WorksheetsAmalgamation and Purchase Consideration Quiz
Total questions: 25
Worksheet time: 13mins
Amalgamation means
Purchase of assets only
Merger of two or more companies into one
Liquidation of a company
Sale of shares
Purchase consideration is
Total assets taken over
Amount paid by transferee company to shareholders of transferor company
Amount paid to creditors
Net worth of company
Lump sum method of purchase consideration is used when
Assets and liabilities are valued individually
Purchase price is given as a single amount
Shares are exchanged
Creditors are paid in cash
Under Net Assets Method, purchase consideration is calculated as
Assets – Liabilities taken over
Assets + Liabilities
Capital + Reserves
Share capital only
Net Payment Method considers
Net assets taken over
Payments made to shareholders
Market value of shares
Goodwill only
Intrinsic Value Method is used for
Valuation of goodwill
Valuation of shares
Valuation of liabilities
Valuation of assets
Purchase consideration does NOT include
Shares issued to shareholders
Cash paid to shareholders
Debentures issued to shareholders
Amount paid to creditors
When purchase consideration is more than net assets, the difference is
Capital reserve
Revenue reserve
Goodwill
General reserve
Pooling of Interest Method is applicable when
Amalgamation is in the nature of merger
Amalgamation is in the nature of purchase
Assets are revalued
Goodwill is created
Under Pooling of Interest Method
Assets are recorded at market value
Assets are recorded at book value
Goodwill is compulsorily created
Capital reserve is created
Purchase Method is applicable when
Companies merge completely
Amalgamation is in the nature of purchase
Pooling conditions are satisfied
Reserves are not transferred
Under Purchase Method, reserves of transferor company are
Fully transferred
Partially transferred
Not transferred (except statutory reserves)
Converted into capital reserve
Capital Reserve arises when
Purchase consideration > Net assets
Assets < Liabilities
Share capital increases
Statutory reserves are maintained under
Pooling method
Purchase method
Internal reconstruction
External reconstruction
Internal reconstruction means
Formation of new company
Liquidation of company
Reorganization without winding up
Sale of company
Reduction of capital is governed by
SEBI
Income Tax Act
Companies Act
RBI
Increase of capital can be done by
Issue of bonus shares
Reduction of paid-up value
Writing off losses
Capital reduction
Internal reconstruction is mainly done to
Expand business
Improve financial position
Increase profit
Liquidate company
Reserve liability refers to
Actual liability
Contingent liability
Uncalled capital
Provision
Writing off fictitious assets is done during
Amalgamation
Internal reconstruction
External reconstruction
Liquidation
Reduction in share capital results in
Increase in liabilities
Decrease in liabilities
No change
Increase in assets
External reconstruction involves
Same company continuing
New company formed
Reduction of capital only
Issue of bonus shares
External reconstruction is similar to
Internal reconstruction
Amalgamation
Liquidation
Merger without winding up
In external reconstruction, assets and liabilities are transferred to
Creditors
Shareholders
New company
Government
External reconstruction usually occurs when
Company is profitable
Company suffers heavy losses
Company expands
Company merges
