Skip to content

CS Professional · Corporate Restructuring, Valuation and Insolvency · Accounting in Corporate Restructuring: Concept and Accounting Treatment

Anand Ltd sells its packaging undertaking as a slump sale for Rs 12 crore cash. Book values on the date of sale: assets Rs 15 crore, liabilities taken over by the buyer Rs 5 crore. What is the profit or loss on the sale in Anand Ltd's books?

Anand Ltd earns a profit of Rs 2 crore. Net assets sold are Rs 15 crore of assets less Rs 5 crore of liabilities, which is Rs 10 crore, and the consideration received is Rs 12 crore. The difference of Rs 2 crore is the gain on slump sale.

  1. AProfit of Rs 2 croreCorrect
  2. BLoss of Rs 3 crore
  3. CProfit of Rs 7 crore
  4. DLoss of Rs 2 crore

Explanation

Net assets transferred = 15 - 5 = Rs 10 crore. Consideration is Rs 12 crore. Profit = 12 - 10 = Rs 2 crore. Ignoring liabilities (15 vs 12) gives a loss of Rs 3 crore, which is wrong because the buyer assumed the liabilities.

Did you get it right without looking?

One question tells you little. A timed set on Accounting in Corporate Restructuring: Concept and Accounting Treatment shows your real accuracy, how long you take and where you lose marks.

Practise Accounting in Corporate Restructuring: Concept and Accounting TreatmentFree diagnostic mock

More Accounting in Corporate Restructuring: Concept and Accounting Treatment questions