The two companies, Moon Light Co. Ltd. and Star Light Co. Ltd., agreed to amalgamate and form a new company called Sun Light Co. Ltd. To calculate the purchase consideration: 1) The net assets (total assets - total liabilities) of Moon Light Co. Ltd. were calculated as Rs. 1,090,000. 2) The net assets of Star Light Co. Ltd. were calculated as Rs. 620,000. 3) Journal entries were made in the books of Sun Light Co. Ltd. to record the purchase of assets and liabilities from both companies and issuance of shares as payment.

1. Chapter # 3
Accounting for Company –
Amalgamation
Sameer Hussain
www.a4accounting.weebly.com

2. Accounting for Company – Amalgamation
Chapter # 3
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Sameer Hussain www.a4accounting.weebly.com
SYLLABUS ACCORDING TO UNIVERSITY OF KARACHI:
 Accounting for companies.
 Amalgamation.
WHAT THE EXAMINER USUALLY ASK?
 Computation of purchase consideration and number of shares.
 General Journal entries in the books of old companies.
 General Journal entries in the books of new company.
 Initial Balance Sheet of new company.

3. Accounting for Company – Amalgamation
Chapter # 3
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AMALGAMATION
The combination of two or more companies in which the old companies merge to form a new
company is called amalgamation. For example Company “A” and Company “B” amalgamate to
form a Company “C”. All the assets and liabilities of both old companies (A and B) are
transferred to new company (C). In that sense the company “C” is acquiring the company “A”
and company “B”.
PURCHASE CONSIDERATION
Purchase consideration is the amount paid by the new company to both old companies. The
purchase consideration can be made in two different ways:
 Purchase consideration by net asset method.
 Purchase consideration by lump sum method.
a) PURCHASE CONSIDERATION BY NET ASSET METHOD
In this method the purchase consideration is calculated according to the value of net asset (total
assets – total liabilities). It means that the amount paid to the old companies is equal to their
book value (if liquidation expenses are not paid separately by new company) and no goodwill or
capital reserve arises.
COMPUTATION OF PURCHASE CONSIDERATION:
“A” Co. “B” Co.
Total assets XXX XXX
Less: Total liabilities (XXX) (XXX)
Net assets XXX XXX
Add: Liquidation expense XXX XXX
Purchase consideration XXX XXX
b) PURCHASE CONSIDERATION BY LUMP SUM METHOD
In this method the new company paid the amount of consideration without calculating the net
assets value. In this method there is a chance of goodwill or capital reserve.
COMPUTATION OF PURCHASE CONSIDERATION:
Company – A:
XXX no. of shares @ Rs.XX each. Rs.XXX
Company – B:
XXX no. of shares @ Rs.XX each. Rs.XXX
GENERAL ENTRIES IN THE BOOKS OF OLD COMPANY
1- Entry to record the transfer of assets:
Realization Debit
Assets (all) Credit
---------------------------------------------------------------------------------------------------------------
2- Entry to record the transfer of liabilities:
Liabilities Debit
Realization Credit
---------------------------------------------------------------------------------------------------------------
3- Entry to record the purchase consideration:
Receivable from purchasing company Debit
Realization Credit
---------------------------------------------------------------------------------------------------------------

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Chapter # 3
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4- Entry to record the purchase consideration received:
Shares – in Debit
Debentures – in Debit
Cash Debit
Receivable from purchasing company Credit
---------------------------------------------------------------------------------------------------------------
5- Entry to close the shareholder’s equity account:
Share capital Debit
Retained earning Debit
Share premium Debit
Payable to shareholders Credit
---------------------------------------------------------------------------------------------------------------
6- Entry to record the payment to shareholders:
Payable to shareholders Debit
Shares – in Credit
Debentures – in Credit
Cash Credit
-----------------------------------------------------------------------------------------------------------------
GENERAL ENTRIES IN THE BOOKS OF NEW COMPANY
1- Entry to record the purchase of assets and liabilities from A company:
Assets Debit
Liabilities Credit
Payable to old company (A) Credit
----------------------------------------------------------------------------------------------------------------
2- Entry to record the payment of purchase consideration to A company:
Payable to old company (A) Debit
Debentures – in Credit
Cash Credit
Shares – in Credit
----------------------------------------------------------------------------------------------------------------
3- Entry to record the purchase of assets and liabilities from B Company:
Assets Debit
Liabilities Credit
Payable to old company (B) Credit
----------------------------------------------------------------------------------------------------------------
4- Entry to record the payment of purchase consideration to B Company:
Payable to old company (B) Debit
Debentures – in Credit
Cash Credit
Shares – in Credit
ILLUSTRATION # 1: (NET ASSET METHOD)
ABC Co. Ltd. and XYZ Co. Ltd. have agreed to amalgamate. A new company A2Z Co. Ltd. has been
formed to take over the both companies. After negotiations the financial position of both
companies is shown in the following balance sheet as on December 31, 2009.
ABC Co. Ltd. (Rs.) XYZ Co. Ltd. (Rs.)
Total assets 500,000 470,000
Total liabilities 140,000 170,000
Share capital 360,000 300,000

