Question

Q.19 If purchase consideration is calculated as Assets taken over less external liabilities taken
over, both at market/agreed value, then this method of calculation is called
O A. Net Assets method
B. Net Payment method
o
C. Lumpsum method
D. Capital method​

Answer 1

Answer:

The amount of purchase consideration can be computed under any of the following four methods:- 1. Lump Sum Method 2. Net Worth or Net Assets Method 3. Net Payment Method 4. Intrinsic Value Method (Shares Exchange Method

Explanation:

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Answer 2

NET ASSETS OR NET WORTH METHOD

If purchase consideration is calculated as assets taken over less external liabilities taken over, both at market/ agreed value, then this method of calculation is called (A) Net assets method.

GETTING TO KNOW MORE ABOUT NET ASSETS METHOD:

* The purchase consideration is computed using this approach by adding up the values of different assets acquired by the purchasing firm and subtracting them from the values of various liabilities acquired by the purchasing company.

* For the purposes of calculating purchase consideration, the values of assets and liabilities are those that are agreed upon between the purchasing firm and the vendor business, rather than the values that show on the vendor company's Balance Sheet.

* If the transferee firm agrees to take over all of the transferor company's assets, including cash and bank balances, the transaction is complete.