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Amalgamation of companies

Accountancy

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 .

374f8017-3cad-4e5e-a9b8-421abb22af68.jpg
8a898931-062e-4b98-b8ff-1d02b069e009.jpg
edc89428-3a23-4381-91ea-4b4021ce0183.jpg
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Pravin Nesaraj

Pravin Nesaraj

CA Inter

32K+

25-Mar-23 21:37

247

Answers (14)

Hi , please note picture 3


Thread Starter

Pravin Nesaraj

Pravin Nesaraj

CA Inter

32K+

25-Mar-23 21:39

Thread Starter

Pravin Nesaraj

Hi , 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

Ashik Ahamed

CA Inter

845

25-Mar-23 23:53

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 Nesaraj

Pravin Nesaraj

CA Inter

32K+

25-Mar-23 23:58

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 Nesaraj

Pravin Nesaraj

CA Inter

32K+

26-Mar-23 00:13

Why 3lakh reserves and surplus of better ltd Is not shown in reserves and surplus of best ltd?

Screenshot_20230326_004856_Drive.jpg

Thread Starter

Pravin Nesaraj

Pravin Nesaraj

CA Inter

32K+

26-Mar-23 01:04

Thread Starter

Pravin Nesaraj

Why 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?


Thread Starter

Pravin Nesaraj

Pravin Nesaraj

CA Inter

32K+

26-Mar-23 13:03

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.


CA Suraj Lakhotia

CA Suraj Lakhotia

Admin

26-Mar-23 17:22

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?


Thread Starter

Pravin Nesaraj

Pravin Nesaraj

CA Inter

32K+

26-Mar-23 18:46

Balance sheet of transferee company( after absorption). Why they have not added 3lakhs res& surplus of better ltd?

IMG_20230326_004900_293.jpg

Thread Starter

Pravin Nesaraj

Pravin Nesaraj

CA Inter

32K+

26-Mar-23 18:49

It is solved assuming in nature of purchase


CA Suraj Lakhotia

CA Suraj Lakhotia

Admin

26-Mar-23 19:14

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


Thread Starter

Pravin Nesaraj

Pravin Nesaraj

CA Inter

32K+

26-Mar-23 21:45

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.


CA Suraj Lakhotia

CA Suraj Lakhotia

Admin

26-Mar-23 21:54

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