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Chapter # 3
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REQUIRED
(a) Compute purchase consideration.
(b) General Journal entries in the books of ABC Co. Ltd. and XYZ Co. Ltd.
(c) General Journal entries in the books of A2Z Co. Ltd.
(d) Initial balance sheet of A2Z Co. Ltd. on 31 December 2009.
SOLUTION # 1:
Computation of Purchase Consideration:
ABC Co. Ltd. (Rs.) XYZ Co. Ltd. (Rs.)
Total assets 500,000 470,000
Less: Total liabilities 140,000 170,000
Purchase consideration 360,000 300,000
Number of shares = 360,000/10 300,000/10
Number of shares = 36,000 30,000
ABC Co. Ltd.
General Journal
Date Particulars P/R Debit Credit
1 Realization 500,000
Assets 500,000
(To record the transfer of assets to A2Z Co. Ltd.)
2 Liabilities 140,000
Realization 140,000
(To record the transfer of liabilities to A2Z Co. Ltd.)
3 Receivable from A2Z Co. Ltd. 360,000
Realization 360,000
(To record the purchase consideration)
4 Shares – in 360,000
Receivable from A2Z Co. Ltd. 360,000
(To record the shares received for purchase
consideration from A2Z Co. Ltd.)
5 Share capital 360,000
Payable to shareholders 360,000
(To record the closing of shareholders’ equity)
6 Payable to shareholders 360,000
Shares – in 360,000
(To record the shares issued to the shareholders)
XYZ Co. Ltd.
General Journal
Date Particulars P/R Debit Credit
1 Realization 470,000
Assets 470,000
(To record the transfer of assets to A2Z Co. Ltd.)
2 Liabilities 170,000
Realization 170,000
(To record the transfer of liabilities to A2Z Co. Ltd.)
3 Receivable from A2Z Co. Ltd. 300,000
Realization 300,000
(To record the purchase consideration)

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Chapter # 3
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Date Particulars P/R Debit Credit
4 Shares – in 300,000
Receivable from A2Z Co. Ltd. 300,000
(To record the shares received for purchase
consideration from A2Z Co. Ltd.)
5 Share capital 300,000
Payable to shareholders 300,000
(To record the closing of shareholders’ equity)
6 Payable to shareholders 300,000
Shares – in 300,000
(To record the shares issued to the shareholders)
A2Z Co. Ltd.
General Journal
Date Particulars P/R Debit Credit
1 Assets 500,000
Liabilities 140,000
Payable to ABC Co. Ltd. 360,000
(To record the purchase of assets and liabilities
from ABC Co. Ltd.)
2 Payable to ABC Co. Ltd. 360,000
Ordinary share capital (36,000 x 10) 360,000
(To record the shares issued to the ABC Co. Ltd.)
3 Assets 470,000
Liabilities 170,000
Payable to XYZ Co. Ltd. 300,000
(To record the purchase of assets and liabilities
from XYZ Co. Ltd.)
4 Payable to XYZ Co. Ltd. 300,000
Ordinary share capital (30,000 x 10) 300,000
(To record the shares issued to the XYZ Co. Ltd.)
A2Z Co. Ltd.
Balance Sheet
As on 31 December 2009
Equities Assets
Shareholder’s Equity: Assets 970,000
Issued & Paid-up Capital:
66,000 ordinary shares
@ Rs.10 each 660,000
Total shareholder’s equity 660,000
Liabilities 310,000
Total equities 970,000 Total assets 970,000
ILLUSTRATION # 2: (LUMP SUM METHOD)
On January 1, 2010 balance sheet of A Ltd. and B Ltd. appeared as follows:
A Ltd. (in Rs.) B Ltd. (in Rs.)
Cash 40,000 90,000
Assets 300,000 400,000
Liabilities 40,000 40,000
Shares capital (Rs.10 each) 300,000 450,000

