Illustration - 14 The following are the summarised Balance sheets of three undertakings as on 31st March, 2009. Particulars Freehold premises at cost Other Fixed assets at cost less depreciation Stock in trade Sundry Debtors Cash at Bank B Lid. Rs 5,00,000 15,80,000 13,50,000 12.30,000 2,10,000 48,70,000 30,00,000 E Ltd. Rs. 1,80,000 3,70,000 1,80,000 4,30,000 1,20,000 12,80,000 5,00,000 D Lid. Rs. 1,20,000 2,00,000 1,10,000 2,10,000 55.000 6,95,000 Equity Shares of Rs. 10 each Capital: D Ltd 4,15,000 2. Reserves 12,20,000 2,60,000 Creditors 6,50,000 5,20,000 2,80,000 48,70,000 12,80,000 6,95,000 It was decided that on 31st March 2009 would acquire the whole of the Share capital of E Ltd. and the goodwill, Fixed assets and stocks of D, the purchase consideration in both cases being discharged by the issue of equity shares in B Ltd., valued at Rs. 12.50 per share. The terms agreed upon were the following: 1. The Fixed assets were to be taken at the value placed on them by an independent valuer. The stocks of D were to be reduced by Rs. 10,000 because of obsolete items. Stocks of ELtd. were to be taken at their book value. 3. In the case of E Ltd. debtors and creditors to be taken at book value less Rs. 30,000 for debtor and Rs. 15,000 for creditor. 4. Goodwill was to be valued at two years' purchase of the average profits of the last three years subject only to the following adjustments. In the case of E Ltd. The Director's remuneration charged in each year was to be reduced by Rs. 25,000; and ii. The depreciation charged in each year on Other Fixed assets was to be substituted with depreciation on those assets calculated at 10% of cost on straight line basis. i In the case of D: i. Notional expenses of Rs. 50,000 p.a. in total, are to be provided; and ii. Rs. 20,000 being exceptional items of expense was to be added back to the profits in 2007 a 14 Other Information: Particulars B Ltd. E Ltd. D Ltd. Rs. Rs Rs. Depreciation on Other Fixed assets till date 6,20,000 2,50,000 1,00,000 ii. Independent valuation as on 31st March 2009; Freehold premises 6,00,000 2,50,000 Other Fixed assets 3,30,000 2,10,000 iii. Profits for the last three years, 2006-07 90,000 90.000 2007-08 1,21,000 65,000 2008-09 1,31,060 95,000 Depreciation charged on other Fixed assets of E Ltd. was Rs. 54,500 in 2006-07, Rs. 44,580 in 2007-08 and Rs. 45,360 in 2008-09 iv. Particulars of other Fixed assets at 31 st March, 2009 at cost were: Before 31 st March 2007 6,00,000