37. Holding Company [D98-J14] [27.02.2014]

HOLDING COMPANIES Section

The Companies Act, 2014

19(1)

Subsidiary company not to hold shares in its holding company. No company shall, either by itself or through its nominees, hold any shares in its holding company and no holding company shall allot or transfer its shares to any of its subsidiary companies and any such allotment or transfer of shares of a company to its subsidiary company shall be void: Provided that nothing in this sub-section shall apply to a case—

19(1)(a)

where the subsidiary company holds such shares as the legal representative of a deceased member of the holding company; or

19(1)(b)

where the subsidiary company holds such shares as a trustee; or

19(1)(c)

where the subsidiary company is a shareholder even before it became a subsidiary company of the holding company: Provided further that the subsidiary company referred to in the preceding proviso shall have a right to vote at a meeting of the holding company only in respect of the shares held by it as a legal representative or as a trustee, as referred to in clause (a) or clause (b) of the said proviso.

19(2)

The reference in this section to the shares of a holding company which is a company limited by guarantee or an unlimited company, not having a share capital, shall be construed as a reference to the interest of its members, whatever be the form of interest.

Consolidated Financial Statements of Group Companies BASIC CONCEPTS Question: Write a note on Holding Company and Subsidiary Company. Answer: Section

The Companies Act, 2014

2(46)

2(46) ‚holding company‛, in relation to one or more other companies, means a company of which such companies are subsidiary companies;

2(87)

(87) ‚subsidiary company‛ or ‚subsidiary‛, in relation to any other company (that is to say the holding company), means a company in which the holding company—

2(87)(i)

(i) controls the composition of the Board of Directors; or

Financial Accounting

6.1

2(87)(ii)

(ii) exercises or controls more than one-half of the total share capital either at its own or together with one or more of its subsidiary companies: Provided that such class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers as may be prescribed. Explanation.—For the purposes of this clause,— (a) a company shall be deemed to be a subsidiary company of the holding company even if the control referred to in sub-clause (i) or sub-clause (ii) is of another subsidiary company of the holding company; (b) the composition of a company’s Board of Directors shall be deemed to be controlled by another company if that other company by exercise of some power exercisable by it at its discretion can appoint or remove all or a majority of the directors; (c) the expression ‚company‛ includes any ‚body-corporate‛; (d) ‚layer‛ in relation to a holding company means its subsidiary or subsidiaries;

• In a wholly owned subsidiary, there is no minority interest because all the shares with voting rights are held by the holding company. • Consolidated financial statements are prepared and presented by a parent/holding enterprise to provide financial information about a parent and its subsidiary(ies) as a single economic entity. • Distinction must be made from the point of view of the holding company, between revenue and capital profit of the subsidiary. In the absence of information, profits of a year may be treated as accruing from day to day Consolidation procedures In preparing the consolidated financial statements, the following steps are taken: • the carrying amount of the parent’s investment in each subsidiary and the parent’s portion of equity of each subsidiary are eliminated. • In case cost of acquisition exceeds or is less than the acquirer’s interest, goodwill or capital reserve is calculated retrospectively. • intragroup transactions, including sales, expenses and dividends, are eliminated, in full; • unrealised profits resulting from intragroup transactions that are included in the carrying amount of assets, such as inventory and fixed assets, are eliminated in full; • unrealised losses resulting from intragroup transactions that are deducted in arriving at the carrying amount of assets are also eliminated unless cost cannot be recovered; • minority interest in the net income of consolidated subsidiaries for the reporting period are identified and adjusted against the income of the group in order to arrive at the net income attributable to the owners of the parent; and • minority interests in the net assets of consolidated subsidiaries are identified and presented in the consolidated balance sheet separately from liabilities and the parent shareholders’ equity. • If the controlling interest was acquired during the course of a year, profit for that year must be apportioned into the pre-acquisition and post-acquisition portions, on the basis of time in the absence of information on the point. • the financial statements of the parent and its subsidiaries are combined on a line by line basis by adding together like items of assets, liabilities, equity, income and expenses. • Dividend received from a subsidiary company, must be distinguished between the part received out of capital profits and that out of revenue profits - the former is credited to Investment Account, it being a capital receipt, and the latter is adjusted as revenue income for being credited to the Profit & Loss Account.

Financial Accounting

6.2

• In respect of such goods not yet sold, the unrealised profits are to be eliminated in full. This may be done by creating a reserve in respect of total unrealised profit which has not yet been realised. • Also, unrealised losses resulting from intragroup transactions should also be eliminated unless cost cannot be recovered. Preparation of Consolidated Profit and Loss Account • All the revenue items are to be added on line by line basis and from the consolidated revenue items inter-company transactions should be eliminated. • If there remains any unrealised profit in the stock of good, of any of the Group Company, such unrealised profit is to be eliminated from the value of stock to arrive at the consolidated profit. • Also it is necessary to eliminate the share of holding company in the proposed dividend of the subsidiary. Preparation of Consolidated Cash Flow Statement All the items of Cash flow from operating activities, investing activities and financing activities are to be added on line by line basis and from the consolidated items, intercompany transactions should be eliminated. Treatment of Investment in Associates in Consolidated Financial Statements An enterprise that presents consolidated financial statements should account for investments in associates in the consolidated financial statements in accordance with the Accounting Standard (AS) 23. Accounting for Associates (AS 23) AS 23 suggests equity method of accounting for investments in associates. Under equity method The following procedure should be followed: • Investment is initially recorded at cost. Subsequently, the carrying amount is increased on the basis of share of profit or decreased on the basis of share of loss in the associate. • Step (1): Find out value of investments on the basis of proportionate value of net assets of the investee; • Step (2): Find out goodwill or capital reserve arising out of the purchase consideration. • If the purchase price is above the value of investments determined in step (1) then there is goodwill and • if the purchase price is less than the value of the investments determined in step (1) then there is capital reserve. • Step (3): Goodwill or capital reserve as determined in step (2) should be included in the carrying amount of the investments with a separate disclosure. On the contrary, investments are recognised at purchase price as per AS 13 without disclosing goodwill/capital reserve. DISCLOSURE-Goodwill/capital reserve can be disclosed within bracket below the ‚Investments in Associates‛ in the following style and accumulated income which was not earlier recognized should be added to value of investments for first time consolidation with corresponding credit to consolidated reserve. Equity method is not applicable (1) when an investment is acquired for the purpose of disposal in the near future, i.e., as short term investments; and (2) there is severe long term restriction on fund transfer by the associate to the investor. In these two cases AS 13 should be applied. Treatment of Investment in Joint Ventures in Consolidated Financial Statements (AS 27) AS 27 identifies three broad types of Joint Ventures- jointly controlled operations, jointly controlled assets and jointly controlled entities. Jointly Controlled Operations

Financial Accounting

6.3

In respect of its interests in jointly controlled operations, a venturer should recognise in its separate financial statements and consequently in its consolidated financial statements: (a) the assets that it controls and the liabilities that it incurs; and (b) the expenses that it incurs and its share of the income that it earns from the joint venture. Jointly Controlled Assets In respect of its interest in jointly controlled assets, a venturer should recognise, in its separate financial statements, and consequently in its consolidated financial statements: (a) its share of the jointly controlled assets, classified according to the nature of the assets; (b) any liabilities which it has incurred; (c) its share of any liabilities incurred jointly with the other venturers in relation to the joint venture; (d) any income from the sale or use of its share of the output of the joint venture, together with its share of any expenses incurred by the joint venture; and (e) any expenses which it has incurred in respect of its interest in the joint venture. Jointly Controlled Entities: A jointly controlled entity maintains its own accounting records and prepares and presents financial statements in the same way as other enterprises in conformity with the requirements of AS 27 applicable to that jointly controlled entity. Separate Financial Statements of a Venturer In a venturer's separate financial statements, interest in a jointly controlled entity should be accounted for as an investment in accordance with Accounting Standard (AS) 13. Consolidated Financial Statements of a Venturer In its consolidated financial statements, a venturer should report its interest in a jointly controlled entity using proportionate consolidation except (a) an interest in a jointly controlled entity which is acquired and held exclusively with a view to its subsequent disposal in the near future; and (b) an interest in a jointly controlled entity which operates under severe long-term restrictions that significantly impair its ability to transfer funds to the venturer. Question: What are holding company and subsidiary company? Answer: A holding company is one which holds 51% or more of the shares in another company (subsidiary company). For example, A Ltd holds 75% of shares in B Ltd., and B Ltd., holds 80% of shares in C Ltd. Here A Ltd., has two subsidiaries (subsidiary company of a subsidiary is also a subsidiary of holding company). It is mandatory to consolidates the accounts of subsidiary company with its holding company and reported to the shareholders (1)

Calculation of ratio of shares held by holding company and outsiders Share of Holding Company Minority Interest

(2)

𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑕𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

Total

1

General Reserve

2

Capital Reserve

3

Profit or Loss

4

Over (Under) Valuation of Assets

Financial Accounting

Capital

Revenue

Profit

Profit

% % H Co.