7. Accounting for Company – Amalgamation
Chapter # 3
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The two companies amalgamate on January 1, 2010 to form C Ltd. on the following conditions:
(a) Authorized capital of C Ltd. is to be 120,000 ordinary shares of Rs.10 each.
(b) All assets and liabilities of A Ltd. are taken at book value and shareholders are issued
33,000 shares (fully paid up) in C Ltd.
(c) All the assets and liabilities of B Ltd. are taken at book value and the shareholders are
issued 40,000 shares (fully paid up) in C Ltd.
(d) Liquidation expenses paid by the C Ltd. Rs.12,000 to each liquidating company.
REQUIRED
(a) Give journal entries in the books of both liquidating companies.
(b) Give journal entries in the books of C Ltd.
(c) Balance sheet of C Ltd. on January 1, 2010.
SOLUTION # 2:
Computation of Purchase Consideration:
A Ltd. Rupees
33,000 ordinary shares @ Rs.10 each 330,000
Add: Liquidation expense (Cash) 12,000
Purchase consideration 342,000
B Ltd. Rupees
40,000 ordinary shares @ Rs.10 each 400,000
Add: Liquidation expense (Cash) 12,000
Purchase consideration 412,000
A Ltd.
General Journal
Date Particulars P/R Debit Credit
1 Realization 340,000
Assets 300,000
Cash 40,000
(To record the transfer of assets to C Ltd.)
2 Liabilities 40,000
Realization 40,000
(To record the transfer of liabilities to C Ltd.)
3 Receivable from C Ltd. 342,000
Realization 342,000
(To record the purchase consideration)
4 Shares – in 330,000
Cash 12,000
Receivable from C Ltd. 342,000
(To record the shares and cash received for
purchase consideration from C Ltd.)
5 Realization 12,000
Cash 12,000
(To record the liquidation expense paid)
6 Share capital 300,000
Payable to shareholders 300,000
(To record the closing of shareholders’ equity)
7 Realization 30,000
Payable to shareholders 30,000
(To record the closing of realization account)

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Chapter # 3
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Date Particulars P/R Debit Credit
8 Payable to shareholders 330,000
Shares – in 330,000
(To record the shares issued to the shareholders)
Realization
3 Assets 340,000 1 Receivable from C Ltd. 342,000
5 Cash 12,000 4 Liabilities 40,000
7 Payable to shareholders 30,000
382,000 382,000
B Ltd.
General Journal
Date Particulars P/R Debit Credit
1 Realization 490,000
Assets 400,000
Cash 90,000
(To record the transfer of assets to C Ltd.)
2 Liabilities 40,000
Realization 40,000
(To record the transfer of liabilities to C Ltd.)
3 Receivable from C Ltd. 412,000
Realization 412,000
(To record the purchase consideration)
4 Shares – in 400,000
Cash 12,000
Receivable from C Ltd. 412,000
(To record the shares and cash received for
purchase consideration from C Ltd.)
5 Realization 12,000
Cash 12,000
(To record the liquidation expense paid)
6 Share capital 450,000
Payable to shareholders 450,000
(To record the closing of shareholders’ equity)
7 Payable to shareholders 50,000
Realization 50,000
(To record the closing of realization account)
8 Payable to shareholders 400,000
Shares – in 400,000
(To record the shares issued to the shareholders)
Realization
3 Assets 490,000 1 Receivable from C Ltd. 412,000
5 Cash 12,000 4 Liabilities 40,000
7 Payable to shareholders 50,000
502,000 502,000

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Chapter # 3
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C Ltd.
General Journal
Date Particulars P/R Debit Credit
1 Assets 300,000
Cash 40,000
Goodwill 42,000
Liabilities 40,000
Payable to A Ltd. 342,000
(To record the purchase of assets and liabilities
from A Ltd.)
2 Payable to A Ltd. 342,000
Ordinary share capital (33,000 x 10) 330,000
Cash
(To record the shares & cash paid to the A Ltd.)
3 Assets 400,000
Cash 90,000
Liabilities 40,000
Capital reserve 38,000
Payable to B Ltd. 412,000
(To record the purchase of assets and liabilities
from B Ltd.)
4 Payable to B Ltd. 412,000
Ordinary share capital (40,000 x 10) 400,000
Cash 12,000
(To record the shares & cash paid to B Ltd.)
C Ltd.
Balance Sheet
As on 1January 2010
Equities Assets
Shareholder’s Equity: Goodwill 42,000
Authorized Capital: Assets 700,000
120,000 ordinary shares Cash 106,000
@ Rs.10 each 1,200,000
Issued & Paid-up Capital:
73,000 ordinary shares
@ Rs.10 each 730,000
Capital reserve 38,000
Total shareholder’s equity 768,000
Liabilities 80,000
Total equities 848,000 Total assets 848,000

