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CMA Intermediate · Financial Accounting · Conversion of Partnership Firm into a Company and Sale of Partnership Firm to a Company

Under the lump sum method, purchase consideration is:

Under the lump sum method, the purchase consideration is simply a fixed amount agreed between the purchasing company and the vendor firm. It is not derived by valuing the assets and liabilities taken over, unlike the net payment method.

  1. AComputed from assets less liabilities taken over
  2. BComputed from the claims of partners and creditors
  3. CBased on the market value of shares issued
  4. DA fixed amount agreed between the company and the vendor firmCorrect

Explanation

In the lump sum method the parties directly agree a fixed total, for example ₹8,00,000, without computing from assets and liabilities. The net payment method computes it from assets and liabilities, so that option describes a different method.

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