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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 β‚Ή10 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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