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

Gamma Ltd acquires Delta Ltd, which has 50,000 equity shares of ₹10 each, in an amalgamation in the nature of purchase. Gamma issues one equity share of ₹10 face value (fair value ₹14) for every two Delta shares and pays ₹1 cash per Delta share. What is the purchase consideration?

The purchase consideration is ₹4,00,000. Gamma issues 25,000 shares at a fair value of ₹14, which is ₹3,50,000, and pays ₹50,000 in cash. Consideration for AS 14 purposes includes the fair value of shares issued plus cash paid.

  1. A₹4,00,000Correct
  2. B₹3,00,000
  3. C₹3,50,000
  4. D₹7,00,000

Explanation

Shares issued are 50,000 divided by 2, which is 25,000. At fair value ₹14 these are worth ₹3,50,000. Cash is 50,000 × ₹1, which is ₹50,000. The total is ₹4,00,000. Using face value would wrongly give ₹3,00,000.

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