Net payment method accounts

From amalgamation

1. Net payment Method Under this method , consideration is ascertained by adding up the cash paid , agreed value of assets given and the agreed values of securities allotted by the transferee company to the transferor company in discharge of consideration.

2. Lets consider the following balance sheet of S Ltd . Suppose P Ltd. Takes over the business of S Ltd. And agrees to give for each 11% preference share in S Ltd. ten 12% preference shares of Rs.10 fully paid up at par and for each equity share in S Ltd. Re. 1 in cash and one fully paid equity share in P Ltd. Of Rs.10 valued at Rs.15. The consideration will be completed as follows: Liabilities Assets Share Capital: 20,000 11% Preference Shares of Rs.100 each, fully paid up 8,00,000 Equity Share Of Rs. 10 each, fully paid up Reserves Sundry Liabilities 20,00,000 80,00,000 50,00,000 60,00,000 Sundry Assets 2,10,00,000 2,10,00,000 2,10,00,000

3. Rs . 12% preference shares to be allowed by P Ltd. =Rs.10 x 20,000 x 10 20,00,000 Equity shares to be allotted by P Ltd. = Rs. 15 x 8,00,000 1,20,00,000 Cash to be paid by P Ltd. = Rs. 1 x 8,00,000 8,00,000 CONSIDERATION 1,48,00,000