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CA Intermediate · Advanced Accounting · Amalgamation of Companies

Tapi Ltd is taken over by Pennar Ltd in an amalgamation in the nature of purchase. The purchase consideration is ₹9,00,000, of which 80% is to be discharged by issuing equity shares of ₹10 each at a premium of 25%, and the balance in cash. How many equity shares will Pennar Ltd issue?

Pennar Ltd will issue 57,600 shares. Only 80% of the purchase consideration, ₹7,20,000, is paid in shares, and each share is issued at ₹12.50 (₹10 face value plus 25% premium). Dividing ₹7,20,000 by ₹12.50 gives 57,600 shares.

  1. A57,600 sharesCorrect
  2. B72,000 shares
  3. C90,000 shares
  4. D45,000 shares

Explanation

The share portion is 80% of ₹9,00,000 = ₹7,20,000. Issue price = ₹10 + 25% premium = ₹12.50, so shares = 7,20,000 ÷ 12.5 = 57,600. Dividing the share portion by the face value alone, or the full consideration by ₹12.50, gives 72,000, which is wrong.

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