CP

RP

S Co. CP

RP

6.4

5

Change in Depreciation (3) Cost of Control Cost of Acquisition

(4) MI

×××

1

Book Value

×××

×××

2

Capital Profit

×××

×××

3

Bonus Shares

×××

4

Pre-acquisition Dividend

×××

Goodwill (Capital Reserve) Revenue Profit

××× ×××

×××

Minority Interest

×××

[CMA FINAL J04& D05, 2 Marks] Question: What entries would you make in holding company’s accounts to record dividend received from a subsidiary’s pre-acquisition profits? Answer: Journal Entry – In the books of Holding Company Date

particular

Amount

Bank A/c

Dr.

Amount

xxxx

To Investment in Subsidiary A/c

xxxx

(Being Dividend received from subsidiary’s pre-acquisition profit) [CMA FINAL D04, 2 Marks] Question: How is cost of control computed when an interest in subsidiary company is acquired in blocks over a period of time? Answer: When interest in a subsidiary company is acquired in blocks, the cost of control or goodwill is computed as if all the blocks are purchased on the date when a control is achieved. However if shares are required in major blocks, then for each block ‚Analysis of profit‛ will be computed after considering the dates of acquisition. PRACTICAL QUESTIONS [Basic Sum] Question: Consolidate the following Balance Sheet: Particulars

Note

H Ltd

S Ltd

1,400

1,000

No. I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Equity Share of ₹1 each

(b)

Reserves and surplus

-

300

(2)

Current liabilities [Creditors]

-

500

1,400

1,800

Total II

ASSETS

(1)

Non-current assets

Financial Accounting

6.5

Fixed Assets [Investments in 900 shares in S Ltd.,]

1,200

Sundry assets

(2)

Total

200

1,800

1,400

1,800

When H Ltd acquired shares in S Ltd the profit and loss in the later had a credit balance of ₹ 200 Answer: (1) Calculation of ratio of shares held by holding company and outsiders Share of Holding Company Minority Interest (2)

Total

1

Profit or Loss

𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑕𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

Capital

Revenue

Profit

Profit

300

200

100

RP

180

1,000

%

90%

%

10%

S Co.[10%] CP

90

(3) Cost of Control Cost of Acquisition

1,000 100

%

H Co.[90%] CP

900

%

RP

20

10

(4) MI

1,200

1

Book Value

900

100

2

Capital Profit

180

20

3

Bonus Shares

×××

4

Pre-acquisition Dividend

×××

5

Over (Under) Valuation of Assets

×××

1,080

Goodwill (Capital Reserve) Revenue Profit

120 20

10

Minority Interest Consolidated Balance Sheet of H Co. Ltd (a)

Share capital

(b)

Reserves and surplus: Profit and Loss A/c

(c)

Minority Interest

(4)

Current liabilities [Creditors]

130 H Co.

S Co.

1,400 90

ASSETS

(1)

Non-current assets

(a)

Fixed assets

(b)

Intangible assets [Goodwill]

(2)

Current assets Total

90 130

Nil

500

Total II

Cons.

500 2,120

200

1,800

2,000 120 2,120

Stock Reserve: When holding or subsidiary company purchased or sold goods at invoice price (with profit) mutually, the profit Element on the unsold stock held on the balance sheet date should be eliminated from profit and loss account in step 6and from stock in the balance sheet.

Financial Accounting

6.6

[Wholly owned subsidiary company | Unrealized profit on unsold stock] Question: Following are the Balance sheet of R Ltd and S Ltd as at 31.12.1994: Particulars

Note

R Ltd

S Ltd

4,00,000

1,50,000

80,000

65,000

No. I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Equity Share of ₹10 each

(b)

Reserves and surplus

(2)

Non-current liabilities [12% Debenture]

2,00,000

-

(3)

Current liabilities

3,20,000

2,85,000

10,00,000

5,00,000

Fixed Assets

5,00,000

2,40,000

Investments in 15,000 shares in S Ltd., on 1.1.94

2,00,000

-

Current assets

3,00,000

2,60,000

10,00,000

5,00,000

1

Total II

ASSETS

(1)

Non-current assets

(2)

[including ₹10,000 stock purchased from R Ltd] Total 1

Reserves and Surplus

R Ltd

S Ltd

General Reserve

50,000

40,000

Profit and Loss A/c

30,000

25,000

80,000

65,000

Prepare a consolidated balance sheet as at 31.12.94 assuming that: 1. 2.

S Ltd general reserve and profit and loss account stood at ₹ 25000 and ₹ 10000 respectively on 1.1.1994 R Ltd. sells goods at profit of 25% on cost.

Answer: (1)

Calculation of ratio of shares held by holding company and outsiders Share of Holding Company Minority Interest

(2)

(3)

Total

𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑕𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

Capital

Revenue

Profit

Profit

% %

15,000 15,000 0 15,000

%

100%

%

0%

H Co.[100%]

S Co.[0%]

CP

RP

CP

RP

1

Profit or Loss

25,000

10,000

15,000

10,000

15,000

-

-

2

General Reserve

40,000

25,000

15,000

25,000

15,000

-

-

Total

65,000

35,000

30,000

35,000

30,000

-

-

Unrealised Profit on Unsold Stocks Proportion of unsold stock × Profit %

H Co. 25

10,000 × 125 %

2,000

Debit – Profit and Loss A/c Credit – Stock in Trade A/c

Financial Accounting

6.7

(4) Cost of Control Cost of Acquisition 1

Book Value

2

Capital Profit

2,00,000 1,50,000 35,000

Goodwill (Capital Reserve) Consolidated Balance Sheet of H Co. Ltd

1,85,000 15,000

Note

H Co.

S Co.

Cons.

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital

(b)

Reserves and surplus: Profit and Loss A/c

(3)

Non-current liabilities [12% Debentures]

2,00,000

-

2,00,000

(4)

Current liabilities [Creditors]

3,20,000

2,85,000

6,05,000

4,00,000 1

1,08,000

Total

13,13,000

II

ASSETS

(1)

Non-current assets

(a)

Intangible assets [Goodwill]

(b)

Fixed assets

(2)

Current assets

15,000

15,000

5,00,000

2,40,000

7,40,000

3,00,000

2,60,000

5,58,000

Less: [Unrealised profit on unsold stock]

(2,000)

Total

13,13,000 1

Reserves and Surplus

R Ltd

S Ltd

Consol.

General Reserve

50,000

15,000

65,000

Profit and Loss A/c

30,000

15,000

45,000

80,000

1,10,000

Unrealised profit on unsold stock

2,000

Total

1,08,000

[Inter-company Owings | Unrealized Profit on Unsold Stock] Question: Particulars

Note

H Ltd

S Ltd

5,00,000

2,00,000

No. I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Equity Share of ₹10 each

(b)

Reserves and surplus

1

3,50,000

1,00,000

(2)

Non-current liabilities [12% Debenture]

2

-

1,20,000

(3)

Current liabilities

3

1,50,000

80,000

10,00,000

5,00,000

Total

Financial Accounting

6.8

II

ASSETS

(1)

Non-current assets

(a)

Intangible Assets [Goodwill]

(b)

Tangible Assets

(c)

Investments

(2)

Current assets

4 5

Total

1,00,000

-

3,50,000

1,50,000

2,50,000

50,000

3,00,000

2,00,000

10,00,000

5,00,000

Note: Liability of bills discounted of H Ltd is ₹ 20000 1

Reserves and Surplus

3

2,00,000

60,000

Profit and Loss A/c

1,50,000

50,000

-

(10,000)

3,50,000

1,00,000

Secured Loan

-

80,000

Unsecured Loan

-

40,000

-

1,20,000

1,00,000

60,000

50,000

20,000

1,50,000

80,000

Plant and Machinery

2,00,000

1,20,000

Building

1,50,000

1,30,000

3,50,000

2,50,000

80,000

50,000

100,000

40,000

Non-current Liabilities

Current Liabilities Creditors Bills Payable

4

5

Non-current Assets

Current Liabilities Stock Debtors

1.

2. 3. 4.

S Ltd

General Reserve Preliminary Expenses 2

H Ltd

Bills receivable

50,000

Bank

20,000

80,000

Cash

50,000

30,000

3,00,000

2,00,000

H Ltd acquired 16,000 shares of ₹ 10 each is S Ltd., on 1.4.2000 at a cost of ₹ 2,00,000.Balance sheet of S ltd on 1.4.2000 showed balance in general reserve of ₹ 20,000 and profit and loss a/c ₹ 20,000 (credit) Bills payable of S Ltd include ₹ 10,000 due to H Ltd., which has discounted bills worth of ₹ 6,000 Sundry creditors of H Ltd., include ₹ 20,000 due to S Ltd. Closing stock of H Ltd., includes a stock worth of ₹ 60,000 supplied by S Ltd., which had invoiced to H Ltd at cost plus 20%.

Prepare consolidated balance sheet. Answer:

Financial Accounting

6.9

(1)

Calculation of ratio of shares held by holding company and outsiders 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑕𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

Share of Holding Company

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠

Minority Interest (2)

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

Total

Capital

Revenue

Profit

Profit

16,000

%

20,000 4,000

%

20,000

%

80%

%

20%

H Co.[80%]

S Co.[20%]

CP

RP

CP

RP

1

General Reserve

60,000

20,000

40,000

16,000

32,000

4,000

8,000

2

Profit and Loss A/c

50,000

20,000

30,000

16,000

24,000

4,000

6,000

3

Preliminary Expenses

(10,000)

(10,000)

-

(8,000)

-

(2,000)

-

Total

1,00,000

30,000

70,000

24,000

56,000

6,000

14,000

(3)

Cost of Control Cost of Acquisition

1

Book Value

2

Capital Profit

2,00,000 24,000

Minority Interest Book Value

1,60,000

Goodwill (5)

(4)

40,000

Capital Profit 1,84,000 16,000

6,000

Revenue Profit

14,000

Minority Interest

60,000

Unrealised Profit on Unsold Stocks [Downstream] Proportion of unsold stock × Profit %

H Co.

