Amalgamation

Problem.No.5
Purchase consideration of X Ltd
Total assets ( excluding loss of Rs.50,000)
200,000
Less: Liabilities (30,000 +20,000)
50,000
Purchase consideration paid in equity shares 2,50,000
Purchase consideration of Y Ltd
Total assets
3,50,000
Less: Liabilities (creditors)
50,000
Purchase consideration paid in equity shares 3,50,000
Closing entries in the books of X Ltd.,(Transferor company)
PARTICULARS
Realization A/c
Dr.
To Building
To Machinery
To Stock
To Debtors
To Cash
(Being transfer of the above assets at book values to
realisation accounts)
Creditors A/c
Dr.
Bills payable A/c
Dr.
To Realization A/c
Being transfer of liabilities to realisation a/c)
Share holders Account
Dr.
To Profit & loss A/c
(Being loass transferred to shareholders)
Share capital A/c
Dr.
To Shareholders A/c
Dr.
(Being transfer of share capital to shareholders)
XY Ltd. A/c
Dr.
To Realisation A/c
(being adjustment of purchase consideration receivable)
Shares in XY Ltd a/c
Dr.
To XY Ltd.
(being purchase consideration received in shares)
Shareholders A/c
Dr.
To shares in XY Ltd.
(Being distribution of shares among shareholders)

To
To
To
To

building
Machinery
Stock
debtors

Ledger accounts of X ltd

Realisation A/c
Rs.
60,000 By creditors
80,000 By bills payable
70,000 By X Y Ltd.
30,000

DR.
2,50,00
0

CR.
60,000
80,000
70,000
30,000
10,000

30,000
20,000
50,000
50,000
50,000
2,50,00
0
2,00,00
0
2,00,00
0
2,00,00
0

2,50,00
0
2,00,00
0
2,00,00
0
2,00,00
0

Rs.
30,000
20,000
2,00,000

To Cash

To Realisation

To Profit & loss A/c

To shares in XY Ltd.

To XY Ltd.

10,000
2,50,000

2,50,000

XY (purchasing Co.,) Account

Rs.
2,00,000 By Shares in XY Ltd.
2,00,000
Shareholders Account
Rs.
50,000 By share capital
2,00,000
2,50,000
Shares in XY Ltd.
Rs.
2,00,000 By shareholders
2,00,000

Rs.
2,00,000
2,00,000
Rs.
2,50,000
2,50,000
Rs.
2,00,000
2,00,000

Closing entries in the books of Y Ltd.,(Transferor company)

PARTICULARS
Realization A/c
Dr.
To Goodwill
To Building
To Machinery
To Stock
To Debtors
To Cash
(Being transfer of the above assets at book values to
realisation accounts)
Creditors A/c
Dr.
To Realization A/c
Being transfer of liabilities to realisation a/c)
Share capital A/c
Dr.
General Reserves A/c Dr.
P& L A/c Dr.
To Shareholders A/c
Dr.
(Being transfer of share capital to shareholders)
XY Ltd. A/c
Dr.
To Realisation A/c
(being adjustment of purchase consideration receivable)
Shares in XY Ltd a/c
Dr.
To XY Ltd.
(being purchase consideration received in shares)
Shareholders A/c
Dr.
To shares in XY Ltd.
(Being distribution of shares among shareholders)

To Goodwill

Ledger accounts of X ltd

Realisation A/c
Rs.
By creditors

DR.
3,50,00
0

CR.
50,000
90,000
80,000
40,000
70,000
20,000

50,000
50,000
2,50,00
0
40,000
10,000
3,00,00
0
3,00,00
0
3,00,00
0

3,00,00
0
3,00,00
0
3,00,00
0
3,00,00
0

Rs.
50,000

To
To
To
To
To

building
Machinery
Stock
debtors
Cash

To Realisation

To shares in XY Ltd.

To XY Ltd.

50,000
90,000
80,000
40,000
70,000
20,000
3,50,000

By X Y Ltd.

3,00,000

3,50,000

XY (purchasing Co.,) Account

Rs.
3,00,000 By Shares in XY Ltd.
3,00,000
Shareholders Account
Rs.
3,00,000 By share capital
By general reserve
By P & L A/c
3,00,000
Shares in XY Ltd.
Rs.
3,00,000 By shareholders
3,00,000

Opening entries in the books of XY Ltd. (transferee)

(Pooling of interest method)
PARTICULARS
Business purchase Account
Dr.
To Liquidator of X Ltd.
To Liquidator of Y Ltd.
Being consideration payable to x Ltd. And Y ltd.)
Goodwill A/c Dr.
Building A/c Dr.
Machinery A/c Dr.
Stock A/c
Dr.
Debtors A/c Dr.
Cash A/c Dr.
To Business Purchases
To Creditors
To Bills payable
( Incorporation of assets , liabilities reserves and loss of X
Ltd. And Y ltd., at book values)
Liquidators of X ltd.,
Dr.
Liquidators of Y ltd.,
Dr.
To equity share capital A/c
(Being allotment of fully paid equity shares of Rs.10 each in
settlement of purchase consideration)
Balance sheet of XY ltd.
Liabilities
Rs.
Share Capital
Equity shares of

