110 accordingly, settle dues with creditors by driving discounts and cuts and to effect economies in operations. Such a process is called internal reconstruction which is carried out without liquidating the company and forming a new one. The other process of amalgamating the company or merge it with another under a scheme of reconstruction and rehabilitation is called External Reconstruction You must have studied the concepts of amalgamation and reconstruction of companies in Chapters 5 and 6 in Paper 1 Accounting of Intermediate (IPC) Course - Group L. In this unit, we will deal with some advanced problems for advanced knowledge on the topic. 4.3 Advanced Problems Amalgamation of Companies Illustration 1 Following are the summarised Balance Sheets of A Ltd. and B Ltd as at 31.3.2012: Particulars A Lid. B Ltd. Share capital: Equity shares 10 each (fully paid up) 10,00,000 6.00,000 Securities premium 2,00.000 General reserve 3,00,000 2,50,000 Profit and loss account 1,80,000 1,60,000 10% Debentures 5,00,000 Secured loan 3.00,000 Trade payables 2,60,000 1.70,000 24,40,000 14,80.000 Land and building 9,00,000 4.50,000 Plant and machinery 5,00,000 3.80,000 Investment 80,000 Inventory 5,20,000 3,50,000 Trade receivables 4,10,000 2.60.000 Cash at bank 30,000 40,000 24,40,000 14.80.000 The companies agree on a scheme of amalgamation on the following terms: (1) A new company is to be formed by name AB Ltd. () AB Ltd. to take over all the assets and liabilities of the existing companies. (ii) For the purpose of amalgamation, the shares of the existing companies are to valued as under A Ltd. = 18 per share BLtd. = 20 per share (iv) A contingent liability of A Ltd, of 60,000 is to be treated as actual existing liability (V) The shareholders of A Ltd. and B Ltd. are to be paid by issuing sufficient number of shares of AB Ltd. at a premium of 6 per share. (vi) The face value of shares of AB Ltd. are to be of 10 each. You are required to: (0) Calculate the purchase consideration (i.e., number of shares to be issued to A Ltd. and B Ltd.). () Pass journal entries in the books of A Ltd. for the transfer of assets and liabilities. (ii) Pass journal entries in the books of AB Ltd. for acquisition of A Ltd. and B Ltd. (iv) Prepare the Balance Sheet of AB Ltd