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a21 Illustration - 21 The summarised Balance sheets of A Ltd. and its subsidiary B Ltd. as an 31.3.2009 are as follows: ALI BLtd. Rs. Rs. Equity Share Capital (Rs. 10 each) 1,00,00,000 20,00,000 Reserves and Surplus 1,40,00,000 60,00,000 Secured Loans 40,00,000 Current liabilities 60,00,000 20,00,000 3,40,00,000 1,00,00,000 Fixed Assets 1,20,00,000 35,00,000 Investment in B Ltd 7,40,000 Sundry Debtors 70,00,000 10,00,000 Inventories 60,00,000 50,00,000 Cash and Bank 82,60,000 5,00,000 3,40,00,000 1,00,00,000 A Ltd. holds 76% of the paid up capital of B Ltd. The balance shares in B Ltd. are held by a foreign Col- laborating Company. A memorandum of understanding has been entered into with the foreign company providing for the following a. The shares held by the foreign company will be sold to A Ltd. The price per share will be calculated by capitalising the yield at 16%. Yield, for this purpose, would mean 40% of the average of pre-tax profits for the last 3 years, which were Rs. 35 lakhs, Rs.44 lakhs and Rs.65 lakhs. b. The actual cost of shares to the foreign company was Rs. 2,40,000 only. The profit that would accrue to them would be taxable at an average rate of 20%. The tax payable be deducted from the proceeds and A Ltd. will pay it to the Government c. Out of the net consideration, 50% would be remitted to the foreign company immediately and the balance will be an unsecured loan repayable after one year. It was also decided that A Lid would absorb B Ltd. simulataneously by writing down the Fixed assets of Ltd. by 5%. The Balance sheet figures included a sum of Rs.150,000 due by B Ltd. to A Ltd. The entire arrangement was approved by all concerned for giving effect to on 1.4.2009. You are required to show the Balance Sheet of A Ltd, as it would appear after rrangement is put through on 1.4.2009

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