Profit and loss account shows the net profit of the year after transfer to general reserve and…

Model: Fair value of shares—on the basis of majority and minority holdings Determine the fair value of 200 shares held by Mr. Ram in Goodluck Ltd. to be transferred to Mr. Mehta on the basis of majority and minority holdings. The balance sheet of Goodluck Ltd. as on 31 March 2010 is as follows:

Liabilities

Assets

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Share Capital:

Goodwill

40,000

80,000 Equity Shares of Z 10 Each Fully

8,00,000

Buildings

3,00,000

Paid Up

Machinery

3,60,000

General Reserve

2,60,000

Debtors

4,00,000

P&L A/c

1,60,000

Stock

1,60,000

Sundry Creditors

80,000

Cash at Bank

20,000

Preliminary Expenses

20,000

13,00,000

13,00,000

Debtors are estimated to be 10% below book value and goodwill is valued at its book value. Profit and loss account shows the net profit of the year after transfer to general reserve and payment of income tax. Dividend was paid for the last 3 years at the rate of 14%, 18% and 16%, respectively. Normal expected return is 10%.

 

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