20

10,000

60,000 × 120 %

Debit – Profit and Loss A/c Credit – Stock in Trade A/c

(6)

Consolidated Balance Sheet of H Co. Ltd

Note

H Co.

S Co.

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital

(b)

Reserves and surplus: Profit and Loss A/c

(c)

Minority Interest

(3)

Non-current liabilities

2

1,20,000

(4)

Current liabilities [Creditors]

3

2,06,000

5,00,000

Cons.

-

1

5,00,000 3,96,000 60,000

Total

12,82,000

II

ASSETS

(1)

Non-current assets

(a)

Intangible Assets [Goodwill]

(b)

Tangible Assets

(c)

Investments

(2)

Current assets

4

1,00,000

16,000

1,16,000

3,50,000

2,50,000

6,00,000

50,000

50,000

1,00,000

5

4,66,000

Total

12,82,000

Note: Liability of bills discounted of H Ltd is ₹ 14,000 [20,000 less inter-company owings] 1

Reserves and Surplus General Reserve

Financial Accounting

R Ltd 2,00,000

S Ltd

Consol

32,000

2,32,000

6.10

Profit and Loss A/c Less

1,50,000

24,000

1,74,000

3,50,000

56,000

4,06,000

Unrealized Profit on unsold stocks

10,000 3,96,000

Non-current Liabilities

2

Secured Loan

-

80,000

80,000

Unsecured Loan

-

40,000

40,000

-

1,20,000

1,20,000

1,00,000

60,000

1,60,000

50,000

20,000

70,000

1,50,000

80,000

2,30,000

Current Liabilities

3

Creditors Bills Payable Inter-company Owings Less

Creditors of S Ltd

Less

Bills Payable

20,000 4,000 2,06,000

Non-current Assets

4

Plant and Machinery

2,00,000

1,20,000

3,20,000

Building

1,50,000

1,30,000

2,80,000

3,50,000

2,50,000

6,00,000

80,000

50,000

1,30,000

Current Liabilities

5

Stock Less

Unrealised profit on unsold stock Debtors

Less

(10,000) 100,000

40,000

Inter-company Owings Bills receivable

Less

1,40,000 (20,000)

50,000

-

Inter-company Owings

50,000 (4,000)

Bank

20,000

80,000

1,00,000

Cash

50,000

30,000

80,000 4,66,000

[CMA FINAL SY12, D13, 10 Marks] Question: On 31.03.2011, A Ltd. acquired 1,05,000 shares of B Ltd. for ₹12,00,000. The Balance Sheet of B Ltd. as on that date was as under: The Balance Sheet of B Ltd. as on 31.03.2011 I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹10 each, fully paid up

(b)

Reserves and surplus Securities Premium

Note

₹in ‘000

1,500 -

Pre-incorporation profits

30

Profit and Loss A/c

60

Financial Accounting

6.11

(2)

Current liabilities [Trade Payables]

75

Total

1,665

II

ASSETS

(1)

Non-current assets [Tangible Assets]

(2)

Current assets

1,050 615

Total

1,665

The B/Ss of A Ltd and B Ltd as on 31.03.2012

A Ltd

B Ltd

4,500

1,500

900

-

-

30

General Reserve

6,000

1,905

Profit and Loss A/c

1,575

420

555

210

13,530

4,065

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹10 each [before bonus shares]

(b)

Reserves and surplus

Note

Securities Premium Pre-incorporation Profits

(2)

Current liabilities [Trade Payables] Total

II

ASSETS

(1)

Non-current assets

(a)

Tangible Assets

7,920

2,310

(b)

Investments in B Ltd at cost

1,200

-

(2)

Current assets

4,410

1,755

13,530

4,065

Total

Directors of B Ltd. made a bonus issue on 31.03.2012 in the ratio of one equity share of ₹10 each fully paid for every two equity shares held on that date. Calculate as on 3.03.2012 the following: Cost of Control / Capital Reserve Minority Interest Consolidated Profit and Loss Account in each of the following cases o Before Issue of Bonus Shares o Immediately after the Issue of Bonus Shares It may be assumed that Bonus Shares were issued out of Post-Acquisition Profits by using General Reserve. Answer: (1)

Calculation of ratio of shares held by holding company and outsiders Share of Holding Company Minority Interest

(2)

Before Bonus Shares

Financial Accounting

𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑕𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

Total

Capital

Revenue

Profit

Profit

% %

1,05,000 1,50,000 45,000 1,50,000

%

70%

%

30%

A Ltd [70%]

B Ltd [30%]

CP

CP

RP

RP

6.12

1

Profit or Loss

2

General Reserve

3

Pre-incorporation Profits Total

(3)

After Bonus Shares

1

Profit or Loss

2

General Reserve after Bonus

3

Pre-incorporation Profits Total

4

Bonus Shares

420

60

360

1,905

-

1,905

30

30

-

21

2,355

90

2,265

63

Total

42

252.0

18

108.0

1,333.5

Capital

Revenue

Profit

Profit

571.5 9

1,585.5

27

679.5

A Ltd [70%]

B Ltd [30%]

CP

CP

RP

420

60

360

42

252.0

1,155

-

1,155

-

808.5

30

30

-

21

1,605

90

1,515

63

750

750

18

RP 108.0 346.5

9 1,060,.5

525

27

454.5

225

Before Bonus Shares (4)

Cost of Control

(5)

Cost of Acquisition 1

Book Value

2

Capital Profit(2)

1,200

Minority Interest Book Value

1,050

450.0

Capital Profit

63

1,113

Goodwill

27.0

(2)

Revenue Profit(2)

87

Minority Interest

679.5 1,156.5

Before Bonus Shares (4)

Cost of Control

(5)

Cost of Acquisition 1

Book Value

2

Capital Profit

3

Bonus Shares

1,200

Book Value

1,050 (3)

Minority Interest Capital Profit

63 525

1,638

Capital Reserve

27.0

Revenue Profit

454.5

Reserves and surplus Securities Premium

438

225.0

Minority Interest

A Ltd

B Ltd

900.0

-

Total 900.0

-

Pre-incorporation Profit

(3)

Bonus Shares

Before Bonus Shares 1

450.0 (3)

1,156.5

After Bonus Shares A Ltd

B Ltd

900.0

-

Total 900.0

-

Capital Reserve

438.0

General Reserve

6,000.0

1,333.5

7,333.5

6,000.0

808.5

6,808.5

Profit and Loss A/c

1,575.0

252.0

1,827.0

1,575.0

252.0

1,827.0

[Bonus Shares Out of Post-acquisition Profit] Question: H Ltd., acquired, 2000 equity shares of ₹ 100 each from S Ltd., on 31st March 2000.The summarized Balance Sheet of the companies as on 31 March 2001 were as follows: Particulars I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

Financial Accounting

Note

H Ltd

S Ltd

No.

6.13

(a)

Equity Share of ₹100 each

(b)

Reserves and surplus

(2)

8,00,000

2,50,000

Reserves

3,00,000

50,000

Profit and Loss A/c

1,00,000

1,00,000

Current liabilities

2,00,000

50,000

14,00,000

4,50,000

2,50,000

Total II

ASSETS

(1)

Non-current assets

(a)

Tangible Assets [Fixed Assets]

7,00,000

(b)

Investments [2,000 shares in S Ltd at cost]

3,00,000

(2)

Current assets

4,00,000

2,00,000

14,00,000

4,50,000

Total

S Ltd., had a credit balance of ₹ 50,000 in the reserve and ₹ 20,000 in profit and loss account when H Ltd acquired shares in S Ltd. S Ltd issued bonus shares in the ratio of one for every five shares held out of the profits earned during 2000-2001. This is not shown in the above balance sheet of S Ltd. Prepare a consolidated balance sheet of H Ltd., and its subsidiary on 31 March 2001 giving all necessary working. Answer: (1)

Calculation of ratio of shares held by holding company and outsiders Share of Holding Company Minority Interest

(2)

𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑕𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

Total

Capital

Revenue

Profit

Profit

2,000

%

2,500 500

%

2,500

%

80%

%

20%

H Co.[80%]

S Co.[20%]

CP

RP

CP

RP

1

Profit or Loss(3)

50,000

20,000

30,000

16,000

24,000

4,000

6,000

2

General Reserve

50,000

50,000

-

40,000

-

10,000

-

1,00,000

70,000

30,000

56,000

24,000

14,000

6,000

Total

₹

(3) Less

(4)

Profit or Loss

1,00,000

Bonus Shares

50,000

Profit or Loss

50,000

Cost of Control Cost of Acquisition

(6)

Book Value

2

Capital Profit

56,000

3

Bonus Shares

40,000

40,000

10,000

(5)

2,00,000

Minority Interest Book Value

50,000

Capital Profit

14,000

Revenue Profit 296,000 4,000

Consolidated Balance Sheet of H Co. Ltd

Financial Accounting

S Co.[20%]

3,00,000

1

Goodwill

H Co.[80%]

Note

6,000

Bonus Shares

10,000

Minority Interest

80,000

H Ltd

S Ltd

Consol.