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Chapter # 3
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PRACTICE QUESTIONS
Question # 1: 1995 – Regular (Advanced & Cost Accounting)–UOK
The Moon Light Co. Ltd. and the Star Light Co. Ltd. have agreed to amalgamate. A new company
Sun Light Co. Ltd. has been formed to take over the both companies. After negotiations the
financial position of both companies is shown in the following balance sheet as on October 31,
1995.
Moon Light Co. Ltd.
Balance Sheet
As on October 31, 1995
Assets (in Rs.) Equities (in Rs.)
Cash and bank balances 45,000 Accounts payable 100,000
Accounts receivable 150,000 Issued and Paid – Up Capital:
Merchandise inventory 155,000 100,000 Ordinary shares
Land and building 490,000 @ Rs.10 fully paid 1,000,000
Machinery and plant 200,000 Retained earnings 90,000
Patents 150,000
1,190,000 1,190,000
Star Light Co. Ltd.
Balance Sheet
As on October 31, 1995
Assets (in Rs.) Equities (in Rs.)
Cash 500,000 Accounts payable 110,000
Accounts receivable 25,000 General reserve 50,000
Merchandise inventory 25,000 Issued and Paid – Up Capital:
Land and building 290,000 81,600 Ordinary shares
Machinery and plant 280,000 @ Rs.10 fully paid 510,000
Goodwill 60,000 Retained earnings 60,000
730,000 730,000
REQUIRED
Compute: What amount payable is arrived at each, and prepare the journal entries in the books
of Sun Light Co. Ltd. Also prepare amalgamated balance sheet of the new company.
Question # 2: 1992 – Private (Advanced & Cost Accounting)–UOK
A Ltd. and B Ltd. decide to amalgamate C Ltd. take over the assets and liabilities of the two
companies. C Ltd. issues ordinary shares of Rs.10 each to the value of net assets to each of the
old companies. The balance sheets of A Ltd. and B Ltd. on the date of amalgamation were:
Assets A Ltd. (in Rs.) B Ltd. (in Rs.)
Plant assets 180,000 200,000
Patents 35,000 ---
Merchandise inventory 150,000 80,000
Accounts receivable 50,000 60,000
Cash 15,000 50,000
Profit and loss 10,000 ---
Total assets 440,000 390,000
Liabilities and Capital A Ltd. (in Rs.) B Ltd. (in Rs.)
Ordinary share capital 360,000 190,000
Accounts payable 80,000 50,000
General reserve --- 90,000
Profit and loss --- 60,000
Total liabilities and capital 616,000 546,000

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Chapter # 3
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REQUIRED
(a) Compute purchase consideration to A Ltd. and B Ltd.
(b) General Journal entries in the books of A Ltd. and B Ltd.
(c) Entries in the General Journal of C Ltd.
Question # 3: 2013 – Private (Advanced & Cost Accounting)–UOK
Two companies carrying on similar business enter into a contract to amalgamation. A new
company called Al-Falah Ltd. being formed to take over the assets and liabilities of both the
companies. The agreed balances in the balance sheet of each company are as under:
AMBER LTD.
Share capital 1,250,000 Building 480,000
Accounts payable 200,000 Machinery 450,000
Merchandise 370,000
Bank 50,000
Profit & loss 100,000
Total 1,450,000 Total 1,450,000
RANIA LTD.
Share capital 1,000,000 Building 375,000
General reserve 250,000 Machinery 500,000
Accounts payable 150,000 Merchandise 225,000
Profit & loss 50,000 Accounts receivable 175,000
Bank 175,000
Total 1,450,000 Total 1,450,000
In the contract, it was provided that fully paid Rs.100 shares shall be issued by Al-Falah Ltd. to
the value of net assets of each of the old companies.
REQUIRED
(i) Calculate the amount of purchase consideration of the two companies.
(ii) Record journal entries in the books of Al-Falah Ltd. and also prepare its balance sheet.
Question # 4: 2007 – Regular (Advanced & Cost Accounting)–UOK
Two companies A and B carrying on similar business decided to amalgamate and a new
company called AB Company Ltd. being formed to take over the assets and liabilities of each.
The followings are the respective balance sheets, showing the values of assets as agreed in the
contract and it is provided that fully paid up Rs.100 shares will be issued by the new company to
the value of the net assets of each of the old companies:
Assets A. Co. Ltd. B. Co. Ltd.
Cash 16,500 52,500
Accounts receivable --- 52,500
Merchandise inventory 112,500 67,500
Retained earnings 30,000 ---
Building 142,500 112,500
Machinery 135,000 150,000
Total assets 436,500 435,000
Liabilities and Capital A. Co. Ltd. B. Co. Ltd.
Accounts payable 61,500 45,000
Share capital 375,000 300,000
Reserve fund --- 75,000
Retained earnings --- 15,000
Total liabilities and capital 436,500 435,000

