Model: Net assets method—Two companies agree to amalgamate The following are the balance sheets of A Co. Ltd. and B. Co. Ltd. as on 31 March 2011:
|
Liabilities |
A Ltd. |
B Ltd. |
Assets |
A Ltd. Rs. |
B Ltd. |
|
Equity Share Capital Rs. 10 |
2,00,000 |
1,00,000 |
Land & Building |
50,000 |
— |
|
per Share |
Plant & Machinery |
2,30,000 |
80,000 |
||
|
10% Debentures of Rs.10 |
30,000 |
— |
Stock |
20,000 |
14,000 |
|
Each |
Debtors |
14,000 |
12,000 |
||
|
Reserve Fund |
50,000 |
— |
Cash |
6,000 |
4,000 |
|
Dividend Equalization |
5,000 |
— |
|||
|
Fund |
|||||
|
Employees Provident |
10,000 |
— |
|||
|
Fund |
|||||
|
Trade Creditors |
20,000 |
10,000 |
|||
|
Profit & Loss Account |
5,000 |
— |
|||
|
3,20,000 |
1,10,000 |
3,20,000 |
1,10,000 |
Additional information:
- SR Ltd. takes over VR Ltd. on 6 April 2011.
- 12% Preference shareholders of VR Ltd. are discharged at a premium of 15% by issuing 13% preference shares of Rs.100 each.
- The net assets value of VR Ltd. equity share is Rs.30 per share and that of SR Ltd. equity share is Rs.50 per share. SR Ltd. will issue equity shares to satisfy the equity shareholders of VR Ltd. on the basis of intrinsic value. But the purchase consideration is to be based on the basis of par value only. The face value of equity share of SR Ltd. is Rs.10.
- Debentures of VR Ltd. are to be discharged at a premium of Rs.by issuing 15% debentures of SR Ltd.
Compute the purchase consideration.