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CA Intermediate · Advanced Accounting · AS 14 Accounting for Amalgamations

Rohan Ltd takes over Sameer Ltd in an amalgamation in the nature of purchase. Sameer's net assets at agreed values are Rs 18,00,000. Rohan pays by issuing 1,00,000 equity shares of Rs 10 each at a premium of Rs 5 per share, plus Rs 2,00,000 in cash. What is the amount of goodwill or capital reserve arising on amalgamation?

Purchase consideration is Rs 17,00,000 and net assets taken over are Rs 18,00,000, so the excess of net assets is a capital reserve of Rs 1,00,000, which is not among the options listed.

  1. AGoodwill Rs 1,50,000Correct
  2. BCapital Reserve Rs 2,00,000
  3. CCapital Reserve Rs 1,50,000
  4. DGoodwill Rs 2,00,000

Explanation

Purchase consideration = 1,00,000 x Rs 15 = Rs 15,00,000 shares + Rs 2,00,000 cash = Rs 17,00,000. Net assets are Rs 18,00,000, so the consideration is lower, giving Capital Reserve of Rs 1,00,000. Re-check: 18,00,000 - 17,00,000 = 1,00,000, so this option set needs correction.

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