2 Corp : Corp - Corp C Acco Q2 S Final (4) 3 My [ (12) to be recorded. Q.2 (a) L, M and N companies agrees to consolidate/amalgamate and form Company O. Net assets at appraised values and average adjusted earnings of the past five years, which the parties believe offer the most reliable estimate of future earning, are as follow: Co. L Co. M Co. N Total Rs in, 000 Rs in, 000 Net asset Contribution Rs in, 000 Rs in, 000 250,000 350,000 400,000 Percentage of above asset contribution 25% 1,000,000 35% 40% Earnings contribution 100% 35,000 45,000 60,000 140,000 Percentage of earnings 25% 32% 43% 100% To give equitable weightage to all three companies, the parties decided to also consider the earnings contribution of each company. In doing so they decided; i. That 10% returns is to be to be regarded as fair return on identifiable net assets. ii. Excess earnings are to be capitalized for goodwill as under a. For Companies A & B the excess earnings will be capitalized @ 25%. b. For Company C the excess earnings will be capitalized @ 20% I Required: i. Give your working to calculate the total contribution of each company by giving effect to the foregoing. ii. Give journal entries that would be recorded on the books of new company O if goodwill is (4) recognized and also give working how the shares of Company D will be distributed among the shareholders of the three companies. Assume the par value of Company O is Rs 10. iii. Give the journal entries supposing the goodwill is not recognized and also give working how the (3) company O issues shares to the shareholders of the three companies. (3) (b) A merger was affected on May 1st 2018 whereby Nishat Textile Mills took over the assets and assumed the liabilities of the Star Textile Mills for total consideration of Rs. 120,000,000, paying 90,000,000 cash and 200,000 shares of its stock that have a market value of Rs 150 per share on the date of acquisition. The Star Textiles Mills Balance Sheet on the date of merger is as follows: Current Assets Rs 28,000,000 Current Liabilities Rs 16,000,000 Act Go to o LP 27CH : Corp - (3 4 X Corp X 2 Corp X C Acco C Q2.C X Final S (5) W My CX + m.google.com/OMDYNTOONSMD/MM/ orporate Accoounting-Sping 2021B.pdf = Open with Google Docs Required: 1. Give your working to calculate the total contribution of each company by giving effect to the foregoing. (4) ii. Give journal entries that would be recorded on the books of new company O if goodwill is recognized and also give working how the shares of Company D will be distributed among the shareholders of the three companies. Assume the par value of Company O is Rs 10. (3) iii. Give the journal entries supposing the goodwill is not recognized and also give working how the company issues shares to the shareholders of the three companies. (3) (b) A merger was affected on May 1st 2018 whereby Nishat Textile Mills took over the assets and assumed the liabilities of the Star Textile Mills for total consideration of Rs. 120,000,000, paying 90,000,000 cash and 200,000 shares of its stock that have a market value of Rs 150 per share on the date of acquisition. The Star Textiles Mills Balance Sheet on the date of merger is as follows: Current Assets Rs 28,000,000 Current Liabilities Rs 16,000,000 Plant and Equipment 82,000,000 Long Term Debt 24,000,000 Share Capital, Par Rs 10 30,000,000 Share Premium 15,000,000 Retained earnings 25,000,000 Total Assets Rs 110,000,000 Total Liabilities & Stockholder equity 110,000,000 The Nishat Textiles Mill Ltd shares have a par value of Rs 10. Required: i. Give the entries that should be made on the books of the Nishat Textile Mills and on the books of Star Textiles Mill Ltd. in recording the merger. (7) ii. How should the cash and the shares of the Nishat Textiles Mill Ltd. be distributed among the shareholders of the Star Textiles Mill? Give your working. (3) Page 2 / 2 a + Q.3 (a) City Developers (Pvt.) Ltd signed a three years contract on 1st January 2013 with Peshawar vate Winde Go to Settings to ac th o Bi x 2 27C Haze Priso 8 o P H K L 5 