India Advance Account Problem | M.COM


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I have no clue of where to start :(

In the Image below has the Ledger Balance :

https://imgur.com/oxZlhEJ --> (in case the image doesn't show up)


What i'm required to do is to compute the purchase price of the equity shares. Ignoring taxation.

Below are the Added details :

  • The profits for the three years ending 31st March 2012,2013 and 2014 were Rs.14,700,Rs.21,500 and Rs.16,000 respectively after charging interest on debentures and before providing for dividend on Preference Shares.
  • Mr.A and his family were holding all shares and they agreed to sell all the Preference Shares which are payable on par in a liquidation ,to a purchaser at Rs.1.50 per share. They also agreed to sell all the Equity Shares to another purchaser.
  • The price of Equity Sharesis to be so calculated that purchaser will obtain return of 10% on the net physical assets attributable to the Equity Shareholders as on 31.03.2014 and in addition pay an amount of goodwill of three times the average super profits (i.e. the profits over 10%) of the previous three years.
The purchase consideration is to be based on the figures shown in the Balance Sheet as on 31st March 2014 and on the profits of the three years account,subject to relevant adjustments in respect of the following matters :

i) The vendor with the consent of the purchaser has agreed with the holders of the Debentures that the Company will purchase these for cancellation at a discount of 25%.
ii) It has been ascertained that the current rental value of the freehold premises is Rs.3,360 and that it
could be sold on the basis of an 8% return.It is agreed to substitute relevant value for the book value.
iii) A revenue creditor of Rs.550 has been omitted from the Balance Sheet as on 31st March 2014.
iv) The market value of the Investments was Rs.25,000.
v)10% of the profits shown in the accounts for the year ending 31st March 2013 arose from the
non- recurring items, which it is agreed should be eliminated.​
 

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