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# Cenversion of partnership

Can someone explain how pc would be calculated in this question

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Amit Verma

CA Final

510

16-May-20 18:52

41

PFA

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ruchi lahoti

Moderator

18-May-20 09:43

ruchi lahoti Moderator

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????

Amit Verma

CA Final

510

20-May-20 14:51

Amit Verma

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????

Purchase consideration does not include any sum directly payable to debenture holders or creditors of the transferor company

ruchi lahoti

Moderator

20-May-20 15:02

In this question we have to calculate pc bye net assets method

Amit Verma

CA Final

510

21-May-20 20:21

Amit Verma

In 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

ruchi lahoti

Moderator

22-May-20 09:23

But the new company issue 420000 worth rs equity shares to creditors

Amit Verma

CA Final

510

22-May-20 09:32

Amit Verma

But the new company issue 420000 worth rs equity shares to creditors

That cannot be used to calculate PC

ruchi lahoti

Moderator

22-May-20 09:33

Than how will new company balance sheet will tally

Amit Verma

CA Final

510

22-May-20 09:34

While 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????

Amit Verma

CA Final

510

22-May-20 09:36

Amit Verma

Than 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

ruchi lahoti

Moderator

22-May-20 09:56

Amit Verma

While 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.

ruchi lahoti

Moderator

22-May-20 10:26