6.14

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Equity Share of ₹100 each

(b)

Reserves and surplus

No. 8,00,000

-

8,00,000

Reserves

3,00,000

-

3,00,000

Profit and Loss A/c

1,00,000

24,000

1,24,000

(c)

Minority Interest

(2)

Current liabilities

80,000 2,00,000

50,000

Total

2,50,000 15,54,000

II

ASSETS

(1)

Non-current assets

(a)

Intangible Assets [Goodwill]

(b) (2)

-

-

4,000

Tangible Assets [Fixed Assets]

7,00,000

2,50,000

9,50,000

Current assets

4,00,000

2,00,000

6,00,000

Total

15,54,000

Revaluation of assets: Increase in value is capital profit therefore it has to be added with the capital profit and to concerned assets. [vice versa for decrease in value ] Adjustment for Depreciation: When an asset goes up, depreciation during the post-acquisition period will also go up. Therefore it should be deducted from Revenue Profit. [Intercompany Owings | Revaluation of Assets] [CMA FINAL D02, 16 Marks] Question: The following are the summarized Balance Sheet of H Ltd. and S. Ltd. as at 31 December, 2001: Particulars

Note

H Ltd

S Ltd

No. I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Equity Shares

(b)

Reserves and surplus

(2)

2,00,000

50,000

1,30,000

50,000

Current liabilities [Creditors]

1,00,000

30,000

Total

4,30,000

1,30,000

Fixed Assets

1,80,000

1,20,000

Investments in S Ltd

2,30,000

-

20,000

10,000

4,30,000

1,30,000

II

ASSETS

(1)

Non-current assets

Current assets

(2)

Total 1

Reserves and Surplus Reserves

Financial Accounting

1

H Ltd 30,000

S Ltd 10,000

6.15

Profit and Loss A/c as on 01.01.01

60,000

30,000

Profit and Loss for the year 2001

40,000

10,000

1,30,000

50,000

H Ltd. acquired 80% of the shares in S Ltd. on 1st July, 2001 included in the assets of H Ltd., there is ₹30,000 Loan to S Ltd. shown as creditors in S Ltd. Sundry Assets of S Ltd. include furniture & fittings of ₹40,000 to be revalued at ₹50,000 being over depreciated as at 31st July 2001. Prepare Consolidated Balance Sheet of H Ltd. as at 31st December, 2001. Answer: (1)

Calculation of ratio of shares held by holding company and outsiders Share of Holding Company Minority Interest

(2)

Total

𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑕𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

Capital

Revenue

Profit

Profit

%

80%

%

20%

H Co.[80%]

S Co.[20%]

CP

CP

RP

RP

1

Reserves

10,000

10,000

8,000

2,000

2

P/L as on 01.01.01

30,000

30,000

24,000

6,000

3

P/L for the year 2001

10,000

5,000

4

Revaluation of Assets

10,000

10,000

Total

60,000

55,000

(3)

5,000 5,000

Book Value of Shares

40,000

2

Capital Profit(2)

44,000

Goodwill

44,000

(4) 2,30,000

1

84,000 1,46,000

(5)

Consolidated Balance Sheet

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Equity Shares

(b)

Reserves and surplus

(c)

Minority Interest

(2)

Current liabilities [Creditors]

4,000

8,000

Cost of Control Cost of Acquisition

4,000

Note

1

ASSETS

(1)

Non-current assets

4,000

(2)

Current assets Total

Financial Accounting

11,000

1,000

Minority Interest Book Value of Shares

10,000

Capital Profit(2)

11,000

Revenue Profit(2)

1,000

Minority Interest

22,000

H Ltd

S Ltd

Consol

2,00,000

-

2,00,000

1,30,000

4,000

1,34,000 22,000

2

1,00,000 4,56,000

Intangible Assets [Goodwill] Tangible Assets

1,000

2,000

Total II

1,000

-

-

3

1,46,000 2,80,000

20,000

10,000

30,000 4,56,000

6.16

1

2

Reserves and Surplus

H Ltd

S Ltd

Consol

Reserves

30,000

Profit and Loss A/c as on 01.01.01

60,000

Profit and Loss for the year 2001

40,000

4,000

1,30,000

4,000

1,34,000

1,00,000

30,000

1,30,000

Current Liabilities Mutual Owings

30,000 1,00,000

3

Non-current Assets [Tangible] Fixed Assets

1,80,000

Appreciation

1,20,000

3,00,000

10,000

10,000

Mutual Owings

(30,000) 2,80,000

Revaluation of Assets [CMA INTER D05 & D07, 8+4+4=16 Marks] Question: The Balance Sheet of Small Ltd. as on 31st March, 2005 was as under: Particulars I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Equity Shares of ₹100 each

(b)

Reserves and surplus

6.00

General Reserve

3.00

Profit and Loss [Brought Forward]

1.20

Profit and Loss [Current Year]

0.60

Preliminary Expenses (2)

₹in lacs

(0.50)

Current liabilities [Creditors]

1.20

Total II

ASSETS

(1)

Non-current assets

11.50

Land and Building

(2)

4.30

4.00

Machinery

3.50

Less: Depreciation for the year

0.50

3.00

Current assets Stock at cost

2.00

Debtors

1.50

Cash and Bank Balance

1.00

Total

4.50 11.50

Big Ltd. purchased 4000 equity shares of ₹100 each on 1st October, 2004 on which date it was found that Land and Building were undervalued by ₹1 lakh and machinery was worth only ₹2.75 lakh. In

Financial Accounting

6.17

preparing the consolidated Balance Sheet of holding company, it was decided to adopt proper values of Assets, and write off preliminary expenses. On the above information given Ascertain: a) Capital Profits b) Revenue profits and c) Minority interest Answer: (1)

Calculation of ratio of shares held by holding company and outsiders 4,000 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑕𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 2 Share of Holding Company 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 % 6,000 % 3 2,000 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠 1 % % Minority Interest 6,000 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 3

(2)

Total

Capital

Revenue

Profit

Profit

𝟐

𝟏

H Co.[𝟑 ] CP

S Co.[ 𝟑]

RP

CP

1

General Reserve

3,00,000

3,00,000

2,00,000

1,00,000

2

Profit or Loss B/F

1,20,000

1,20,000

80,000

40,000

3

Profit or Loss Cur. Year

60,000

30,000

30,000

20,000

4

Preliminary Expenses

(50,000)

(50,000)

-

(33,333)

(16,667)

5

Revaluation of Assets

50,000

50,000

-

33,333

16,667

6

Change in Depreciation

3,571

-

3,571

4,50,000

33,571

(3) (4)

Total (3)

Revaluation of Assets

(a) (b) (c)

(4)

Less

20,000

RP

10,000

10,000

2,381 3,00,000

Date

1,190

22,381

1,50,000

Land and

11,190

Machinery

Building

Book Value

01.04.06

4,00,000

3,50,000

Depreciation [Balancing Figure]

2006-07

-

50,000

Book Value

31.03.07

4,00,000

3,00,000

(𝑏 )

%

1

(d)

Rate of Depreciation

(e)

Depreciation (a)×(d) up to

01.10.06

-

25,000

(f)

Book Value as on the date of acquisition

01.10.06

-

3,25,000

Revaluation of Assets Value as on(3) Less

-

Land and Building

01.10.06

7

Machinery

Book

Revised

Change

Book

Revised

Change

4,00,000

5,00,000

1,00,000

3,25,000

2,75,000

(50,000)

Depreciation Value as on

(5)

Date

(𝑎)

3,571 31.03.07

Revaluation of Assets(4) Change in value Change in depreciation

Financial Accounting

1,00,000

Type

Land and Building

(46,429)

Machinery

Total

Capital Profit (Loss)

1,00,000

(50,000)

50,000

Revenue Profit (Loss)

-

3,571

3,571

6.18

(6)

Minority Interest Book Value Capital Profit

2,00,000 (2)

Revenue Profit(2) Minority Interest

1,50,000 11,190 3,61,190

[Abnormal Loss | Mutual Owings | Tax Treatment | Different Date of B/S for H Ltd and S Ltd] [CMA FINAL D11, 15 Marks] Question: The Balance Sheet of H Ltd. and S Ltd. as on the date of last closing of accounts are as under: Particulars I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Equity Shares of ₹10 each

(b)

Reserves and surplus [Accumulated]

(2)

Non-current liabilities

Note

In ₹ H Ltd as at

S Ltd as at

31.03.2011

31.03.2010

11,00,000

5,00,000

4,50,000

2,05,000

-

3,00,000

[15% Non convertible Debentures] (3)

Current liabilities

(a)

Accounts Payable

4,80,000

2,80,000

(b)

Other Liabilities

1,00,000

40,000

(c)

Tax Provision

1,50,000

2,50,000

22,80,000

15,75,000

8,45,000

5,26,500

(1,95,000)

(1,21,500)

Total II

ASSETS

(1)

Non-current assets Tangible Assets Less: Depreciation for the year Investments

(a)

40,000 Shares in S Ltd.

8,00,000

(b)

1,000 Debentures in S Ltd.

