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Can someone explain how pc would be calculated in this question
Answers (11)
ruchi lahoti
PFA
Sundry creditors allotted 420000 worth rupees of equity shares in new company.the effects of this transaction will not be included in calculating purchase consideration????
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Amit VermaSundry creditors allotted 420000 worth rupees of equity shares in new company.the effects of this transaction will not be included in calculating purchase consideration????
Purchase consideration does not include any sum directly payable to debenture holders or creditors of the transferor company
Thread Starter
Amit VermaIn this question we have to calculate pc bye net assets method
you asked about the sundry creditors being paid using equity shares The sundry creditors worth 1,92,000 is taken for calculation of PC. Please look carefully
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Amit VermaBut the new company issue 420000 worth rs equity shares to creditors
That cannot be used to calculate PC
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Amit VermaThan how will new company balance sheet will tally
I just told, it cannot be used for calculation of PC. Those sundry creditors are allotted equity shares, these will be converted to equity shares and hence there wont be mismatch in balance sheet
Thread Starter
Amit VermaWhile calculating purchase consideration by net assets method we take agreed value of assets and liabilities, then why in this question we are taking book value of creditors????
Sundry creditors have been settled by way of issuing equity shares. Settlement happens after amalgamation, that is why the value at balance sheet is considered as agreed value. If you notice the same is the case with Loan creditors.