Net payment Method

Under this method , consideration is ascertained by adding up the cash paid , agreed value of assets given and the agreed values of securities allotted by the transferee company to the transferor company in discharge of consideration.

Lets consider the following balance sheet of S Ltd. Suppose P Ltd. Takes over the business of S Ltd. And agrees to give for each 11% preference share in S Ltd. ten 12% preference shares of Rs.10 fully paid up at par and for each equity share in S Ltd. Re. 1 in cash and one fully paid equity share in P Ltd. Of Rs.10 valued at Rs.15. The consideration will be completed as follows:

Liabilities Assets

Share Capital:

20,000 11% Preference Shares

of Rs.100 each, fully paid up

8,00,000 Equity Share

Of Rs. 10 each, fully paid up

Reserves

Sundry Liabilities

20,00,000

80,00,000

50,00,000

60,00,000

Sundry Assets 2,10,00,000

2,10,00,000 2,10,00,000

Rs.12% preference shares to be allowed by P Ltd. =Rs.10 x 20,000 x 10 20,00,000

Equity shares to be allotted by P Ltd.= Rs. 15 x 8,00,000 1,20,00,000

Cash to be paid by P Ltd.= Rs. 1 x 8,00,000 8,00,000

CONSIDERATION 1,48,00,000