Meet Ltd. and Preet Ltd. were amalgamated on and from 1 st April, 2024. A new company Heer Ltd. was formed to take over the business of the existing…

CA Intermediate · Advanced Accounting · MTP · May 2025
Meet Ltd. and Preet Ltd. were amalgamated on and from 1 st April, 2024. A new company Heer Ltd. was formed to take over the business of the existing companies. The Balance Sheets of Meet Ltd. and Preet Ltd. as at 31 st March, 2024 are given below: Particulars Notes Meet Ltd. Preet Ltd. I] Equity and Liabilities (1) Shareholder's Funds (a) Share Capital (Equity shares of 100 each fully paid up) 1 3,300 2,850 (b) Reserves and Surplus 2 1,260 990 (2) Non-Current Liabilities Long Term Borrowings 10% Debentures of 100 each 180 90 (3) Current Liabilities Trade Payables 1,260 570 Total 6,000 4,500 II Assets (1) Non-Current Assets (a) Property, Plant and Equipment 2,700 1,950 (b) Non-Current Investments 450 150 (2) Current Assets (a) Inventories 1,050 750 (b) Trade Receivables 900 1,050 (c) Cash and Cash Equivalents 900 600 Total 6,000 4,500 Notes to Accounts: Note No. Particulars Meet Ltd. Preet Ltd. 1 Share Capital Equity Shares of 100 each 2,400 2,250 14% Preference Shares of 100 each 900 600 Total 3,300 2,850 2 Reserves and Surplus Revaluation Reserve 450 300 General Reserve 510 450 Investment Allowance Reserve 150 150 Profit and Loss Account 150 90 Total 1,260 990 Additional Information: (1) Heer Limited will issue 5 equity shares for each equity share of Meet Limited and 4 equity shares for each equity share of Preet Limited. The shares are to be issued @35 each having a face value of 10 per share. (2) Preference shareholders of the two companies are issued equivalent number of 16% preference shares of Heer Limited at a price of 160 per share (face value - 100). (3) 10% Debenture holders of Meet Limited and Preet Limited are discharged by Heer Limited, issuing such number of its 16% Debentures of 100 each so as to maintain the same amount of interest. (4) Investment allowance reserve is to be maintained for 4 more years. (5) Liquidation expenses are for Meet Limited - 12,00,000 and for Preet Limited - 6,00,000. It is decided that these expenses would be borne by Heer Limited. (6) All the assets and liabilities of Meet Limited and Preet Limited are taken over at book value. (7) Authorised equity share capital of Heer Limited is 30,00,00,000 divided into equity shares of 10 each. After issuing required number of shares to the liquidators of Meet Limited and Preet Limited, Heer Limited issued balance shares to public. The issue was fully subscribed. You are required to prepare Balance Sheet of Heer Limited as at 1 st April, 2024 after amalgamation has been carried out on the basis of Amalgamation in the nature of purchase.

Suggested Answer and Working Notes:

Balance Sheet of Heer Ltd. as at 1 st April 2024 Particulars Notes Amount I. Equity and Liabilities: (1) Shareholder's Funds: (a) Share Capital 1 4,500 (b) Reserves and Surplus 2 8,400 (2) Non-current Liabilities: (a) Long Term Borrowing 3 168.75 (3) Current Liabilities: (a) Trade Payable 4 1,830 Total 14,898.75 II. Assets: (1) Non-current assets: (a) PPE 5 4,650 (b) Intangible 6 1,266.75 (c) Non-current Investment 7 600 (2) Current Assets: (a) Inventories 8 1,800 (b) Trade receivables 9 1,950 (c) Cash and cash equivalent 10 4,632 Total 14,898.75 Notes to Accounts: Particulars (₹) lacs (₹) lacs 1. Share Capital Authorized Share Capital a) Equity Share Capital 300 Lakhs equity shares of 10each 3,000 b) Preference Share Capital 15 Lakhs Preference shares of 100 1,500 2,250 Issued, Subscribed & Paid up Capital a) Equity Share Capital 300 Lakhs equity shares of 10each 3,000 (out of above 210 lakhs of equity shares are issued for consideration other than cash) b) Preference Share Capital 15 Lakhs Preference shares of 100 1,500 (all share are issued for consideration other than cash) 4,500 2. Reserves and surplus Investments allowances reserves (450 + 300) 750 Securities premium (300 × 25) + (15 × 60) 8,400 Less: Amalgamation adjustment reserve (750) Total 8,400 3. Long-term borrowings 16% Debentures 1,68.75 4. Trade payables Meet Ltd. 1,260 Preet Ltd. 570 1,830 5. PPE Land and Building 2,700 Plant and Machinery 1,950 4,650 6. Intangible assets Goodwill [W.N. 2] 1248.75 Add: Liquidation exp. (12 + 6) 18 1,266.75 7. Non-current Investments Investments (450 + 150) 600 8. Inventories Meet Ltd. 1,050 Preet Ltd. 750 1,800 9. Trade receivables Meet Ltd. 900 Preet Ltd. 1,050 1,950 10. Cash & cash equivalents Meet Ltd. 900 Preet Ltd. 600 Liquidation Expenses (12 + 6) (18) Share issued for cash (90 lakh shares × ₹ 35) 3,150 4,632 Working Notes: 1. Calculation of Purchase Consideration: Particulars (in lakhs) Meet Ltd. Preet Ltd. A. Preference Shareholders: (9,00,00,000 / 100) × ₹ 160 1440 (6,00,00,000 / 100) × ₹ 160 960 B. Equity Shareholders: (24,00,00,000 / 100) × 5 × 35each 4,200 (22,50,00,000 / 100) × 4 × 35each 3,150 C. Purchase Consideration (A + B) 5,640 4,110 2. Net Assets Particulars Meet Ltd (₹) Preet Ltd (₹) Assets taken over: Property Plant & Equity 2,700 1,950 Non-Current Investments 450 150 Inventory 1,050 750 Trade receivables 900 1,050 Cash and bank 900 600 6,000 4,500 B Liabilities taken over: 10% Debentures 112.50 56.25 Trade payables 1,260 570 1,372.5 626.25 C Net assets taken over 4,627.5 3,873.75 D Purchase consideration (W.N .1) 5,640 4,110 E Goodwill 1,012.5 236.25 3. Issue of Debentures Particulars ₹ Debentures 1,80,00,000 90,00,000 Interest 10% 18,00,000 9,00,000 (18,00,000 × 100) / 16 = 1,12,50,000 (9,00,000 × 100) / 16 = 56,25,000

Topics: AS 14

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