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CA Intermediate · Advanced Accounting · AS 14 Accounting for Amalgamations

Under the pooling of interests method, Ananya Ltd absorbed Bhavna Ltd. Bhavna's share capital was ₹6,00,000 and its general reserve ₹1,50,000, so net assets taken over were ₹7,50,000. Ananya Ltd issued its own equity shares of ₹5,00,000 at par as the purchase consideration. What total amount will be credited to reserves in Ananya Ltd's books because of this amalgamation?

Reserves increase by ₹2,50,000. Under pooling of interests the transferor's reserves of ₹1,50,000 are carried over in the same form, and the ₹1,00,000 by which its share capital exceeds the shares issued is also credited to reserves.

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

Explanation

Under pooling, Bhavna's reserves of ₹1,50,000 are incorporated in the same form. Bhavna's share capital ₹6,00,000 exceeds the shares issued ₹5,00,000, so the ₹1,00,000 difference is also added to reserves. Total = 1,50,000 + 1,00,000 = ₹2,50,000. Check: net assets 7,50,000 = shares 5,00,000 + reserves 2,50,000. Taking only ₹1,50,000 ignores the capital difference.

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