Question

16. On Amalgamation, Share issue
Expenses A/c appearing on the Asset
side of Balance sheet of the vendor
company is closed by​

Answer 1

4. If the purchasing company agrees to bear the expenses of liquidation of the vendor company, the entry will be to debit Goodwill (or Capital Reserve) and oredit cash.

Is

Answer 2

Answer:

Accounting Standard (AS) 14

Accounting for Amalgamations

(This Accounting Standard includes paragraphs set in bold italic type

and plain type, which have equal authority. Paragraphs in bold italic type

indicate the main principles. This Accounting Standard should be read

in the context of the General Instructions contained in part A of the

Annexure to the Notification.)

Introduction

1. This standard deals with accounting for amalgamations and the

treatment of any resultant goodwill or reserves. This standard is directed

principally to companies although some of its requirements also apply to

financial statements of other enterprises.

2. This standard does not deal with cases of acquisitions which arise when

there is a purchase by one company (referred to as the acquiring company)

of the whole or part of the shares, or the whole or part of the assets, of

another company (referred to as the acquired company) in consideration for

payment in cash or by issue of shares or other securities in the acquiring

company or partly in one form and partly in the other. The distinguishing

feature of an acquisition is that the acquired company is not dissolved and its

separate entity continues to exist.

Definitions

3. The following terms are used in this standard with the meanings

specified:

(a) Amalgamation means an amalgamation pursuant to the

provisions of the Companies Act, 1956 or any other statute

which may be applicable to companies.

(b) Transferor company means the company which is amalgamated

into another company.(c) Transferee company means the company into which a

transferor company is amalgamated.

(d) Reserve means the portion of earnings, receipts or othersurplus

of an enterprise (whether capital or revenue) appropriated by

the management for a general or a specific purpose other than

a provision for depreciation or diminution in the value of assets

or for a known liability.

(e) Amalgamation in the nature of merger is an amalgamation

which satisfies all the following conditions.

(i) All the assets and liabilities of the transferor company

become, after amalgamation, the assets and liabilities of

the transferee company.

(ii) Shareholders holding not less than 90% of the face value

of the equity shares of the transferor company (other than

the equity shares already held therein, immediately before

the amalgamation, by the transferee company or its

subsidiaries or their nominees) become equity

shareholders of the transferee company by virtue of the

amalgamation.

(iii) The consideration for the amalgamation receivable by

those equity shareholders of the transferor company who

agree to become equity shareholders of the transferee

company is discharged by the transferee company wholly

by the issue of equity shares in the transferee company,

except that cash may be paid in respect of any fractional

shares.

(iv) The business of the transferor company is intended to be

carried on, after the amalgamation, by the transferee

company.

(v) No adjustment is intended to be made to the book values of

the assets and liabilities of the transferor company when

they are incorporated in the financial statements of the

transferee company except to ensure uniformity