A. A new company formed to take over business of two or more companies is known as Absorption
B. Reconstruction of a company without forming a new company is Internal Reconstruction
C. One existing company taking over two or more existing company is Amalgamation
D. When the transferee company takes over all assets of Transferor Company at an agreed value, the suggested accounting method is Pooling of Interest Method
2. The book value of Machinery of Subsidiary Company as on 1.4.2020 was Rs. 4,50,000 while its closing value as on 31.3.2021 was Rs. 4,05,000. The holding company while acquiring shares of subsidiary company as on 31.7.2020 revalued this machinery at Rs. 4,50,000. The revaluation gain is ________?
A. Rs. 22,500
B. Rs. 15,000
C. Rs. 45,000
D. Rs. 40,500
3. As on 31st March 2020 the contingent liabilities for Bills discounted of Holding Co. and its Subsidiary Co. amounted to Rs. 4,000 and Rs. 6,000 respectively. Out of the total bills discounted by Holding Co., the bills worth Rs. 2,000 are accepted by Subsidiary Company. What amount of bills will be disclosed as footnote while preparing Consolidated Financial Statement?
A. Rs. 2,000
B. Rs. 8,000
C. Rs. 10,000
D. Rs. 12,000
4. A Ltd acquired the business of B Ltd and agreed to issue 3,00,000 equity shares of Rs. 10 each at a premium of Rs.2 per share to equity shareholders of B Ltd. It also issued 2,00,000 10% preference shares of Rs. 10 each, Rs. 8 paid up to preference shareholders of B Ltd and paid Cash of Rs. 30,000 to liquidator of transferor company to meet liquidation expenses. Calculate the amount of purchase consideration.
A. Rs. 52,30,000
B. Rs. 36,00,000
C. Rs. 16,00,000
D. Rs. 52,00,000
5. KC Ltd holds 65% equity shares in NK Ltd. Up to the date of acquisition, the operating profit earned by NK Ltd. was Rs. 3,00,000 while its total operating profit in the year of acquisition amounted to Rs. 6,50,000. The balance of profit & loss a/c in the Consolidated Balance sheet will increase by __________.
A. Rs. 2,27,500
B. Rs. 1,95,000
C. Rs. 4,22,500
D. Rs. 4,30,000
6. The book value of Machinery of Subsidiary Company as on 1.4.2020 was Rs. 4,50,000 while its closing value as on 31.3.2021 was Rs. 4,05,000. The holding company while acquiring shares of subsidiary company as on 31.7.2020 revalued this machinery at Rs. 4,50,000. The carrying value of Machinery in the consolidated balance sheet will be _________?
A. Rs. 4,50,000
B. Rs. 4,95,000
C. Rs. 4,20,000
D. Rs. 4,35,000
7. X Itd purchased 80% of equity shares of Rs. 10 each of Y ltd on 30.09.2019 for Rs. 2,40,000. On 1st April 2019, the equity share capital of Y ltd was Rs. 2,50,000, Profit and loss account Dr. balance Rs. 40,000 and Reserves showed a balance of Rs. 20,000. During the year 2019-20. Y ltd has earned a profit of Rs. 40,000. Calculate the Total capital Profits and Revenue Profits
A. Rs. 80,000 and Rs. 20,000
B. Rs. 16,000 and Rs. 4,000
C. Rs. Nil and Rs. 20,000
D. Rs. 1,00,000 and Nil
8. The balance sheet of ABC Itd had net assets of Rs. 11,00,000 on 31.03.2020. XYZ Itd agreed to take over the business on the same day and valued net assets at 110% and agreed to issue necessary number of equity shares of its own of Rs. 10 each at a premium of Rs.1 as purchase consideration. The number of equity shares issued and the amount of premium will be ___________.
A. 1,10,000 equity shares and premium of Rs. 1,10,000
B. 1,00,000 equity shares and premium of Rs. 1,00,000
C. 1,00,000 equity shares and premium of Rs.10,000
D. 1,21,000 equity shares and premium of Rs. 1,21,000
9. For an upstream sales, which of the following is correct? ________.
A. Holding Company sells goods to Subsidiary Company
B. Subsidiary Company sells goods to Holding Company
C. Holding company sells goods to a non-affiliated company
D. Subsidiary company sells good to a non-affiliated company
10. The Holding ratio is 8:7. The annual sales of Holding company include Rs. 1,00,000 sold to Subsidiary company of which 75% remained unsold as on the last date of accounting year. The holding company sales goods at 20% on sales. How much amount of unrealized profit to be adjusted in the Consolidated Balance sheet?
A. Rs. 8,000
B. Rs. 7,000
C. Rs. 20,000
D. Rs. 15,000
11. The guidelines for Measurement, Recognition and disclosures of amalgamation transactions is given by __________?
A. AS-15
B. AS-14
C. AS-21
D. AS-09
12. On absorption in nature of purchase, it was agreed that the realization expenses to the extent of Rs. 10,000 will be paid by Transferee Company. If the actual realization expense amounts to Rs. 12,000 Which of the following entry will be passed in books of Transferee Company?
A. Goodwill A/c Dr. 10,000 To Cash A/c 10,000
B. P & L A/c Dr. 10,000 To Cash A/c 10,000
C. Goodwill A/c Dr. 12,000 To Cash A/c 12,000
D. P & L A/c Dr. 12,000 To Cash A/c 12,000
13. While preparing the consolidated balance sheet of Holding and its subsidiary company, the Investment in the shares of Subsidiary is eliminated as it is ___________?
