CA Inter P1 · Chapter 11 · Question 1 of 10
Case: Nirmal Ltd takes over the business of Ojas Ltd. Assets taken over at agreed values are PPE ₹40,00,000, inventory ₹12,00,000, trade receivables ₹8,00,000 and cash ₹2,00,000. Liabilities taken over are trade payables ₹7,00,000 and debentures ₹15,00,000. Under the net assets method, the purchase consideration is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) ₹40,00,000
Explanation
Under the net assets method, purchase consideration = agreed value of assets taken over - liabilities taken over. Assets = 40,00,000 + 12,00,000 + 8,00,000 + 2,00,000 = 62,00,000. Liabilities = 7,00,000 + 15,00,000 = 22,00,000. PC = ₹40,00,000.
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