12. Accounting for Company – Amalgamation
Chapter # 3
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REQUIRED
(a) Compute purchase consideration for each liquidating Co.
(b) State what shares the liquidator of each company will receive in the new company.
(c) Give entries in the books of new company.
Question # 5: 1995 – Private (Advanced & Cost Accounting)–UOK
The balance sheets of the two private companies are given below:
M/S. Nisar Ahmed (Pvt.) Ltd.
Balance Sheet
As on June 30, 1994
Equities (in Rs.) Assets (in Rs.)
Share Capital: Machinery and equipment 150,000
5,400 Shares of Rs.150 each 450,000 Land and building 200,000
Accounts payable 50,000 Merchandise inventory 80,000
Cash at bank 40,000
Profit & loss account 30,000
Total equities 500,000 Total assets 500,000
M/S. Qurban Ali (Pvt.) Ltd.
Balance Sheet
As on June 30, 1994
Equities (in Rs.) Assets (in Rs.)
Share Capital: Land and building 250,000
4,500 Shares of Rs.150 each 375,000 Machinery and equipment 140,000
Accounts payable 40,000 Merchandise inventory 50,000
Reserve (General) 30,000 Accounts receivable 15,000
Profit & loss account 25,000 Cash at bank 15,000
Total equities 470,000 Total assets 470,000
On July 1, 1994, both the companies are of the opinion that the companies should be
amalgamated to avoid future competition as they are doing the same business. Hence, they
agreed to enter into a contract to amalgamate their business. The new business will be carried
on under the name and style of M/S. Nisar and Qurban (Pvt.) Ltd. under the term that fully paid
shares of Rs.100 each should be issued by the new company of the net assets.
REQUIRED
(a) State the number of shares the liquidator of each Co. will receive from the new Co.
(b) Pass necessary journal entries at the time of amalgamation in the book of newly formed
company.
(c) Prepare the opening balance sheet of the new company as on July 1, 1994.
Question # 6: 1999 – Regular & Private (Advanced & Cost Accounting)–UOK
On January 1, 1999 balance sheet data of Khairpur Limited and Noori Abad Limited are as
follows:
Khairpur Limited Noori Abad Limited
Cash 7,000 41,000
Accounts receivable 104,000 97,000
Merchandise inventory 85,000 100,000
Land 60,000 45,000
Building 125,000 140,000
Goodwill 20,000 ---
Retained earnings 10,000
401,000 433,000

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Chapter # 3
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Khairpur Limited Noori Abad Limited
Allowance for bad debts 4,000 3,000
Allowance for depreciation 25,000 30,000
Accounts payable 47,000 50,000
Share capital 300,000 350,000
Reserve for contingencies 5,000 ---
Retained earnings 20,000
401,000 433,000
Both the companies have agreed to amalgamate on January 1, 1999. For this purpose a new
company, Sindh Co. Limited has been formed with an authorized capital of Rs.1,000,000 divided
into ordinary shares of Rs.10/- each. The new company issued shares equal to the value of their
net assets in payment of purchase consideration to each of the old company and also paid
Rs.15,000 to each liquidating Co. for their liquidating expenses and paid preliminary expenses
Rs.25,000/-.
REQUIRED
(a) Amount of purchase consideration of each company and the number of shares to be
issued.
(b) Entries in general journal of Sindh Company Limited.
(c) Initial balance sheet of Sindh Company Limited.
Question # 7: 2006 – Regular (Advanced Accounting)–UOK
Balance sheets of Blue Limited and Bright Limited as on January 1, 2006 are given below:
Assets Blue Limited Bright Limited
Cash and bank balance 10,000 50,000
Accounts receivable 100,000 105,000
Merchandise inventory 80,000 95,000
Land & building 800,000 300,000
Goodwill 110,000 ---
1,100,000 550,000
Liabilities & Equity
Accounts payable 40,000 50,000
Ordinary share capital (Rs.10 ordinary shares fully paid) 1,000,000 400,000
General reserves --- 60,000
Retained earnings 60,000 40,000
1,100,000 550,000
On January 1, 2006 both companies agreed to amalgamate and form Indigo Limited with an
authorized capital of Rs.10,000,000 divided into ordinary shares of Rs.10 each.
Indigo Limited issued shares equal to the value of their net assets in payment of purchase
consideration of Blue Limited and Bright Limited. The new company also paid Rs.25,000 to each
liquidating company for their liquidation expenses.
REQUIRED
(a) Amount of purchase consideration for each liquidating company and the number of
shares to be issued.
(b) Entries in General Journal of Indigo Limited.
(c) Initial balance sheet of Indigo Limited as on January 1, 2006.

