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    Question

    X Ltd. is merged with Y Ltd. under the pooling of

    interest method. The reserves and surplus of X Ltd. amount to ₹10 lakhs. How will this be treated in the books of Y Ltd.?
    A Not recorded Correct Answer Incorrect Answer
    B Added to General Reserve Correct Answer Incorrect Answer
    C Credited to Capital Reserve Correct Answer Incorrect Answer
    D Merged with retained earnings Correct Answer Incorrect Answer

    Solution

    Explanation: As per AS 14, under pooling of interests method , all the reserves (including general reserve and surplus) of the transferor company (X Ltd.) are preserved and added to the same heads in the books of transferee company (Y Ltd.) .

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