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    Question

    State which statement is

    correct:
    A In case of merger – All reserves and surplus of vendor company are taken over by purchasing company. Correct Answer Incorrect Answer
    B In case of purchase – None of the reserves and surplus of vendor company are taken over by purchasing company. Correct Answer Incorrect Answer
    C Both (a) and (b) are correct. Correct Answer Incorrect Answer
    D Only (a) is correct. Correct Answer Incorrect Answer

    Solution

    Under AS 14, in case of merger (pooling of interests), all assets, liabilities, and reserves of the transferor company are recorded at book values. In case of purchase, only assets and liabilities agreed upon are recorded, and reserves are not carried over.

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