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Question # 8: 2004 – Private (Advanced Accounting)–UOK
The respective balance sheets of Fiza Ltd. and Aimen Ltd. stood on 31, Dec. 2004 as under:
Assets (in Rs.) Fiza Ltd. Aimen Ltd.
Building (Net) 800,000 1,400,000
Plant & machinery (Net) 650,000 800,000
Goodwill --- 100,000
Merchandise inventory 100,000 250,000
Accounts receivable 60,000 300,000
Cash 40,000 150,000
Profit and loss 50,000 ---
Total: 1,700,000 3,000,000
Equities (in Rs.) Fiza Ltd. Aimen Ltd.
Share capital (in Rs.10 shares) 1,500,000 2,500,000
Accounts payable 200,000 300,000
Retained earnings --- 200,000
Total: 1,700,000 3,000,000
On 1st January 2005, both the companies agreed to amalgamate. A new company Nadeem Ltd.
was formed with an authorized capital of Rs.5,000,000 (divided into 500,000 shares of Rs.10
each) to take over assets and liabilities of the both the concerns at book values with the
exception of buildings which were taken at 20% more than their book values.
REQUIRED
(1) Compute the amount payable to each company and number of shares to be issued to the
shareholders of the liquidation companies.
(2) Journal entries in the books of Nadeem Ltd.
(3) Prepare initial balance sheet of Nadeem Ltd.
Question # 9: 2005 – Private (Advanced Accounting)–UOK
On January 1, 2005 balance sheet of Karim Ltd. and Rahim Ltd. appeared as follows:
Assets Karim Ltd. Rahim Ltd.
Cash 32,000 16,000
Accounts receivable 24,000 48,000
Merchandise 56,000 24,000
Prepaid insurance 8,000 ---
Plant assets 120,000 144,000
Equities
Accounts payable 40,000 24,000
Accumulated depreciation 40,000 48,000
Shares capital (Rs.10 each) 160,000 160,000
The two companies amalgamate on January 1, 2005 to form Bright Star Ltd. on the following
conditions:
(a) Authorized capital of Bright Star Ltd. is to be 80,000 ordinary shares of Rs.10 each.
(b) All assets and liabilities of Karim Ltd. are taken at book value and shareholders are
issued 24,000 shares (fully paid up) in Bright Star Ltd.
(c) All the assets and liabilities of Rahim Ltd. are taken at book value and the shareholders
are issued 19,200 shares (fully paid up) in Bright Star Ltd.
(d) Preliminary expenses paid by the new company Rs.8,000.
REQUIRED
(a) Give journal entries in the books of Bright Star Ltd.
(b) Balance sheet of Bright Star Ltd. on January 1, 2005.