1,50,000

(2)

Current assets Inventories

2,00,000

3,50,000

Accounts Receivable

2,50,000

4,65,000

Cash and Bank Balance

2,30,000

3,55,000

22,80,000

15,75,000

Total The following information is also available:

a) On 8th February, 2011 there was a fire at the factory of S Ltd., resulting in inventory worth ₹20,000 being destroyed. S Ltd. received 75 per cent of the loss as insurance. b) The same fire resulted in destruction of a machine having a written down value of ₹1,00,000. The Insurance company admitted the Company’s claim to the extent of 80 per cent. The machine was insured at its fair value of ₹1,50,000.

Financial Accounting

6.19

On 13th March, 2011, H Ltd. sold goods costing ₹1,50,000 to S Ltd. at a mark-up of 20 per cent. Half of these goods were resold to H Ltd. who in turn was able to liquidate the entire stock of such goods before closure of accounts on 31st March, 2011. As on 31st March, 2011, S Ltd.’s accounts payable show ₹60,000 due to H Ltd. on the two transactions. d) H Ltd. acquired the holdings in S Ltd. on 1st January, 2009 when the reserves and accumulated profits of S Ltd. stood at ₹75,000. e) Both companies have not provided for tax on current year profits. The current year taxable profits are ₹33,000 and ₹66,000 for H Ltd. and S Ltd. respectively. The tax rate is 33%. f) The incremental profits earned by S Ltd. for the period January, 2011 to March, 2011 over that earned in the corresponding period in 2010 was ₹56,000. Except for the profits that resulted from the transactions with H Ltd. in the aforesaid period, the entire profits have been realised in cash before 31st March, 2011. c)

Required: Prepare a Consolidated Balance Sheet of H Ltd. and its Subsidiary as at 31st March, 2011 Answer: (1) I

Particulars

In ₹

Note

EQUITY AND LIABILITIES

S Ltd as at

Change

S Ltd as at

31.03.2010

31.03.2011

(1)

Shareholders’ funds

(a)

Equity Shares of ₹10 each

5,00,000

-

5,00,000

(b)

Reserves and surplus [Accumulated]

2,05,000

*

49,220

2,54,220

(2)

Non-current liabilities

3,00,000

-

3,00,000

2,80,000

60,000†

3,40,000

40,000

-

40,000

2,50,000

21,780‡

2,71,780

[15% Non convertible Debentures] (3)

Current liabilities

(a)

Accounts Payable

(b)

Other Liabilities

(c)

Tax Provision Total

II

ASSETS

(1)

Non-current assets

15,75,000

Tangible Assets

5,26,500

Less: Depreciation for the year (2)

(1,21,500)

Add Less Less

(1,30,000)§

3,96,500

**

30,000

(91,500)

70,000††

4,20,000

Current assets Inventories

*

17,06,000

Incremental profit Incremental Profit Profit on insurance claim [machine] Loss on insurance claim [stocks] Tax Provision Total

3,50,000

₹ 56,000 20,000 (5,000) (21,780) 49,220

†

Payables to H Ltd for the purchases ₹60,000 Tax on current year taxable profit = 60,000×33% = 21,780 § Insurance claim = 80% of fair value 𝐴𝑚𝑜𝑢𝑛𝑡 𝑜𝑓 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 ** Impact on depreciation = Insurance Claim × ‡

††

𝑂𝑟𝑖𝑔𝑖𝑛𝑎𝑙 𝑉𝑎𝑙𝑢𝑒 𝑖𝑛 𝑡𝑕𝑒 𝐵𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔

= 1,30,000×

1,21,500 5,26,500

=₹30,000

Purchase of goods from H Ltd with profit – % of Sales – Abnormal Loss = (1,50,000 + 20%) – 50% – 20,000

Financial Accounting

6.20

Accounts Receivable

4,65,000

-

4,65,000

Cash and Bank Balance

3,55,000

41,000*

3,96,000

-

1,30,000

1,30,000

Insurance Claim Receivable Total (2)

15,75,000

Calculation of ratio of shares held by holding company and outsiders Share of Holding Company Minority Interest

(3)

Total Profit or Loss(3)

(4)

2,54,220

𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑕𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

2

50,000 10,000

%

50,000

80%

%

20%

Profit

Profit

CP

RP

CP

RP

75,000

1,79,220

60,000

1,43,376

15,000

35,844

Cost of Control

H Co.[80%]

%

Revenue

(5)

S Co.[20%]

Minority Interest Book Value

1,00,000

Equity Shares

8,00,000

Capital Profit

15,000

Debenture

1,50,000

Revenue Profit

35,844

Book Value – Equity

4,00,000

Book Value – Debenture

1,00,000

Capital Profit

60,000

Goodwill Consolidated Balance Sheet I

40,000

%

Capital

Cost of Acquisition

1

17,06,000

Minority Interest 5,60,000 3,90,000

In ₹

Note

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Equity Shares of ₹10 each

(b)

Reserves and surplus [Accumulated]

(c)

Minority Interest

(2)

Non-current liabilities

1,50,844

H Ltd as at

S Ltd as at

Consol.

31.03.2011

31.03.2011

31.03.2011

-

11,00,000

11,00,000 1

5,67,486 1,50,844 -

2,00,000

2,00,000

[15% Non convertible Debentures]

*

(3)

Current liabilities

(a)

Accounts Payable

(b)

Other Liabilities

(c)

Tax Provision

Incremental Cash Insurance claim for stocks received Total incremental profit Profit Earned on transaction with H Ltd [not in cash] Total incremental cash

Financial Accounting

2

7,60,000 1,00,000

3

40,000

1,40,000 4,32,670

₹ 56,000 30,000

₹ 15,000 26,000 41,000

6.21

Total

33,51,000

II

ASSETS

(1)

Non-current assets Intangible Assets [Goodwill(4)]

3,90,000

Tangible Assets (2)

3,90,000

4

9,55,000

Inventories

5

6,05,000

Accounts Receivable

6

6,55,000

Current assets

Insurance Claim Receivable Cash and Bank Balance

-

1,20,000

1,20,000

2,30,000

3,96,000

6,26,000

Total 1

33,51,000

Reserves and surplus [Accumulated] 33

4,50,000

1,43,376

Tax Provision for H Ltd [33,000×100 ]

(10,890)

(10,890)

Unrealised Profit [downstream]

(15,000)

(15,000)

Total 2

5,67,486

Accounts Payable

4,80,000

Mutual Owings

(60,000)

3,40,000

7,60,000

Tax Provision

1,50,000 33

Tax Provision for H Ltd [33,000×100 ]

2,71,780

10,890 4,32,670

Tangible Assets Less: Depreciation for the year

8,45,000

3,96,500

12,41,500

(1,95,000)

(91,500)

(2,86,500)

Total 5

9,55,000

Inventories

2,00,000

Unrealised Profit

4,20,000

6,20,000

(15,000)

(15,000)

Total 6

3,21,780

10,890

Total 4

8,20,000 (60,000)

Total 3

5,93,376

6,05,000

Accounts Receivable

2,50,000

Mutual Owings

(60,000)

4,65,000

Total

7,15,000 (60,000) 6,55,000

[Preliminary Expenses | Bonus Shares out of Pre-acquisition Profit | Inter-company Owings |Unrealsied Profit on Unsold Stock | Revaluation of Assets] Question: Balance Sheet as on 31.3.2008

Note

H Co.

S Co.

5,00,000

7,00,000

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹100 each

(b)

Reserves and surplus

1

7,00,000

2,80,000

(2)

Current liabilities

2

3,00,000

2,00,000

Financial Accounting

6.22

Total II

ASSETS

(1)

Non-current assets

(a)

Intangible Assets [Goodwill]

(b)

Tangible Assets

(c)

Investments

(2)

Current assets

Reserves and Surplus

5

1,00,000

5,00,000

4,20,000

4,00,000

2,00,000

5,00,000

4,60,000

15,00,000

11,80,000

4

S Co.

General Reserve

3,00,000

1,00,000

Profit and Loss A/c

4,00,000

2,00,000

-

(20,000)

7,00,000

2,80,000

2,00,000

1,00,000

Bills Payable

50,000

40,000

Other Liabilities

50,000

60,000

3,00,000

2,00,000

Plant and Machinery

2,00,000

2,40,000

Land and Building

3,00,000

1,80,000

5,00,000

4,20,000

1,00,000

3,00,000

Debtors

80,000

90,000

Bills receivable

20,000

30,000

Sundry Assets

3,00,000

40,000

5,00,000

4,60,000

Current Liabilities Creditors

3

1,00,000

H Co.

