a20 Illustration - 20 The Balance sheet of H Ltd. as on 31.3.08: (Figures in Rs. lakhs) Liabilities Amount Assets Amount Equity Share Capital 4.00 Fixed Assets less depreciation 6.00 (in equity shares of Rs. 10 each) to date 10% Preference Share Capital 3.00 Stock and debtors 5.30 General Reserve 1.00 Cash and Bank 0.70 Profit & Loss Account 1.00 Creditors 3.00 12.00 M Ltd. another existing company holds 25% of equity Share capital of H Ltd. purchased at Rs.10 per share. 12.00 It was agreed that M. Ltd. should take over the entire undertaking of H Ltd. on 30.9.08 on which date the position of Current assets (except cash and bank balances) and creditors was as follows. Stock and debtors 4 lakhs Creditors 2 lakhs Profils earned for half year ended 30.9.08 by HLtd. was Rs70,500 after charging depreciation of Rs. 32,500 on fixed assets. H Ltd. declared 10% dividend for 2007-08 on 30.8.08 and the same was paid within a week. Goodwill of H Ltd. was valued at Rs. 80,000 and block assets were valued at 10% over their book value as on 31.3.08 for purposes of take over. Preference shareholders of H Ltd. will be allotted 10% preference shares of Rs. 10 each by M Ltd. Equity share holders of H Ltd. will receive requisite number of equity shares of Rs. 10 each from M Ltd. valued at Rs. 10 per share. 1. Compute the purchase consideration b. Explain, how the Capital reserve or goodwill, if any, will appear in the balance sheet of M Ltd. after absorption