2 Corp : Corp - Corp C Acco Q2 S Final (4) 3 My [ (12) to be recorded. Q.2 (a) L, M and N companies agrees to consolidate/amalgamate and form Company O. Net assets at appraised values and average adjusted earnings of the past five years, which the parties believe offer the most reliable estimate of future earning, are as follow: Co. L Co. M Co. N Total Rs in, 000 Rs in, 000 Net asset Contribution Rs in, 000 Rs in, 000 250,000 350,000 400,000 Percentage of above asset contribution 25% 1,000,000 35% 40% Earnings contribution 100% 35,000 45,000 60,000 140,000 Percentage of earnings 25% 32% 43% 100% To give equitable weightage to all three companies, the parties decided to also consider the earnings contribution of each company. In doing so they decided; i. That 10% returns is to be to be regarded as fair return on identifiable net assets. ii. Excess earnings are to be capitalized for goodwill as under a. For Companies A & B the excess earnings will be capitalized @ 25%. b. For Company C the excess earnings will be capitalized @ 20% I Required: i. Give your working to calculate the total contribution of each company by giving effect to the foregoing. ii. Give journal entries that would be recorded on the books of new company O if goodwill is (4) recognized and also give working how the shares of Company D will be distributed among the shareholders of the three companies. Assume the par value of Company O is Rs 10. iii. Give the journal entries supposing the goodwill is not recognized and also give working how the (3) company O issues shares to the shareholders of the three companies. (3) (b) A merger was affected on May 1st 2018 whereby Nishat Textile Mills took over the assets and assumed the liabilities of the Star Textile Mills for total consideration of Rs. 120,000,000, paying 90,000,000 cash and 200,000 shares of its stock that have a market value of Rs 150 per share on the date of acquisition. The Star Textiles Mills Balance Sheet on the date of merger is as follows: Current Assets Rs 28,000,000 Current Liabilities Rs 16,000,000 Act Go to o LP 27CH : Corp - (3 4 X Corp X 2 Corp X C Acco C Q2.C X Final S (5) W My CX + m.google.com/OMDYNTOONSMD/MM/ orporate Accoounting-Sping 2021B.pdf = Open with Google Docs Required: 1. Give your working to calculate the total contribution of each company by giving effect to the foregoing. (4) ii. Give journal entries that would be recorded on the books of new company O if goodwill is recognized and also give working how the shares of Company D will be distributed among the shareholders of the three companies. Assume the par value of Company O is Rs 10. (3) iii. Give the journal entries supposing the goodwill is not recognized and also give working how the company issues shares to the shareholders of the three companies. (3) (b) A merger was affected on May 1st 2018 whereby Nishat Textile Mills took over the assets and assumed the liabilities of the Star Textile Mills for total consideration of Rs. 120,000,000, paying 90,000,000 cash and 200,000 shares of its stock that have a market value of Rs 150 per share on the date of acquisition. The Star Textiles Mills Balance Sheet on the date of merger is as follows: Current Assets Rs 28,000,000 Current Liabilities Rs 16,000,000 Plant and Equipment 82,000,000 Long Term Debt 24,000,000 Share Capital, Par Rs 10 30,000,000 Share Premium 15,000,000 Retained earnings 25,000,000 Total Assets Rs 110,000,000 Total Liabilities & Stockholder equity 110,000,000 The Nishat Textiles Mill Ltd shares have a par value of Rs 10. Required: i. Give the entries that should be made on the books of the Nishat Textile Mills and on the books of Star Textiles Mill Ltd. in recording the merger. (7) ii. How should the cash and the shares of the Nishat Textiles Mill Ltd. be distributed among the shareholders of the Star Textiles Mill? Give your working. (3) Page 2 / 2 a + Q.3 (a) City Developers (Pvt.) Ltd signed a three years contract on 1st January 2013 with Peshawar vate Winde Go to Settings to ac th o Bi x 2 27C Haze Priso 8 o P H K L 5