Blue Limited and Green Limited had been carrying on business independently. They agreed to amalgamate and form a new company BG Ltd. with an…

CA Intermediate · Advanced Accounting · PYQS · May 2026
Blue Limited and Green Limited had been carrying on business independently. They agreed to amalgamate and form a new company BG Ltd. with an authorized share capital of 12,00,000 divided into 2,40,000 equity shares of 5 each. On 31st March, 2026 the Balance sheets of both the companies were as follows: Particulars Blue Ltd. Green Ltd. I. Equity and Liabilities: (a) Shareholder's Fund (i) Share Capital 10,95,000 10,57,500 (b) Current liabilities (i) Trade Payables 3,50,000 2,25,000 (ii) Short term borrowings 14,41,000 3,15,750 28,86,000 15,98,250 II. Assets: (a) Noncurrent assets (i) Property, plant and equipment 19,05,000 10,95,000 (b) Current assets (i) Inventories 8,56,000 3,53,250 (ii) Trade receivables 1,25,000 1,50,000 28,86,000 15,98,250 Additional Information: (a) Details of trade receivables and trade payables is given as under: Blue Limited Green Limited (i) Trade Payables Bills Payables 1,00,000 - Trade Creditors 2,50,000 2,25,000 3,50,000 2,25,000 (ii) Trade receivables Bills receivables - 50,000 Trade Debtors 1,25,000 1,00,000 1,25,000 1,50,000 (b) Revalued figures of non-current and current assets as on 31st March, 2026 were as follows: Blue (₹) Green (₹) Property, Plant and Equipment 21,30,000 11,70,000 Inventories 7,73,500 3,23,250 (c) The trade debtors and trade creditors include - 75,000 owed by Blue Limited to Green Limited. (d) All the bills receivables held by Green Limited were Blue Limited's acceptances. (e) The purchase consideration is satisfied by issue of the following shares and debentures: (i) 1,80,000 equity shares of 5 each in BG Ltd. to Blue Limited and Green Limited in the proportion to the profitability of their respective business based on the average net profit of previous three years which were as follows: Blue (₹) Green (₹) 2022-23 Profit 13,48,700 8,21,700 2023-24 (Loss)/Profit (7,500) 10,26,300 2024-25 Profit 11,33,800 10,77,000 (ii) 15% debenture in BG Ltd. at par to provide an income equivalent to 8% return on capital employed in their respective business as on 31st March, 2026 after revaluation of assets. You are required to: (A) Compute the number of debentures and shares to be issued to Blue Limited and Green Limited. (B) A Balance Sheet of BG Ltd. as at 31st March, 2026 showing the position immediately after amalgamation.

Suggested Answer and Working Notes:

(A) Computation of Amount of Debentures and Shares to be issued: (i) Average Net Profit Blue ₹ (13,48,700 - 7,500 + 11,33,800)/3 = 8,25,000 Green ₹ (8,21,700 + 10,26,300 + 10,77,000)/3 = 9,75,000 (ii) Equity Shares Issued (a) Ratio of distribution Blue : Green 825 : 975 (b) Number Blue 82,500 Green 97,500 1,80,000 (c) Amount Blue 82,500 shares of 5each = 4,12,500 Green 97,500 shares of 5each = 4,87,500 (iii) Capital Employed (Net Assets Computation) (after revaluation of assets) Blue Green Property, plant and equipment 21,30,000 11,70,000 Current Assets Inventories 7,73,500 3,23,250 Bills receivables - 50,000 Trade debtors 1,25,000 1,00,000 Total (A) 30,28,500 16,43,250 Less: Current Liability Bills payables 1,00,000 - Creditors 2,50,000 2,25,000 Short-term Borrowings 14,41,000 3,15,750 Total (B) (17,91,000) (5,40,750) Net Assets: (A-B) 12,37,500 11,02,500 Debentures Issued 8% of on available Net Assets 99,000 88,200 15% Debentures to be issued to provide equivalent income 6,60,000 5,88,000 99,000 × 100/15 88,200 × 100/15 (B) Balance Sheet of BG Ltd. As at 31st March 2026 (after amalgamation) Particulars Note No ₹ I. Equity and Liabilities (1) Shareholders' Funds (a) Share Capital 1 9,00,000 (b) Reserves and Surplus 2 1,92,000 (2) Non-Current Liabilities (a) Long-term borrowings 3 12,48,000 (3) Current Liabilities (a) Short term borrowings (14,41,000 + 3,15,750) 17,56,750 (b) Trade payables 4 4,50,000 Total 45,46,750 II. Assets (1) Non-current assets (a) PPE 33,00,000 (2) Current assets (a) Inventories (7,73,500 + 3,23,250) 10,96,750 (b) Trade receivables 5 1,50,000 Total 45,46,750 Notes to Accounts Particulars ₹ 1. Share Capital Authorized 2,40,000 Equity Shares of 5each 12,00,000 Issued and Sub-scribed 1,80,000 Equity Shares of 5each 9,00,000 (all the above shares are allotted as fully paid-up pursuant to a contract without payment being received in cash) 2. Reserve and Surplus Capital Reserve (1,65,000 + 27,000) 1,92,000 3. Long-term borrowings Secured Loans 15% Debentures Blue Ltd. 6,60,000 Green Itd. 5,88,000 12,48,000 4. Trade payable Creditors (2,50,000 + 2,25,000 - 75,000) 4,00,000 Bills payable (1,00,000 - 50,000 + 0) 50,000 4,50,000 5. Trade receivable Debtors (1,25,000 - 75,000 + 1,00,000) 1,50,000 Bills receivable (50,000 - 50,000) 0 1,50,000 Working Notes: Capital Reserve Blue ₹ Green ₹ Total ₹ (1) Purchase Consideration Equity Shares Issued 4,12,500 4,87,500 9,00,000 15% Debentures Issued 6,60,000 5,88,000 12,48,000 10,72,500 10,75,500 21,48,000 (2) Capital Reserve (a) Net Assets taken over 12,37,500 11,02,500 23,40,000 (b) Purchase Consideration 10,72,500 10,75,500 21,48,000 (c) Capital Reserve [(a) - (b)] 1,65,000 27,000 1,92,000

Topics: Amalgamation of Companies

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