference shares of 10 each and four equity shares of 10 each at a premium of 20% fully paid for every five shares in Astha Ltd. The number of shares of the vendor company are 1,50,000 of 10 each fully paid. Calculate purchase consideration as per AS 14.

Suggested Answer and Working Notes:

As per AS 14 ‘Accounting for Amalgamations', the term 'consideration' has been defined as the aggregate of the shares and other securities issued and the payment made in the form of cash or other assets by the transferee company to the shareholders of the transferor company. The payment made by transferee company to discharge the Debenture holders and outside liabilities and cost of winding up of transferor company shall not be considered as part of purchase consideration. Computation of Purchase Consideration Particulars ₹ Cash payment 15x 1,50,000 22,50,000 11% Preference Shares of 10each [(1,50,000 x 3/5) x 10] 9,00,000 Equity shares of 10each @ 20% premium [(1,50,000 x 4/5) x 12] 14,40,000 Total Purchase consideration 45,90,000

Topics: AS 14

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