15. Accounting for Company – Amalgamation
Chapter # 3
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Question # 10: 1997 – Private (Advanced & Cost Accounting)–UOK
On January 1, 1996 Balance Sheet data of Amin Co. and Fahim Co. appeared as follows:
Assets Amin Co. (in Rs.) Fahim Co, (in Rs.)
Cash 20,000 10,000
Accounts receivable 15,000 30,000
Merchandise 35,000 15,000
Prepaid insurance 5,000 ---
Plant assets 75,000 90,000
Equities
Accounts payable 25,000 15,000
Accumulated depreciation (Plant assets) 25,000 30,000
Shares capital (Rs.10 par) 100,000 100,000
The two companies amalgamate on January 1, 1996 to form Amin Fahim Company on the
following conditions:
(a) Authorized capital of Amin Fahim Co. is to be 50,000 ordinary shares of Rs.10 each.
(b) All the assets and liabilities of Amin Co. are taken over at book values and its
shareholders are issued 15,000 shares (fully paid up) in Amin Fahim Co.
(c) All the assets and liabilities of Fahim Co. are taken over at book values and its
shareholders are issued 12,000 shares (fully paid up) in Amin Fahim Co.
(d) The new company makes a public issue of 13,000 shares of Rs.10 each at Rs.13 per
share; the issue is fully subscribed and paid for in full.
REQUIRED
(a) General Journal entries in the books of Amin Fahim Company. (Preliminary expenses
paid by the company Rs.5,000).
(b) Balance sheet of Amin Fahim Company on January 1, 1996.
Question # 11: 20011 – Private (Advanced & Cost Accounting)–UOK
Sun Ltd. and Moon Ltd. decided to amalgamate their business and a new company Stars Ltd. is
formed to take over all assets and liabilities of the two concerns. The new Co. Stars Ltd. issue
110,000 shares of Rs.10 each at Rs.20 to Sun Ltd. and 90,000 shares of Rs.10 each at Rs.20 to
Moon Ltd. The following are the balance sheets:
Sun Limited
Balance Sheet December 31, 2010
Cash Rs.120,000 Accounts payable Rs.180,000
Accounts receivable 400,000 General reserves 300,000
Merchandise inventory 600,000 Share capital
Machines 1,200,000 (190,000 shares of Rs.10 each) 1,900,000
Furniture 60,000
2,380,000 2,380,000
Moon Limited
Balance Sheet December 31, 2010
Cash Rs.250,000 Accounts payable Rs.200,000
Accounts receivable 300,000 General reserves 100,000
Merchandise inventory 700,000 Share capital
Machines 800,000 (185,000 shares of Rs.10 each) 1,850,000
Office equipment 100,000
2,150,000 2,150,000
REQUIRED
(a) Give entries in General Journal form in the books of Stars Ltd.
(b) Prepare amalgamated balance sheet in the books of Stars Ltd.

16. Accounting for Company – Amalgamation
Chapter # 3
Page 48
Sameer Hussain www.a4accounting.weebly.com
Question # 12: 2001 – Regular & Private (Advanced & Cost Accounting)–UOK
Shan Ltd. and Adnan Ltd. decided to amalgamate their business and a new company S and A Co.
is formed to take over all assets and liabilities of the two concerns. The new Co. S and A Ltd.
issue 110,000 shares of Rs.10 each at Rs.20 to Shan Ltd. and 90,000 shares of Rs.10 each at
Rs.20 to Adnan Ltd. The following are the balance sheets:
Shan Limited
Balance Sheet December 31, 2000
Cash Rs.120,000 Accounts payable Rs.180,000
Accounts receivable 400,000 General reserves 300,000
Merchandise inventory 600,000 Share capital
Machines 1,200,000 (190,000 shares of Rs.10 each) 1,900,000
Furniture 60,000
2,380,000 2,380,000
Adnan Limited
Balance Sheet December 31, 2000
Cash Rs.250,000 Accounts payable Rs.200,000
Accounts receivable 300,000 General reserves 100,000
Merchandise inventory 700,000 Share capital
Machines 800,000 (185,000 shares of Rs.10 each) 1,850,000
Office equipment 100,000
2,150,000 2,150,000
REQUIRED
(c) Give entries in General Journal form in the books of Shan Ltd.
(d) Prepare amalgamated balance sheet in the books of S and A Co.
(e) Compute purchase consideration for each liquidating Co.
Question # 13: 2005 – Regular (Advanced Accounting)–UOK
Zulfi Ltd. and Lutfi Ltd. decided amalgamate their businesses and a new company ZL Ltd. is
formed to take over all the assets and liabilities of the two concerns.
The new company ZL Ltd. issues 100,000 shares of Rs.10 each at Rs.20 to Zulfi Ltd. and
80,000 shares of Rs.10 each at Rs.20 to Lutfi Ltd. The following are the balance sheets of the two
companies:
Zulfi Ltd.
Balance sheet as at December 31, 2004
Cash 100,000 Accounts payable 380,000
Accounts receivable 350,000 General reserve 100,000
Merchandise inventory 650,000 Share capital (190,000 shares of Rs.10 each) 1,900,000
Machinery 1,220,000
Furniture 60,000
2,380,000 2,380,000
Lutfi Ltd.
Balance sheet as at December 31, 2004
Cash 200,000 Accounts payable 180,000
Accounts receivable 350,000 General reserve 120,000
Merchandise inventory 700,000 Share capital (185,000 shares of Rs.10 each) 1,850,000
Machinery 800,000
Office equipment 100,000
2,150,000 2,150,000
REQUIRED
(a) Compute purchase consideration for each liquidating Co.
(b) Give general journal entries in the books of Zulfi Ltd.
(c) Prepare amalgamated balance sheet of ZL Ltd.

