Model: Intrinsic worth method JK Ltd. is absorbed by LM Ltd. Following are the balance sheets of these two companies as on 31 March 2011:
|
Liabilities |
JK Ltd. |
LM Ltd. |
Assets |
JK Ltd. |
LM Ltd. |
|
Share Capital: |
Sundry Assets |
10,15,000 |
49,05,000 |
||
|
Paid-up Share Capital |
3,50,000 |
||||
|
5.000 Equity Shares of |
Cash in Hand |
10,000 |
1,35,000 |
||
|
Rs. 100 each, ,T. 70 Paid up |
|||||
|
50,000 Equity Shares of |
37,50,000 |
||||
|
Rs. 100 Each, Rs. 75 Paid up |
|||||
|
Reserve Fund |
4,25,000 |
11,00,000 |
|||
|
Profit & Loss Account |
1,50,000 |
1,00,000 |
|||
|
Sundry Creditors |
1,00,000 |
90,000 |
|||
|
10,25,000 |
50,40,000 |
10,25,000 |
50,40,000 |
It was decided that the holder of every 3 shares in JK Ltd. was to receive 5 shares in LM Ltd. plus as much cash as in necessary to adjust the rights of shareholders of both the companies in accordance with the intrinsic value of shares as per respective balance sheets.
Calculate purchase consideration.