Preliminary Expenses 2

11,80,000

3

Total 1

15,00,000

Non-current Assets

Current Liabilities Stock

Adjustment: 1 H Ltd acquired 3,000 shares in S Ltd for ₹350,000 on 1.10.2007. 2 The profit and loss a/c and general reserve stood at ₹1,00,000 and ₹3,00,000 respectively on 1.4.2007 3 A bonus issue of 2 shares for every 5 shares held was made on 1.11.2007 out of pre acquisition reserve. 4 Debtors of S Ltd includes 40,000 due from H Ltd for goods supplied at a profit 25% on cost (half of the goods remained unsold on 31.3.2008) 5 All receivables of H Ltd are from S Ltd 6 Land and Building and Plant and Machinery which stood at ₹200,000 and ₹300,000 on 1.4.2007, where revalued at ₹400,000 & ₹200,000 respectively on the date of purchase of shares. Answer:

Financial Accounting

6.23

(1)

Calculation of ratio of shares held by holding company and outsiders 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑕𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

Share of Holding Company

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠

Minority Interest (2)

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

Total

1

Profit or Loss

2

General Reserve

3

Capital

Revenue

Profit

Profit

% %

4,200 7,000 2,800 7,000

%

60%

%

40%

H Co.[60%]

S Co.[40%]

CP

CP

RP

1,50,000

50,000

90,000

1,00,000

1,00,000

-

60,000

40,000

Preliminary Expenses

(20,000)

(20,000)

-

(12,000)

(8,000)

4

Revaluation of Assets(8)

1,40,000

1,40,000

-

84,000

56,000

5

Change in Depreciation(8)

(3,500)

-

(3,500)

Total

4,16,500

3,70,000

46,500

(4)

Less

2,22,000

General Reserve (Opening Balance)

3,00,000

Bonus Shares

2,00,000

General Reserve (Closing Balance)

1,00,000

Duration

₹

Profit and Loss A/c

As on 31.03.08

2,00,000

Profit

Up to 01.04.07 2007-08

(4) Less

Current Year

27,900

Proportion of unsold stock × Profit %

(1,400) 1,48,000

18,600

S Co.[40%]

1,20,000

80,000

Upto 01.10.07

After 01.10.07

1,00,000

1,00,000

-

1,00,000

50,000

50,000

1,50,000

50,000

Unrealised Profit on Unsold Stocks [Downstream] 1

20,000

H Co.[60%]

Total (5)

60,000

(2,100)

₹

(3)

30,000

RP

2,00,000

(3)

25

H Co.

40,000× 2 × 125 %

4,000

Debit – Profit and Loss A/c Credit – Stock in Trade A/c

(6)

Revaluation of Assets

(a) (b) (c)

(7)

Less

Date

Land and

Plant and

Building

Machinery

Book Value

01.04.07

2,00,000

3,00,000

Depreciation [Balancing Figure]

2007-08

20,000

60,000

Book Value

31.03.08

1,80,000

2,40,000

10%

20%

(𝑏 )

%

(d)

Rate of Depreciation

(e)

Depreciation (a)×(d) up to

01.10.07

10,000

30,000

(f)

Book Value as on the date of acquisition

01.10.07

1,90,000

2,70,000

Revaluation of Assets Value as on(6) Less

Depreciation

Financial Accounting

Date 01.10.07

(𝑎)

Land and Building

Plant and Machinery

Book

Revised

Change

Book

Revised

Change

1,90,000

4,00,000

2,10,000

2,70,000

2,00,000

(70,000)

10,500

(7,000)

6.24

Value as on

(8)

31.10.07

Plant and

Building

Machinery

Capital Profit (Loss)

2,10,000

(70,000)

1,40,000

Revenue Profit (Loss)

(10,500)

7,000

(3,500)

Type

Change in value Change in depreciation Cost of Control Cost of Acquisition 1

Book Bonus

2

Capital Profit

Value

Including

(63,000)

Land and

Revaluation of Assets(7)

(9)

1,99,500

(10)

Total

Minority Interest

3,50,000

Book Bonus

4,20,000

Value

Including

2,80,000

Capital Profit(2) 1,48,000

(2)

2,22,000

Goodwill

6,42,000

Revenue Profit

2,92,000

Minority Interest

(11)

Consolidated Balance Sheet of H Co. Ltd

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹100 each

(b)

Reserves and surplus

(c)

Minority Interest

(2)

Current liabilities

Note

1

H Co.

18,600

(2)

4,46,600

S Co.

Consol.

5,00,000

-

5,00,000

7,00,000

1,15,900

8,15,900 4,46,600

2

4,40,000

Total

22,02,500

II

ASSETS

(1)

Non-current assets

(a)

Tangible Assets

(b)

Investments [for H: 4,00,000-3,50,000]

(2)

Current assets

3

5,00,000

5,56,500

10,56,500

50,000

2,00,000

2,50,000

4

8,96,000

Total 1

2

22,02,500 Reserves and Surplus

H Co.

S Co.

Capital Reserve(9)

-

2,92,000

Goodwill

-

(2,00,000)

Consol.

General Reserve

3,00,000

Profit and Loss A/c (2)

4,00,000

30,000

Change in Depreciation(2)

-

(2,100)

Unrealised Profit on Unsold Stock

-

(4,000)

7,00,000

1,15,900

8,15,900

2,00,000

1,00,000

3,00,000

Current Liabilities Creditors Mutual Owings Bills Payable

Financial Accounting

(40,000) 50,000

40,000

90,000

6.25

Mutual Owings

(20,000)

Other Liabilities 3

50,000

60,000

3,00,000

2,00,000

2,00,000

2,40,000

Non-current Assets Plant and Machinery Change in value Land and Building

(63,000) 3,00,000

Change in value

5

4,40,000

1,80,000 1,99,500

5,00,000

5,56,500

10,56,500

1,00,000

3,00,000

4,00,000

Current Assets Stock Unrealised Profit on Unsold Stock

(4,000)

Debtors

80,000

90,000

Mutual Owings

(40,000)

Bills receivable

20,000

30,000

Mutual Owings Sundry Assets

1,70,000 50,000 (20,000)

3,00,000

40,000

3,40,000

5,00,000

4,60,000

8,96,000

Adjustments for Dividends: I

Dividend declared and paid by subsidiary company:

1

Out of revenue profit – No adjustment is required

2

Out of Capital Profit – Holding company share of dividend

(a)

If the dividend credited to profit and loss a/c

Credit – Cost of Acquisition Debit – Profit and Loss A/c of H Co.

(b)

If the dividend credited to cost of acquisition

No adjustments

II

Proposed Dividend

Minority’s share can be shown in B/S

[CMA FINAL J10, 7 Marks] Question: On 31.12.09 the balance sheets of H Ltd. and S Ltd. disclose the following figures: H. Ltd.

S. Ltd.

₹

₹

Share premium

10,000

6,000

General reserve

20,000

12,000

Capital reserve

--

8,000

30,000

20,000

Profit And Loss Account

On the date when H. Ltd. acquired control of S Ltd., S Ltd. had ₹10,000 in Profit and Loss A/c and ₹10,000 in General Reserve, apart from Share Premium and Capital Reserve Account which were

Financial Accounting

6.26

same as on 31.12.09. H Ltd. holds ¾th of the shares. H. Ltd. received ₹6,000 dividend out of preacquisition profit. Show how the above figures will appear in Consolidated Balance Sheet. Answer: (1)

Calculation of ratio of shares held by holding company and outsiders Share of Holding Company Minority Interest

(2)

Total

1

Profit or Loss

2

𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑕𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

Capital

Revenue

Profit

Profit

%

75%

%

25%

H Co.[75%]

S Co.[25%]

CP

RP

CP

RP

20,000

2,000

18,000

1,500

13,500

500

4,500

General Reserve

12,000

10,000

2,000

7,500

1,500

2,500

500

3

Share Premium

6,000

6,000

4,500

1,500

4

Capital Reserve

8,000

8,000

6,000

2,000

Total

46,000

26,000

(3)

(3)

20,000 ₹

Pre-acquisition P/L Profit or Loss (Opening Balance) Less

19,500

8,000

Profit or Loss (Closing Balance)

2,000

Cost of Control

6,500

H Co.[75%]

S Co.[25%]

6,000

2,000

(5)

Minority Interest

Cost of Acquisition

Book Value

1

Book Value

Capital Profit(2)

6,500

2

Capital Profit(2)

Revenue Profit(2)

5,000

26,000

Capital Reserve 1

5,000

10,000

Dividend Declared

(4)

15,000

Minority Interest

Reserves and Surplus

H Co.

S Co.

Consol.

Profit or Loss

30,000

13,500

43,500

General Reserve

20,000

1,500

21,500

Share Premium

10,000

10,000

[Mutual Owings | Pre-acquisition Dividend correctly credited in investment] [CMA FINAL D09, 10 Marks] H Ltd. acquired 80% shares of S Ltd. on April 1, 2008. The Balance Sheet of H Ltd. and S Ltd. as on March 31. 2009 are as follows: Particulars

Note

H Co.

S Co.

9,00,000

3,00,000

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹10 each

(b)

Reserves and surplus

1

5,80,000

2,80,000

(2)

Current liabilities

2

1,60,000

1,10,000

16,40,000

6,90,000

Total

Financial Accounting

6.27

II

ASSETS

(1)

Non-current assets

(a)

Tangible Assets

(b)

Investments

(2)

Current assets

3 4

Total 1

2

3,20,000

20,000

3,20,000

2,10,000

16,40,000

6,90,000

H Co.

S Co.

