Practice Test - 04 CA Intermediate Udesh May 2025 (Group 1) 27/10/2024
Total Marks : 35 Time : 60 Min.
ADVANCED ACCOUNTING
Question 1(i to iii) Carry 1 Mark
1.(i). X Ltd.’s purchase consideration is Rs.20,000 and (iii). When two or more companies carrying on similar
Net Assets Rs.6,000, then______. business decide to combine, a new company is
(1) Goodwill Rs. 14,000 formed, it is known as ..................
(2) Capital Reserve Rs. 14,000 (1) Amalgamation
(3) Goodwill Rs. 26,000 (2) Absorption
(4) Capital Reserve Rs. 26,000 (3) Internal reconstruction
(4) External reconstruction
(ii). Amalgamation adjustment reserve is opened in
books of amalgamated company to incorporate
(1) Assets of the amalgamating company
(2) Non- Statutory reserves of the amalgamating
company
(3) Statutory reserves of the amalgamating
company
(4) General reserve of the amalgamating
company
Subjective Question
2. The financial position of two companies Orange Ltd. and Yellow Ltd. as on 31st March, 2023 was as under:
Assets Orange Ltd. (₹) Yellow Ltd. (₹)
Goodwill 2,10,000 90,000
Building 7,90,000 2,50,000
Machinery 12,50,000 3,80,000
Inventory 6,60,000 3,30,000
Trade receivables 4,80,000 3,60,000
Cash at Bank 2,40,000 85,000
36,30,000 14,95,000
Liabilities Orange Ltd. (₹) Yellow Ltd. (₹)
Share Capital:
Equity shares of ₹10 each 25,00,000 9,00,000
9% Preference Shares of ₹ 100 each 2,50,000 -
10% Preference Shares of ₹100 each - 3,00,000
General Reserve 3,05,000 1,15,000
Retirement Gratuity fund 1,50,000 35,000
Trade Payables 4,25,000 1,45,000
36,30,000 14,95,000
Yellow Ltd. is absorbed by Orange Ltd. on the following terms:
a) 10% Preference Shareholders are to be paid, at 10% premium, by issue of 9% Preference Shares of Orange Ltd.
b) Goodwill of Yellow Ltd. is valued at ₹ 1,50,000, Buildings is worth ₹ 3,50,000, and Machinery ₹ 4,25,000.
c) Inventory of Yellow Ltd. has been shown at 10% above its cost and expected realization from Trade
Receivables is ₹ 3,33,000.
d) Equity Shareholders of Yellow Ltd. will be issued Equity Shares of Orange Ltd., at 10% premium.
You are required to
(i) Prepare necessary Ledger Accounts to close the books of Yellow Ltd.
(ii) Show the acquisition entries in the books of Orange Ltd.
(iii) Also draft the Balance Sheet of Orange Ltd. after putting through the scheme assuming that the assets and
liabilities of Yellow Ltd. are incorporated at fair value and assets and liabilities of Orange Ltd. are
incorporated at carrying values only as at 31st March, 2023
(16 Marks)
3. L Ltd. and S Ltd. were amalgamated on and from 1st April, 2023. A new company M Ltd. was formed to take over
the business of the existing companies. The summarized Balance Sheets of L Ltd. and S Ltd. as on 31st March,
2023 are given below:
(₹ In Lakhs) (₹ In Lakhs)
Liabilities L Ltd. S Ltd. Assets L Ltd. L Ltd.
Share Capital: Property, Plant & Equip.
Shares of ₹ 100 each fully paid 1,700 1,450 Land and Building 920 550
14% Preference shares of ₹ 100 640 350 Plant & Machinery 650 420
each
Reserves and Surplus Investments
Revaluation Reserve 250 160 Current Assets, Loans & 150 100
Advances
Capital Reserve 600 400 Inventory 650 538
Investment Allowance Reserve 100 60 Trade Receivables 660 540
Profit and Loss Account 30 24 Cash and Bank 770 502
Secured Loans
13% Debentures (₹ 100 each) 100 56
Unsecured Loans
Public Deposits 50 -
Current Liabilities and Provisions
Trade Payables 330 150
3,800 2,650 3,800 2,650
Additional Information:
(1) 13% Debenture holders of L Ltd. and S Ltd. are discharged by M Ltd. issuing such number of its 15%
Debentures of ₹ 100 each so as to maintain the same amount of interest.
(2) Preference shareholders of the two companies are issued equivalent number of 15% preference shares of M
Ltd. at a price of ₹ 125 per share (face value of ₹ 100).
(3) M Ltd. will issue 4 equity shares for each equity share of L Ltd & 3 equity shares for each equity share of S
Ltd. The shares are to be issued @ ₹ 35 each, having a face value of ₹ 10 per share
(4) Investment allowance reserve is to be maintained for 2 more years. Prepare the Balance Sheet of M Ltd. as on
1st April, 2023 after the amalgamation has been carried out if amalgamation in the nature of purchase.
(16 Marks)
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