5,00,000

Assets
Fixed Assets
Goodwill

Rs.
3,00,000
3,00,000
Rs.
3,00,000
40,000
10,000
3,00,000
Rs.
3,00,000
3,00,000

DR.
5,00,00
0

CR.
2,00,00
0
3,00,00
0

50,000
1,50,00
0
1,60,00
0
1,10,00
0
1,00,00
0
20,000

5,00,00
0
80,000
20,000

2,00,00
0
3,00,00
0

5,00,00
0

Rs.
50,000

Rs.10 each
paid
Reserves
Surplus
Current
liabilities
Creditors
Bills payable

fully
&
80,000
20,000

Building
Machinery
Current assets
Stock
Debtors
Cash

6,00,000

1,50,000
1,60,000
1,10,000
1,00,000
30,000

6,00,000

Adjustment to reserves and P& L A/c under pooling of interes method

Note:1
Purchase consideration due to X Ltd.
2,00,000
Purchase consideration due to Y Ltd.
3,00,000
5,00,000
Less: Paid up share capital : X ltd
2,50,000
: Y ltd
2,50,000
5,00,000
Amount to be adjusted to general reserve
Nil
Note 2: Adjustment of profit and loss
General reserve of Y Ltd.
P&L A/c of Y ltd.
Less: P & L A/c(Dr.) of X ltd.
Amount to be adjusted

6. In the books of Y ltd., (transferor company)

40,000
10,000
50,000
50,000
Nil

To
To
To
To
To
To
To

To

To
To

To

Under pooling of interests method

Realisation A/c
Rs.
premises
14,00,000 By current liabilities
plant & machinery
10,00,000 By X ltd.
furniture
1,00,000 By shareholders A/c(loss)
stock
3,00,000
debtors
2,00,000
bills receivables
1,00,000
bank
1,00,000
32,00,000
X (purchasing Co.,) Account
Rs.
Realisation
20,00,000 By Shares in X Ltd.
20,00,000
Equity Shareholders Account
Rs.
equity shares of X ltd
20,00,000 By share capital
realisation A/c (loss)
2,00,000 By general reserves
By development rebate
reserve
By export profit reserve
By P & L A/C
22,00,000
Shares in X Ltd.
Rs.
X Ltd.
20,00,000 By shareholders
20,00,000

In the books of X ltd (transferee company)

Under merger(pooling of interest method)
PARTICULARS
Premises A/c Dr.
Plant & equipment A/c Dr.
Furniture A/c Dr.
Stock A/c Dr.
Bills receivable A/c Dr.
Bank A/c Dr.
General reserve A/c ( balancing figure) Dr.
To Liquidators of Y ltd.
To Current liabilities
To development Rebate reserve
To export project reserve
(Being incorporation of assets , liablites and reserves of Y ltd
at book values , the excess of purchases consideration over
paid up share capital is adjusted against general reserve
and P & L a/c (i.e., 5,00,000 4,50,000 rs.50,000)
Liquidators of Y ltd.,
Dr.
To equity share capital A/c
(Being allotment of fully paid equity shares of Rs.10 each in
settlement of purchase consideration)

DR.
14,00,0
00
10,00,0
00
1,00,00
0
3,00,00
0
2,00,00
0
1,00,00
0
1,00,00
0
50,000
20,00,0
00

Rs.
10,00,000
20,00,000
2,00,000

32,00,000
Rs.
20,00,000
20,00,000
Rs.
15,00,000
1,50,000
50,000
200,000
3,00,000
22,00,000
Rs.
20,00,000
20,00,000

CR.

20,00,0
00
10,00,0
00
50,000
2,00,00
0
20,00,0
00

Balance sheet of X ltd. (after absorption)

Liabilities
Rs.
Share Capital
Equity shares of Rs.10 each fully 40,00,00
paid
0
Reserves & Surplus
General
reserve(8,00,0005,00,000)
7,50,000
P& L A/c
6,00,000
Development
Rebate 1,50,000
reserve(10,00,000+ 50,000)
5,00,000
Export project reserve(3,00,000+ 20,00,00
2,00,000)
0
Current liabilities
80,00,00
0

Assets
Fixed Assets
Premises A/c
Plant & equipment
A/c Furniture A/c
Current assets
Stock
Debtors
Bills receivables
Cash

Rs.
34,00,000
23,00,000
4,00,000
8,00,000
5,00,000
3,00,000
3,00,000

80,00,000

Calculation of general reserve

Purchase consideration
20,00,000
Less: Paid up share capital of vendor company (Y ltd)
15,00,000
Balance being capital loss
5,00,000
Less: Adjusted from general reserve of Y ltd.
1,50,000
Adjusted from P & L of Y Ltd
3,00,000