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Rs in '000
Sun Ltd Moon Ltd

Fair Value 22,000 28,000
Value per share 10 10
No. of shares 2,200 2,800
i.e. Total No. of shares in ABX Ltd. = 5,000 thousand shares
Thus, % Held by each Company in Combined Entity 44% 56%
Note: It is a case of Reverse Acquisition.
Accordingly, BX Ltd. assets will be recorded at historical cost in the merged financial statements.
(1) Calculation of Purchase Consideration (All figures are in thousands)
We need to calculate the number of shares to be issued by Monn Ltd. to Sun Ltd. to maintain the same

percentage i.e. 56%:
Thus, 1400 thousand shares of Moon Ltd. (given in the balance sheet) represents 56%. This means that total
no. of shares would be 2,500 thousand shares ie 1400 thousand shares / 56%.
This implies Moon Ltd. would need to issue 1100 thousand shares (2,500 less 1,400) to Sun Ltd.
Purchase Consideration = 1,100 thousand shares x Rs 20 per share = 22,000

Balance Sheet of SUNMOON Ltd. as on 1.1.20X2
Rs in '000
ASSETS Note No. Amount
Non-current assets:
Goodwill (Refer Working Note) 3,100
Property, Plant and Equipment (19,000 + 15,000) 34,000
Financial assets
Investments (2,100 + 1,100) 3,200
Current assets
Inventory (1,300 + 5,500) 6,800

Trade receivable (3,600 + 8,000) 11,600
Cash and Cash equivalent (900 + 800) 1,700
60,400
EQUITY AND LIABILITIES
Equity
Equity share capital (of face value of Rs 10 each) 1 25,000
Other equity 2 16,400
Liabilities
Non-current liabilities
Financial liabilities
Borrowings 3 14,000
Current liabilities
Trade payable 5,000
60,400

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