General Reserve

3,90,000

1,50,000

Profit and Loss A/c

1,90,000

1,30,000

5,80,000

2,80,000

1,00,000

60,000

60,000

50,000

1,60,000

1,10,000

Land and Building

4,20,000

2,40,000

Plant and Machinery

3,90,000

1,30,000

Furniture and Fixtures

1,90,000

90,000

10,00,000

4,60,000

90,000

50,000

1,20,000

1,00,000

Bills receivable

70,000

40,000

Cash and Bank

40,000

20,000

3,20,000

2,10,000

Current Liabilities Bills Payable

5

4,60,000

Reserves and Surplus

Sundry Creditors

3

10,00,000

Non-current Assets

Current Liabilities Stock Debtors

Other Information: (i) As on the date of acquisition, the following balances were revealed in the books of S. Ltd. a. General Reserve: ₹1, 00,000 b. Profit & Loss Account: ₹60,000 (Cr.) (ii) H. Ltd. received a dividend of ₹24,000 from S. Ltd. on the date of acquisition and credited the amount. (iii) Sundry debtors of H. Ltd. include ₹10,000 due from S. Ltd. (iv) Total bills payable of S. Ltd. consisted of bills drawn by H. Ltd. and the same were discounted with the bank by H. Ltd. You are required to prepare the consolidated Balance Sheet of H. Ltd. and S. Ltd. as on March 31.2009. Answer: (1)

Calculation of ratio of shares held by holding company and outsiders Share of Holding Company Minority Interest

Financial Accounting

𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑕𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

%

80%

%

20%

6.28

(2)

Total

1

Profit or Loss

2

Capital

Revenue

Profit

Profit

H Co.[80%] CP

S Co.[20%]

RP

CP

RP

1,30,000

30,000

1,00,000

24,000

80,000

6,000

20,000

General Reserve

1,50,000

1,00,000

50,000

80,000

40,000

20,000

10,000

Total

2,80,000

1,30,000

1,50,000

1,04,000

1,20,000

26,000

30,000

(3)

(3)

₹

Pre-acquisition P/L Less

Profit or Loss (Opening Balance)

60,000

Dividend Declared

30,000

Profit or Loss (Closing Balance)

30,000

(4)

Cost of Control Cost of Acquisition

1

Book Value

2

Capital Profit

3,20,000 1,04,000

Capital Reserve

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹10 each

(b)

Reserves and surplus

(c)

Minority Interest

(3)

Current liabilities

24,000*

6,000

Minority Interest Book Value

60,000

Capital Profit 3,44,000 24,000

Consolidated Balance Sheet of H Ltd I

S Co.[20%]

(5)

2,40,000 (2)

H Co.[80%]

(2)

26,000

Revenue Profit

30,000

(2)

Minority Interest

Note

H Co.

S Co.

9,00,000

1,16,000 Consol.

9,00,000

1

7,24,000 1,16,000

2

2,60,00

Total

20,00,000

II

ASSETS

(1)

Non-current assets

(a)

Tangible Assets

(b)

Investments

(2)

Current assets

3

10,00,000

4,60,000

14,60,000

-

20,000

20,000

4

5,20,000

Total

20,00,000 1

Reserves and Surplus

H Co.

S Co.

Consol.

Capital Reserve

24,000

24,000

General Reserve

3,90,000

40,000

4,30,000

Profit and Loss A/c

1,90,000

80,000

2,70,000 7,24,000

2

Current Liabilities Sundry Creditors Mutual Owings

*

1,00,000

60,000

1,60,000 (10,000)

Requires no adjustments as pre-acquisition dividend correctly credited in investment a/c

Financial Accounting

6.29

Bills Payable

60,000

50,000

1,10,000 2,60,000

3

5

Non-current Assets Land and Building

4,20,000

2,40,000

6,60,000

Plant and Machinery

3,90,000

1,30,000

5,20,000

Furniture and Fixtures

1,90,000

90,000

2,80,000

10,00,000

4,60,000

14,60,000

90,000

50,000

1,40,000

1,20,000

1,00,000

2,20,000

Current Assets Stock Debtors Mutual Owings

(10,000)

Bills receivable

70,000

40,000

1,10,000

Cash and Bank

40,000

20,000

60,000 5,20,000

[Bonus shares | Dividend out of pre-acquisition profit |Mutual Owings | Unrealised profit on unsold stock and assets transferred] Question: Following are the Balance Sheet of H Ltd and S Ltd., as at 31.03.2001 Note

H Co.

S Co.

10,00,000

7,00,000

General Reserve

2,00,000

3,00,000

Profit and Loss A/c

3,00,000

3,00,000

Current liabilities

5,00,000

9,00,000

20,00,000

22,00,000

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹10 each

(b)

Reserves and surplus

(2)

Total II

ASSETS

(1)

Non-current assets

(a)

Tangible Assets

8,00,000

9,00,000

(b)

Investments in S Ltd

5,00,000

-

(2)

Current assets

7,00,000

13,00,000

20,00,000

22,00,000

Total The following further information is furnished:

1 H Ltd acquired 30,000 shares in S Ltd as on 01.04.2000, when reserves and profit and loss a/c position was as follows: General reserve

5,00,000

Profit and Loss a/c

2,00,000

2 On 01.10.2000, S Ltd issued 2 shares for every 5 shares held, as bonus shares at a face value of ₹10 per share. [No entry is made in the books of H Ltd for receipt of these bonus shares.] 3 On 30.06.2000, S Ltd declares dividend out of pre-acquisition profit at 20% and H Ltd credited the

Financial Accounting

6.30

receipt of dividend on its profit and loss account. 4 S Ltd., owed H Ltd ₹1,20,000 for purchase of stock from H Ltd., the entire stock held by S Ltd on 31.3.2001. H Ltd made a profit of 20% on cost. 5 H Ltd transferred machinery to S Ltd., for ₹1,00,000. The book value of the machine of H Ltd was ₹75,000. Prepare a consolidated balance sheet as at 01.03,2001. Answer: Shares held by H Ltd. [including bonus shares of 2 for 5 shares held] = 4,200 (1)

Calculation of ratio of shares held by holding company and outsiders Share of Holding Company Minority Interest

(2)

𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑕𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

Total

Capital

Revenue

Profit

Profit

4,200

%

7,000 2,800

%

7,000

H Co.[60%] CP

%

60%

%

40%

S Co.[40%]

RP

CP

RP

1

Profit or Loss(3)

3,00,000

1,00,000

2,00,000

60,000

1,20,000

40,000

2

General Reserve(4)

3,00,000

3,00,000

-

1,80,000

-

1,20,000

Total

6,00,000

4,00,000

2,00,000

2,40,000

1,20,000

1,60,000

(3) Less

(4)

General Reserve (Opening Balance)

2,00,000

Dividend Declared

1,00,000

General Reserve (Closing Balance)

1,00,000 ₹

Pre-acquisition GR Less

(5)

₹

Pre-acquisition P/L

General Reserve (Opening Balance)

5,00,000

Bonus Shares

2,00,000

General Reserve (Closing Balance)

3,00,000

Proportion of unsold stock × Profit %

1,20,000× 120

80,000

H Co.[60%]

S Co.[40%]

60,000

40,000

H Co.[60%]

S Co.[40%]

1,20,000

80,000

(a) Unrealised Profit on Unsold Stocks [Downstream] 20

80,000

H Co. 20,000

Debit – Profit and Loss A/c Credit – Stock in Trade A/c

(b) Profit on assets transferred [Downstream] Transfer Price – Cost Price

1,00,000 – 75,000

25,000

Debit – Profit and Loss A/c Credit – Machinery A/c

(6)

Cost of Control

(7)

Cost of Acquisition

5,00,000

Minority Interest Book Value Including Bonus

2,80,000

(2)

1,60,000 80,000

1

Book Value Including Bonus

4,20,000

Capital Profit

2

Capital Profit

2,40,000

Revenue Profit

3

Dividend from Pre-acq Profit

(2)

Financial Accounting

60,000

(2)

7,20,000

6.31

Capital Reserve

2,20,000

Minority Interest

(8)

Consolidated Balance Sheet of H Co. Ltd

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹10 each

(b)

Reserves and surplus

(c)

Minority Interest

(2)

Current liabilities

Note

H Co.

5,20,000

S Co.

Consol.

-

10,00,000

10,00,000 1

7,35,000 5,20,000

2

12,80,000

Total

35,35,000

II

ASSETS

(1)

Non-current assets

3

16,75,000

(2)

Current assets

4

18,60,000

Total 1

35,35,000 Reserves and Surplus

S Co.

Consol.

-

2,20,000

2,20,000

General Reserve

2,00,000

-

2,00,000

Profit and Loss A/c (2)

3,00,000

1,20,000

4,20,000

Capital Reserve

H Co.

(6)

Profit on Assets Transferred

(25,000)

Unrealised Profit on Unsold Stock

(20,000)

Pre-acquisition Dividend

(60,000) 7,35,000

2

Current Liabilities

5,00,000

9,00,000

Mutual Owings

14,00,000 (1,20,000) 12,80,000

3

Non-current Assets

8,00,000

9,00,000

17,00,000

Profit on Assets Transferred

(25,000) 16,75,000

4

Current Assets

7,00,000

13,00,000

20,00,000

Unrealised Profit on Unsold Stock

(20,000)

Mutual Owings

(1,20,000) 18,60,000

[Proposed Dividend | Unrealised Profit | Mutual Owings] Question: The Balance Sheets of H Ltd, and its subsidiary S Ltd, as on 31st March, 1999 are as follows: Note I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹100 each

(b)

Reserves and surplus

Financial Accounting

1

H Co.

S Co.

