Question

Calculate the amount of purchase consideration from the following details: The purchasing company agreed to issue 30000 equity shares of Rs.10 each and 12000 8% debentures of Rs.10 each at a premium of Rs.5 per debenture and 25000 in the form of cash. *

5,00,000

5,50,000

5,05,000

5,55,000​

Answer 1

Answer:

Under this Method, purchase consideration is ascertained by aggregating the agreed values of only those assets which have been taken over by the transferee company and deducting it from the agreed value of liabilities taken over.

Explanation:

It is calculated by dividing the net asset value of transferor company by price of one share of transferee company. The result figure then divided by number of existing shares of transferor company to find out the ratio. Intrinsic value – Net asset / Number of equity shares.

Under the purchase method, the transferee company accounts for the amalgamation either by incorporating the assets and liabilities at their existing carrying amounts or by allocating the consideration to individual identifiable assets and liabilities of the transferor company on the basis of their fair values at the ...

Purchase Consideration refers to the payment made by the transferee company to the transferor company for the business taken over. It includes all types of payments made in the form of the shares, securities, bonds or cash etc....

Advantages of Amalgamation

Competition between the companies gets eliminated.

R&D facilities are increased.

Operating cost can be reduced.

Stability in the prices of the goods is maintained.