The balance sheets of Hanging Limited (HL) and Flat Limited (FL) on 31st March, 2011 are as

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The balance sheets of Hanging Limited (HL) and Flat Limited (FL) on 31st March, 2011 are as follows:

Liabilities Equity shares of face value* 10 each General reserve P & La/c Creditors Bills payable Balance

On the balance sheet date, HL acquired the business of FL for which it agrees to pay the following purchase consideration on the date of business combination.

(i) HL to issue one share of its for every three shares of FL.

(ii) The market price of HL’s shares on the date of business combination is ₹35 per share.

(iii) HL to pay ₹6 per share in cash for every one share of FL.

(iv) Further it is provided in the scheme of business combination that if combined entity reports a profit of ₹40,000 crore as half year’s profit on 30th September, 2011, then HL shall issue additional Rs 100 crore face value shares to be valued at the fair value when such contingency is resolved. Show how purchase consideration and different assets and liabilities should be recognized in the books of HL.

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Financial Accounting

ISBN: 9780071078023

1st Edition

Authors: Dhanesh K. Khatri

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