17. Accounting for Company – Amalgamation
Chapter # 3
Page 49
www.a4accounting.weebly.com Sameer Hussain
Question # 14: 2008 – Private (Advanced & Cost Accounting)–UOK
Hafeez Co. Ltd and Rasheed Co. Ltd. decided to amalgamate their business and a new company
Hameed Co. Ltd. was formed to take over all assets and liabilities of the two companies. Hameed
Co. Ltd. issued 100,000 shares of Rs.10 each at Rs.26 to Hafeez Co. Ltd. and 98,000 shares of
Rs.10 each at Rs.26 to Rasheed Co. Ltd. At the time of amalgamation following were the balance
sheets of two companies:
Hafeez Co. Ltd.
Balance Sheet as on Dec. 31, 2007
Assets Equities
Cash 110,000 Accounts payable 280,000
Accounts receivable 400,000 Share Capital:
Merchandise inventory 600,000 190,000 shares of Rs.10 1,900,000
Building 1,300,000 General reserves 300,000
Furniture 70,000
2,480,000 2,480,000
Rasheed Co. Ltd.
Balance Sheet as on Dec. 31, 2007
Assets Equities
Cash 200,000 Accounts payable 200,000
Accounts receivable 350,000 Share Capital:
Merchandise inventory 600,000 185,000 shares of Rs.10 1,850,000
Building 900,000 General reserves 100,000
Furniture 100,000
2,150,000 2,150,000
REQUIRED
(a) Compute purchase consideration for each of the amalgamating company.
(b) Give all necessary entries in the General Journal of Hameed Co. Ltd.
(c) Prepare a balance sheet of Hameed Co. Ltd. after amalgamation.
Question # 15: 1993 – Regular (Advanced & Cost Accounting)–UOK
The following are the assets and equities of Faqeer Ltd. and Ameer Ltd. on June 30, 1993:
Faqeer Ltd. (Rs.) Ameer Ltd. (Rs.)
Current assets 60,000 400,000
Non – current assets 660,000 840,000
Investments --- 80,000
Accounts payable 300,000 200,000
5% Debentures payable --- 100,000
General reserves 40,000 60,000
Paid up capital (Rs.20 each) 480,000 800,000
Retained earnings (Dr.) 100,000 (Cr.) 160,000
The above companies enter into a contact to amalgamate a new company being formed under
the name of Rising Star Ltd.
The Rising Star Ltd. issued 60,000 shares of Rs.10 each to Faqeer Ltd. and 100,000 shares of
Rs.10 each to Ameer Ltd. The new company also issued 8% debentures to the debenture holders
of Ameer Ltd. at a premium of 5%. All the assets and liabilities of the companies were taken over
at book values.
REQUIRED
(a) Give journal entries in the books of Faqeer Ltd. and Ameer Ltd.
(b) Give journal entries in the books of Rising Star Ltd.

18. Accounting for Company – Amalgamation
Chapter # 3
Page 50
Sameer Hussain www.a4accounting.weebly.com
Question # 16: 1988 – Regular (Advanced & Cost Accounting)–UOK
On January 1, 1987, balance sheet of data of A Co. and B Co. appeared as follows:
Assets A Co. (in Rs.) B Co. (in Rs.)
Cash 10,000 4,000
Accounts receivable 20,000 10,000
Merchandise inventory 15,000 18,000
Prepaid insurance 4,000 ---
Plant assets 50,000 80,000
Equities A Co. (in Rs.) B Co. (in Rs.)
Allowance for depreciation – Plant 14,000 15,000
10% Bonds payable --- 20,000
Ordinary share capital (Rs.10 each) 50,000 50,000
Retained earnings 35,000 27,000
The two companies amalgamate on January 1, 1987 to form AB Co. on the following conditions:
1. Authorized capital of AB Co. to be 50,000 ordinary shares of Rs.10 each.
2. All the assets of A Co. (except cash and prepaid insurance) are taken over at book values
and its shareholders are issued 8,000 shares (fully paid up) in AB Co.
3. Of the assets of B Co. cash, accounts receivable and merchandise are taken over at book
values and plant assets are taken over at Rs.60,000. The bondholders are issued 2,100
shares and a suitable number of shares were issued to the shareholders of B Co.
REQUIRED
(a) General Journal entries in the books of the two liquidating companies.
(b) General Journal entries in the books of AB Co. (Preliminary expenses paid by the
company Rs.39,000).