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  • Illustrations: I. Computation and Discharge of Purchase Consideration Illustration - 1

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    The document discusses the acquisition of companies P Ltd., Q Ltd., and R Ltd. by The Oil Shell Ltd. It provides balance sheet information for the three companies as of March 31, 2009 and details of the acquisition agreement. The key terms of the agreement were that Oil Shell would issue 12% unsecured debentures equal to the net assets of the acquired companies and issue equity shares worth Rs. 100 for the capitalized average profits of each company in excess of net assets, capitalized at a rate of 10%. Oil Shell was required to compute the purchase consideration and discharge it according to the terms of the agreement.

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    The document discusses the acquisition of companies P Ltd., Q Ltd., and R Ltd. by The Oil Shell Ltd. It provides balance sheet information for the three companies as of March 31, 2009 and details of the acquisition agreement. The key terms of the agreement were that Oil Shell would issue 12% unsecured debentures equal to the net assets of the acquired companies and issue equity shares worth Rs. 100 for the capitalized average profits of each company in excess of net assets, capitalized at a rate of 10%. Oil Shell was required to compute the purchase consideration and discharge it according to the terms of the agreement.

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    © All Rights Reserved
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    16 views1 page

    Illustrations: I. Computation and Discharge of Purchase Consideration Illustration - 1

    Uploaded by

    mknatoo1963
    The document discusses the acquisition of companies P Ltd., Q Ltd., and R Ltd. by The Oil Shell Ltd. It provides balance sheet information for the three companies as of March 31, 2009 and details of the acquisition agreement. The key terms of the agreement were that Oil Shell would issue 12% unsecured debentures equal to the net assets of the acquired companies and issue equity shares worth Rs. 100 for the capitalized average profits of each company in excess of net assets, capitalized at a rate of 10%. Oil Shell was required to compute the purchase consideration and discharge it according to the terms of the agreement.

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    © All Rights Reserved
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    of 1

    Preparation of Company Accounts under Various Circumstances

    66
    Illustrations :
    I. Computation and Discharge of Purchase Consideration
    Illustration - 1
    The Oil Shell Ltd. was incorporated on 1st April 2008 for the purpose of acquiring P Ltd., Q. Ltd., and R
    Ltd.
    The Balance sheet of these companies as on 31st March 2009 are as follows :
    (Rs.)
    Particulars P Ltd. Q Ltd. R Ltd.
    Assets
    Tangible Fixed assets - at cost less depreciation 50,00,000 40,00,000 30,00,000
    Goodwill 6,00,000
    Other assets 20,00,000 28,00,000 8,50,000
    Total 70,00,000 74,00,000 38,50,000
    Liabilities
    Issued Equity Share Capital (shares of Rs. 10 each) 40,00,000 50,00,000 25,00,000
    Prot and Loss A/c 15,00,000 11,00,000 6,00,000
    10% Debentures 7,00,000 4,00,000
    Sundry Creditors 8,00,000 13,00,000 3,50,000
    Total 70,00,000 74,00,000 38,50,000
    Average annual prots before debentures interest 9,00,000 12,00,000 5,00,000
    (April 2008 to March 2009 inclusive)
    Professional valuation of tangible assets on
    31st March 2009 62,00,000 48,00,000 36,00,000
    1. The directors in their negotiations agreed that : (i) the recorded goodwill of Q Ltd. is valueless ;
    (ii) the Other assets of P Ltd. are worth Rs. 3,00,000; (iii) the valuation of 31st March 2009 in respect
    of tangible Fixed assets should be accepted. (iv) these adjustments are to be made by the individual
    companyt before the completion of the acquitition.
    2. The acquisition agreement provided for the issue of 12% unsecured Debentures to the value of the
    net assets of companies P Ltd. Q Ltd and R Ltd., and for the issuance of Rs. 100 nominal value equity
    shares for the capitalized average profit of each acquired company in excess of net assets contributed.
    The capitalisation rate is established at 10%.
    You are required to:
    i. Compute Purchase consideration.
    ii. Dicscharge of Purchase consideration.

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