a5 Illustration - 3 The summarized Balance Sheets of P Ltd. and R Ltd, for the year ended 31.3.2009 are as under: P Ltd. R Ltd. P Ltd. R Ltd. Rs. Rs. Rs. Rs. Equity Share capital in shares of 24,00,000 12,00,000 Fixed 55,00,000 27,00,000 Rs. 100 each) Assets 8% Preference Share capital in 8,00,000 Current share of Rs. 100 each) Assets 25,00,000 23,00,000 10% Preference Share capital (in 4,00,000 shares of Rs. 100 each) Reserves 30,00,000 24,00,000 Current liabilities 18,00,000 10,00,000 80,00,000 50.00.000 80,00,000 50,00,000 1. The following information is provided : P Ltd. Rs. R Ltd Rs. 3. a. i a) Profit before tax 10,64,000 4,80,000 b) Taxation 4,00,000 2,00,000 c) Preference dividend 64,000 40,000 d) Equity dividend 2,88,000 1,92,000 2. The Equity shares of both the companies are quoted in the market. Both the companies are carrying on similar manufacturing operations. P. Ltd. proposes to absorb R Ltd, as on 31.3.2009. The terms of absorption are as under: Preference shareholders of R Ltd. will receive 8% preference shares of P. Ltd. sufficient to increase the income of preference shareholders of R Ltd. by 10% b. The equity shareholders of R Ltd. will receive equity shares of P Ltd. on the following basis : The equity shares of R Ltd. will be valued by applying to the earnings per share of R Ltd. 75% of price earnings ratio of P Ltd. based on the results of 2008-2009 of both the companies. ii The market price of equity shares of P Ltd. is Rs. 400 per share. ill. The number of shares to be issued to the equity shareholders of R Ltd. will be based on the above market value. iv. In addition to equity shares, 8% preference share of P Ltd. will be issued to the equity shareholders of R Ltd. to make up for t s in income arising from the above exchange of shares based on the dividends for the year 2008-2009 4. The assets and liabilities of R Ltd. as on 31.3.2009 are revalued by professional valuer as under: Increased by Decreased by Rs. Rs. 1,60,000 Current assets 2,00,000 Current liabilities 40,000 For the next two years, no increase in the rate of equity dividend is expected. You are required to: i) Calculate purchase consideration. ii) Give the Balance Sheet as on 31.3.2009 after absorption Note: Journal entires are not required. Fixed assets 5