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Hi, can anyone help me to solve my doubt? Note [ see last pic] point (b) -> best ltd will take over the business of better ltd.., consideration -> allotment of shares in best ltd Is the above points relate to amalgamation in the nature of merger, if yes then, reserves and surplus of transferor company should be added with transferee Co ,right? Also in the books of transferee co, the difference between purchase consideration and payment made to shareholders should be adjusted in the reserves of transferee Co. Then, why this problem has been solved like below .
Answers (14)
Thread Starter
Pravin NesarajHi , please note picture 3
See 2nd page of the question. There was an unsold stock in the Transferor company which included the profit of the Transferee company. In the book of the Transferee company, you have to eliminate the unsold stock which includes your profit (before amalgamation) to cost of the stock (sold by you before amalgamation). I hope it helps
Ashik Ahamed
See 2nd page of the question. There was an unsold stock in the Transferor company which included the profit of the Transferee company. In the book of the Transferee company, you have to eliminate the unsold stock which includes your profit (before amalgamation) to cost of the stock (sold by you before amalgamation). I hope it helps
Hi, thanks for your reply. My first doubt has cleared( by discussing with my friend). My doubt now is , 300000 remaining in res & surplus after using for bonus issue should be added to reserves and surplus of transferee company ( best ltd) but here it(3L) is transferred to shareholders , why?
Thread Starter
Pravin NesarajHi, thanks for your reply. My first doubt has cleared( by discussing with my friend). My doubt now is , 300000 remaining in res & surplus after using for bonus issue should be added to reserves and surplus of transferee company ( best ltd) but here it(3L) is transferred to shareholders , why?
To know whether the shareholders earn profit or loss on amalgamation. Hope it clears. Let me know
OK, but this in the books of transferor company (better ltd). I am asking the impact of 3lakhs in the balance sheet of best limited ( after absorption) because in case of merger, reserves and surplus should added to purchasing Co's reserves, right?
Thread Starter
Pravin NesarajWhy 3lakh reserves and surplus of better ltd Is not shown in reserves and surplus of best ltd?
Hi, can anyone please help me to solve the above doubt?
Thank you sir, for the reply. But sir, my exact doubt is if I assume this question as amalgamation in the nature of merger( since given in question that : it is agreed that best limited will take over the business of better ltd), the reserves and surplus ₹ 3 lakhs (after utilizing for bonus issue) should be added to the transferee company's reserves and surplus, right? But why in this problem, they have not added the reserves and surplus 3lakhs( of better ltd) with reserves and surplus of best ltd?
CA Suraj Lakhotia Admin
It is solved assuming in nature of purchase
Hi sir, in the question they have given that" best limited will take over the business of better ltd + consideration => allotment of shares in best ltd." These are the conditions in amalgamation in case of merger, right? Then, how they assume it as nature of purchase. I am literally confused by the above lines sir, it would be of great help if you help me to understand this problem
CA Suraj Lakhotia Admin
You can assume it in the nature of merger and solve. Or you can solve it assuming it in the nature of purchase. Pls note the business should be continued in case of merger.
One of the 5 conditions is that business should be continued. This is not clear in question. In exam you can assume as merger and solve.