The following are the summarized Balance Sheet of Blue Limited and Yellow Limited as at 31 st March 2025: Particulars Blue Limited (₹ in Lakhs)…

CA Intermediate · Advanced Accounting · PYQS · September 2025
The following are the summarized Balance Sheet of Blue Limited and Yellow Limited as at 31 st March 2025: Particulars Blue Limited (₹ in Lakhs) Yellow Limited (₹ in Lakhs) Equity and liabilities Equity Shares of 100 each 40.000 28.000 10% Debentures of 100 each 15.000 8% Debentures of 100 each 8.000 General Reserves 1.500 0.670 Retirement Gratuity Fund (Long term) 3.450 1.300 Trade Payables 7.400 4.250 Other current liabilities 1.240 0.880 Short -term provisions 0.710 0.320 Total 69.300 43.420 Assets Goodwill 8.750 1.795 Property, Plant and Equipment 35.650 31.260 Inventories 8.890 4.800 Trade Receivables 13.535 4.650 Cash in hand 0.485 0.315 Balances with banks 1.990 0.600 Total 69.300 43.420 On 31 st March 2025, Blue Limited absorbs the business of Yellow Limited on the following terms: (i) 8% Debenture holders of Yellow Limited are to be paid at 10% discount by issue of 10% Debentures at par in Blue Limited. (ii) There is an unrecorded current asset of 1,16,000 in the books of Yellow Limited, which is taken over by Blue Limited. (iii) Trade payables of Yellow Limited included - 1,50,000 payable to Blue Limited. (iv) Inventory of Yellow Limited is taken over by Blue Limited at 10% more than its book value. (v) Goodwill of Yellow Limited on absorption is to be computed based on two times of simple average profits of preceding three financial years (2021-2022:4,50,000; 2022-2023:3,90,000; and 2023-2024:2,35,000). In the year 2022-2023, there was an embezzlement of cash by an employee amounting to 50,000, which has already been adjusted in the profit for the year 2022-2023. (vi) Property, Plant and Equipment of Yellow Limited are taken over by Blue Limited at 36,44,500. (vii) Remaining Assets and Liabilities of Yellow Limited are taken over by Blue Limited at their book value. (viii) Equity Shareholders of Yellow Limited will be issued necessary equity shares in Blue Limited at 5% premium. You are required to: (i) Calculate the Purchase consideration. (ii) Prepare Balance Sheet of Blue Limited after absorption as at 31 st March 2025.

Suggested Answer and Working Notes:

(i) Calculation of Purchase Consideration ₹ in Lakhs Goodwill 7.500 PPE 36.445 Inventory 5.280 Trade receivables 4.650 Cash in hand 0.315 Cash at Bank 0.600 Unrecorded assets 1.160 (i) 55.950 Less: Liabilities: 10% debentures 7.200 Retirement Gratuity Fund 1.300 Trade payables 4.250 Other current liabilities 0.880 Short term provisions 0.320 (ii) 13.950 Net Assets/ Purchase Consideration 42.000 To be satisfied as under: Equity Shareholders of Yellow Ltd. to be satisfied by issue of 40,000 (42 lakhs/105) Equity Shares of Blue Ltd. at 5% Premium (40,000 x 105) Balance Sheet of Blue Ltd (after absorption) as on 31/03/2025 Particulars Notes ₹ in lakhs Equity & Liabilities 1 Shareholders' Fund a Share Capital 1 80.000 b Reserves & Surplus 2 3.500 2 Non -Current Liabilities a Long-term Borrowings 3 22.200 b Long-term Provisions 4 4.750 3 Current Liabilities a Trade Payables 5 10.150 b Other current liability 6 2.120 c Short term provisions 7 1.030 Total 123.750 Assets 1 Non-current assets a Property, Plant & Equipment 8 72.095 b Intangible assets 9 16.250 2 Current assets a Inventories 10 14.170 b Trade receivables 11 16.685 c Cash and cash equivalents 12 3.390 d Other current assets 13 1.160 Total 123.750 Notes to Accounts Particulars ₹ in lakhs 1 Share Capital Authorised share capital Issued, Subscribed & Paid up 80,000 Equity Shares of 100each 80.000 (out of the above 40,000 shares have been issued for consideration other than cash) Total 80.000 2 Reserves & Surplus Securities Premium 2.000 General Reserve 1.500 Total 3.500 3 Long Term Borrowings 10% Debentures of 100 (15.000 + 7.200) 22.200 4 Long Term Provisions Retirement Gratuity Fund (3.450 +1.300) 4.750 5 Trade Payables (7.400 + 4.250 -1.500) 10.150 6 Other Current Liabilities (1.240 + 0.880) 2.120 7 Short term provisions (0.710 + 0.320) 1.030 8 Property, Plant and Equipment PPE (35.650+36.445) 72.095 9 Intangible Assets Goodwill (8.750+7.500) 16.250 10 Inventories (8.890 + 5.280) 14.170 11 Trade Receivables (13.530 + 4.650 – 1.500) 16.685 12 Cash & Cash equivalent Cash in hand (0.485+0.315) 0.800 Balance with banks (1.990+0.600) 2.590 13 Other Current Assets 1.160 Working notes 1. Calculation of goodwill Particulars ₹ in lakhs Total profit Year: 2021-22 4.50 2022-23 (3.90+0.50) 4.40 2023-24 2.35 (i) 11.25 Average profit (i/3) (ii) 3.75 No of years of purchase (iii) 2 years Goodwill (ii*iii) 7.5

Topics: Amalgamation of Companies

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