a3 a 3 R Ltd. 1. Computation and Discharge of Purchase Consideration Illustration - 1 The Oil Shell Ltd. was incorporated on Ist April 2008 for the purpose of acquiring P Ltd., Q. Ltd., and R Ltd. The Balance sheet of these companies as on 31st March 2009 are as follows: (Rs.) Particulars P Ltd. Q Ltd. Assets Tangible Fixed assets - at cost less depreciation 50,00,000 40,00,000 30,00,000 Goodwill 6,00,000 Other assets 20,00,000 28,00,000 8,50,000 Total 70,00,000 74,00,000 38,50,000 Liabilities Issued Equity Share Capital (shares of Rs. 10 each) 40,00,000 50,00,000 25,00,000 Profit and Loss A/C 15,00,000 11,00,000 6,00,000 10% Debentures 7,00,000 4,00,000 Sundry Creditors 8,00,000 13,00,000 3,50,000 Total 70,00,000 74,00,000 38,50,000 Average annual profits before debentures interest 9,00,000 12,00,000 5,00,000 (April 2008 to March 2009 inclusive) Professional valuation of tangible assets on 31st March 2009 62,00,000 48,00,000 36,00,000 1. The directors in their negotiations agreed that: (i) the recorded goodwill of Q Ltd. is valueless; (ii) the "Other assets" of P Ltd. are worth Rs. 3,00,000; (iii) the valuation of 31st March 2009 in respect of tangible Fixed assets should be accepted. (iv) these adjustments are to be made by the individual companyt before the completion of the acquitition 2. The acquisition agreement provided for the issue of 12% unsecured Debentures to the value of the net assets of companies P Ltd. Q Ltd and R Ltd., and for the issuance of Rs. 100 nominal value equity shares for the capitalized average profit of each acquired company in excess of net assets contributed. The capitalisation rate is established at 10%. You are required to: i. Compute Purchase consideration. ii. Dicscharge of Purchase consideration