A. Necessary to avoid such irrelevant disclosures
B. Not a mandatory disclosure
C. Replaced by share in the assets and liability of subsidiary Company
D. Exempted to be shown by the act
14. The payment due to Subsidiary Co. of Rs. 25,000 was paid by holding company by issuing crossed cheque as on 30th March 2020. The same was received by Subsidiary company on 3rd April 2020. Which of the following is the correct treatment while preparing the consolidated Balance sheet of Holding and its subsidiary as of 31st March 2020?
A. Deduct Rs. 25,000 from total Debtors and also from total Creditors
B. Deduct from the total debtors of Subsidiary company and add Rs. 25,000 to Cash & bank balance as Cheque in Transit. True
C. No accounting treatment is to be given
D. Deduct the bank balances by Rs. 25,000 and show it as Bank overdraft on the liability side.
15. The downward revaluation of the assets of subsidiary company on acquisition of equity shares by controlling company leads to __________?
A. Capital loss and increase in revenue profits
B. Revenue loss and increase in capital profits
C. Increase in the value of assets
D. Increase in the depreciation of assets in the post acquisition period
16. The holding ratio is 4:1. The Share capital of the subsidiary company consists of 1,20,000 equity shares of Rs. 10 each fully paid and its Reserves & Surplus showed a balance of Rs. 7,00,000. The claim of the Minority Shareholders is __________.
A. Rs. 1,40,000
B. Rs. 3,80,000
C. Rs. 2,40,000
D. Rs. 1,20,000
17. Under the Internal Reconstruction scheme, an unrecorded liability of Rs. 25,000 is settled by the company at Rs. 15,000. The unpaid amounts of Rs. 10,000 will __________.
A. be credited to Capital Reduction Account
B. be shown as liability in the New Balance sheet after Internal Reconstruction
C. not be recorded at all.
D. be debited to Capital Reduction Account
18. Ayush Itd. Absorbed business of Ayushi Itd and agreed to issue such an amount of fully paid 8% debentures of its own at 90% as is sufficient to discharge the 7% Rs. 2,00,000 Preference shares of Ayushi Itd at a discount of 10%. The value of debentures issued by Ayush Itd is __________.?
A. 2,00,000
B. 2,20,000
C. 1,80,000
D. 1,90,000
19. Excel Ltd has paid up share capital of Rs. 3,50,000 divided into equity shares of Rs. 10 each, called & paid up Rs.8 each. Under the Internal reconstruction, the company decides to cancel the liability of members to the extent of Rs.1 per share. What will be the number of equity shares and its paid up value in the balance sheet after Implementation of this scheme?
A. 35,000 equity shares and Rs. 3,50,000
B. 35,000 equity shares and Rs. 2,80,000
C. 35,000 equity shares and Rs. 3,15,000
D. 43,750 equity shares and Rs. 3,50,000
20. KC Ltd is a holding company of NK Ltd. NK Itd is holding company of JK ltd while JK ltd is a holding company MK Itd. Which of the following statement is true for the given situation?
A. NK Ltd is sub-subsidiary of KC Itd
B. JK Ltd is subsidiary of KC Itd.
C. MK Ltd is sub-subsidiary company of JK ltd
D. JK Ltd is holding company of MK Ltd and sub-subsidiary company of KC Ltd.
21. Which of the following is the correct entry for maintaining Statutory Reserves of Transferor Company in the books of Transferee company ?
A. Goodwill A/c Dr_______To Amalgamation Adjustment A/c
B. Statutory Reserves A/c Dr_______To Amalgamation Adjustment A/c
C. Amalgamation Adjustment A/c Dr________To Statutory Reserves A/c
D. Amalgamation Adjustment A/c Dr________To Goodwill A/c
22. A new company, R Itd was formed to take over the business of P Ltd. & Q Ltd. on 31/03/2020. The balance sheet of P Ltd. & Q Ltd. showed 10% Debenture of Rs. 30,00,000 & Rs. 15,00,000 respectively. R Ltd. agreed to discharge these debentures by issuing such a number of its 15 %, Debentures of Rs.100 each so as to maintain the same amount of interest. What will be the agreed value of Debentures taken over _______ & _________.
A. Rs. 30,00,000 & Rs. 15,00,000
B. Rs. 20,00,000 & Rs. 30,00,000
C. Rs. 20,00,000 & Rs. 10,00,000
D. Rs. 15,00,000 & Rs. 30,00,000
23. Which the following is incorrect ________.?
A. The two companies amalgamate to enjoy economies of large scale operations
B. The companies amalgamate to increase the managerial effectiveness
C. The companies amalgamate to decrease the cut-throat competition and increase the market share.
D. The two companies amalgamate to increase their number of employees,
24. The upward revaluation of the assets of subsidiary company on acquisition of equity shares by controlling company leads to __________?
A. Capital loss and increase in revenue profits
B. Capital profit and decrease in revenue profits
C. Revenue loss and increase in capital profits
D. Decrease in the depreciation of assets in the post acquisition period
25. Rapid Ltd absorbed the business of Fast Ltd. and agreed to issue One equity shares of Rs. 10 each, 8 paid up at a premium of Rs.4 against two equity share and also to issue One 10% preference shares of Rs. 10 each, 5 paid up at a premium of Rs. 3 against every two preference shares of Fast Ltd. The share capital of Fast Ltd. consists of 3,00,000 equity shares of Rs. 5 each fully paid up and 2,00,000, 8% preference shares of Rs. 10 each fully paid up. The transferee company will credit Rs. __________ to Security premium account.
A. Rs. 5,00,000
B. Rs. 6,00,000
C. Rs. 3,00,000
D. Rs. 9,00,000
