The following are the Balance Sheets of Andrew Ltd. and Barry Ltd. as at 31.12.2007:

Particulars Note No Andrews Ltd Barry Ltd
    (‘000) (‘000)

Equity & Liabilities

Shareholder’s Fund

Equity Capital (3 lacs & 1 lac Shares of Rs 10 each fully paid up)   3,000 1,000
Pref. Capital (Shares of Rs 100 each fully paid up) Reserves & Surplus   1,000

General Reserve

Non Current Liabilities

  400 2,800
Secured Loan   16,000 8,000
Unsecured Loan   8,600
Current Liabilities   13,000 4,600
Total   42,000 16,400


Non Current Assets

Tangible Assets

Sundry Fixed Assets

Current Assets

  3,400 6,800
Stock   18,400
Other Current Assets   3,600 9,600
Total   25,400 16,400

Stock of Andrews Ltd Pledge for Secured Loan


Both the companies go into liquidation and Charlie Ltd. is formed to take over their businesses. The following information is given:


(a) All Current assets of two companies, except pledged stock are taken over by Charlie Ltd. The realizable value of all Current assets are 80% of book values in case of Andrew Ltd. and 70% for Barry Ltd. Fixed assets are taken over at book value.


(b) The break up of Current liabilities is as follows:                     


Andrew Ltd.


Barry Ltd.


Statutory liabilities (including Rs 22 Lakh In cash of Andrew Ltd. in case of a claim Not having been admitted shown as Contingent liability)

Liability to employees






The balance of current liability is miscellaneous creditors.


  • Secured loans include Rs 16,00,000 accrued interest in case of Barry Ltd.
  • 2,00,000 equity shares of Rs 10 each are allotted by Charlie Ltd. at par against cash payment of entire face value to the shareholders of Andrew Ltd. and Barry Ltd. in the ratio of shares held by them in Andrew Ltd. and Barry Ltd.
  • Preference shareholders are issued Equity shares worth Rs 200 in lieu of present holdings.
  • Secured loan creditors agree to continue the balance amount of their loans to Charlie Ltd. after adjusting value of pledged security in case of Andrew Ltd. and after waiving 50% of interest due in the case of Barry Ltd.
  • Unsecured loans are taken over by Charlie Ltd. at 25% of Loan amounts
  • Employees are issued fully paid Equity shares in Charlie Ltd. in full settlement of their dues.
  • Statutory liabilities are taken over by Charlie Ltd. at full values and miscellaneous creditors are taken over at 80% of the book value.


Show the opening Balance Sheet of Charlie Ltd. workings should be part of the answer.

Balance sheet of Charlie Ltd. as at 31st December, 2007


Note No

(in ‘000)

Equity & Liabilities

Shareholder’s Fund

Equity Capital (Rs 10 each fully paid up)

Non Current Liabilities

Secured Loan   8,480
Unsecured Loan   2,150
Current Liabilities   13,640
Total   31,270


Non Current Assets

Tangible Assets


Fixed Assets   10,200
Current Assets   9,600
Cash   2,000
Total   31,270


Working Notes:

1. Value of miscellaneous creditors taken over by Charlie Ltd.

(in Rs ‘ooos)
  Andrew Ltd. Barry Ltd.
Given in balance sheet 13,000 4,600
Less: Statutory liabilities 5,000 1,000
Liabilities to employee 3,000 1,800
Miscellaneous creditors 5,000 1,800
80% thereof 4,000 1,440


  1. Value of total liabilities taken over by Charlie Ltd.
  Andrew Ltd. Barry Ltd.
Current liabilities        
Statutory liabilities 7,200   1,000  
Liability to employees 3,000   1,800  
Miscellaneous creditors (W.N.l) 4,000 14,200 1,440 4,240
Secured loans        
Given in Balance sheet 16,000   8,000  
Interest waived –     800 7,200
Value of Stock 14,720      
(80% of Rs 184 lakhs)   1,280    
Unsecured Loans        
(25% of Rs 86 lakhs)   2,150  
    17,630   11,440



3. Assets taken over by Charlie Ltd.

    Andrew Ltd.   Barry Ltd.
Fixed Assets (Assumed on book value basis)   3,400   6,800
Current Assets 80% and 70% respectively of book value 2,880   6,720
  6,280   13,520


  1. Goodwill/Capital Reserve on amalgamation
Liabilities taken over (W.N. 2) 17,630 11,440
Equity shares to be issued to Preference Shareholders 200
  A 17,830 11,440
Less: total assets taken over (W.N. 3) B 6,280 13,520
  A-B 11,550 (2,080)
    Goodwill C/R

Net Goodwill




  1. Equity shares issued by Charlie Ltd.


(i) For Cash

For consideration other than cash

(ii) In Discharge of Liabilities to Employees 4,80,000  
(iii) To Preference shareholders 20,000 5,00,000


Value of shares Rs 10 x 7,00,000 = Rs 70 Lakhs