30,00,000

15,00,000

16,00,000

9,50,000

6.32

(2)

Non-current Liabilities [15% Debentures]

(3)

Current liabilities

2

Total

10,00,000

-

4,60,000

3,00,000

60,60,000

27,50,000

II

ASSETS

(1)

Non-current assets

43,00,000

16,00,000

(2)

Current assets

17,60,000

11,50,000

Total

60,60,000

27,50,000

1

Reserves and surplus

H Ltd

S Ltd

General Reserve as on 01.04.98

8,00,000

4,00,000

Profit and Loss A/c as on 01.04.98

2,00,000

2,50,000

Net Profit for 1998-99

6,00,000

4,00,000

-

(1,00,000)

16,00,000

9,50,000

4,00,000

2,70,000

60,000

30,000

4,60,000

3,00,000

Premises

14,00,000

9,00,000

Machinery

12,00,000

7,00,000

Investment in Shares of S Ltd

17,00,000

-

43,00,000

16,00,000

Inventories

7,00,000

4,50,000

Debtors

5,00,000

4,20,000

Cash and Bank

3,80,000

2,00,000

Bills Receivable

1,80,000

80,000

17,60,000

11,50,000

Miscellaneous Expenses 2

Current liabilities Creditors Bills Payable

3

4

Non-current Assets

Current Assets

The following is the additional information: 1 H Ltd acquired 12,000 equity shares in S Ltd on 1st April 1998. 2 Bills receivable of H Ltd includes ₹30,000 accepted by S Ltd 3 Accounts receivable of H Ltd include ₹1,00,000 due from S Ltd 4 S Ltd purchased goods from H Ltd for ₹2,50,000 which invoiced by H Ltd at a profit of 20% on Sales. Half of the goods remains unsold 5 Both H Ltd and S Ltd have proposed 10% dividend for the year 1998-99, but no effect has been given in the balance sheets. Prepare a consolidated balance sheet of H Ltd and its subsidiary S Ltd as on 31 stMarch, 1999 giving proper working notes. Ignore corporate dividend tax. Answer:

Financial Accounting

6.33

(1)

Calculation of ratio of shares held by holding company and outsiders Share of Holding Company Minority Interest

(2)

𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑕𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

Capital

Revenue

Profit

Profit

15,000 3,000

%

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

Total

12,000

%

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠

15,000

%

80%

%

20%

H Co.[80%] CP

S Co.[20%]

RP

CP

RP

1

P/L as on 01.04.98

2,50,000

2,50,000

-

2,00,000

-

50,000

-

2

GR as on 01.04.98

4,00,000

4,00,000

-

3,20,000

-

80,000

-

3

P/L for 1998-99

4,00,000

-

4,00,000

-

3,20,000

-

80,000

4

Miscel. Expenses

(1,00,000)

(1,00,000)

-

(80,000)

-

(20,000)

-

9,50,000

5,50,000

4,00,000

4,40,000

3,20,000

1,10,000

80,000

Total (3)

Unrealised Profit on Unsold Stocks [Downstream] Proportion of unsold stock × Profit %

1

H Co. 20

2,00,000× 2 × 100

20,000

Debit – Profit and Loss A/c Credit – Stock in Trade A/c

(4)

Cost of Control Cost of Acquisition

1

Book Value of Shares

2

Capital Profit

(5) 17,00,000

12,00,000

(2)

4,40,000

16,40,000

Goodwill

60,000

(6)

Consolidated Financial Statement of H Co.

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹100 each

(b)

Reserves and surplus

(c)

Minority Interest

(2)

Non-current Liabilities [15% Debentures]

(3)

Current liabilities

Minority Interest Book Value of Shares

3,00,000

Capital Profit

(2)

1,10,000

Revenue Profit

80,000

(2)

Minority Interest Note

H Co.

4,90,000

S Co.

30,00,000

Consol.

-

1

16,00,000 4,90,000 10,00,000

2

9,30,000

Total

70,20,000

II

ASSETS

(1)

Non-current assets

(a)

Intangible Assets [Goodwill]

(b)

Tangible Assets

3

(2)

Current assets

4

60,000 26,00,000

16,00,000

42,00,000 27,60,000

Total 1

30,00,000

70,20,000 Reserves and surplus

H Ltd

General Reserve as on 01.04.98

8,00,000

-

Profit and Loss A/c as on 01.04.98

2,00,000

-

Financial Accounting

S Ltd

Consol

6.34

Net Profit for 1998-99 Proposed Dividend of H Ltd.,

6,00,000

3,20,000

16,00,000

3,20,000

19,20,000

(3,00,000)

-

(3,00,000)

Unrealised Profit

(20,000) 16,00,000

2

Current liabilities Creditors Mutual Owings Bills Payable Mutual Owings Proposed Dividend of H Ltd.,

4,00,000

2,70,000

6,70,000

-

-

(1,00,000)

60,000

30,000

90,000

-

-

(30,000)

3,00,000

-

3,00,000 9,30,000

3

4

Non-current Assets [Tangible Assets] Premises

14,00,000

9,00,000

23,00,000

Machinery

12,00,000

7,00,000

19,00,000

26,00,000

16,00,000

42,00,000

7,00,000

4,50,000

11,50,000

Current Assets Inventories Unrealised Profit Debtors

(20,000) 5,00,000

4,20,000

Mutual Owings

9,20,000 (1,00,000)

Cash and Bank

3,80,000

2,00,000

5,80,000

Bills Receivable

1,80,000

80,000

2,60,000

Mutual Owings

(30,000) 27,60,000

[Preference Shares | Dividend | Bonus Shares] [CMA FINAL D03, 16 Marks] Question: The following are the summarized balance sheets of P Ltd. and S Ltd. as at 31 st March, 2003: Note

P Co.

S Co.

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital

1

80,00,000

60,00,000

(b)

Reserves and surplus

2

70,00,000

34,00,000

(2)

Non-current Liabilities [10% Debentures]

20,00,000

5,00,000

(3)

Current liabilities

30,00,000

24,00,000

2,00,00,000

1,23,00,000

3

Total II

ASSETS

(1)

Non-current assets

(a)

Tangible Assets

4

90,00,000

70,00,000

(b)

Investments

5

70,00,000

20,00,000

Financial Accounting

6.35

(2)

Current assets

6

Total 1

Share Capital

40,00,000

33,00,000

2,00,00,000

1,23,00,000

P Ltd

12% Preference Shares of ₹10 each

-

20,00,000

80,00,000

40,00,000

80,00,000

60,00,000

Securities Premium

10,00,000

-

General Reserve

36,00,000

20,00,000

Profit and Loss A/c

24,00,000

14,00,000

70,00,000

34,00,000

12,00,000

6,00,000

-

2,40,000

-

50,000

18,00,000

15,10,000

30,00,000

24,00,000

Land and Building

50,00,000

40,00,000

Other Fixed Assets

40,00,000

30,00,000

90,00,000

70,00,000

(1) 3,00,000 Equity Shares

45,00,000

-

(2) 1,00,000 Preference Shares

12,00,000

-

2,50,000

-

10,50,000

20,00,000

70,00,000

20,00,000

Stocks

15,00,000

12,00,000

Debtors and Bank

25,00,000

21,00,000

40,00,000

33,00,000

Equity Shares of ₹10 each 2

3

S Ltd

Reserves and surplus

Current liabilities Proposed Dividend (1) Equity (2) Preference Accrued Debenture Interest Creditors Non-current Assets

4

5

Tangible Assets

Investment at cost in S Ltd

(3) 10% Debentures at face vale Investments in Govt. Securities 6

Current Assets

Additional information: a) P Ltd. acquired its interest in S Ltd. on 1st April, 2002, when the latter company had ₹18,00,000 in its general reserve account. b) S Ltd. arrives at its profit and Loss account balance as follows: ₹ Balance – 1st April, 2002

Financial Accounting

₹ 4,00,000

6.36

Profit in the current year

20,40,000 24,40,000

Transfer to Reserves

2,00,000

Proposed Dividend

8,40,000 10,40,000

Balance on 31 March, 2003

14,00,000

st

c)

The profit and loss account balance of S Ltd. as on 1 st April, 2002 was arrived at after providing for preference and 10% equity dividends for the year ended 31st March, 2002. These dividends were paid in August, 2002. P Ltd. credited dividends received from S Ltd. to its profit and loss account. d) P Ltd. has made no provisions in respect of debenture interest and dividends receivable from S Ltd. for the year ended 31st March, 2003. e) In January, 2003 S. Ltd. issued fully paid bonus shares in the ratio of one share for every four held by utilizing general reserve. The transaction is yet to be recorded in the books of both P Ltd. and S Ltd. Draft a consolidated balance sheet as at 31st March, 2003. Show details of computation of cost of control, minority interest and consolidated profit. Answer: (1)

Calculation of ratio of shares held by holding company and outsiders Share of Holding Company Minority Interest

(2)

Total

𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑕𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

4,00,000 1,00,000

%

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

4,00,000

P Co.[75%]

%

75%

%

25%

Capital

Revenue

S Co.[25%]

Profit

Profit

CP

RP

CP

RP

1

Profit or Loss

14,00,000

4,00,000

10,00,000

3,00,000

7,50,000

1,00,000

2,50,000

2

Gen. Reserve

10,00,000

8,00,000

2,00,000

6,00,000

1,50,000

2,00,000

50,000

3

Proposed Divid.

(a)

Equity

6,00,000

6,00,000

4,50,000

1,50,000

(b)

Preference [1:1]

2,40,000

2,40,000

1,20,000

1,20,000

Total

32,40,000

(3)

(4)

*

12,00,000

20,40,000

9,00,000

₹

Pre-acquisition Dividend

(4)

3,00,000

S Co.[25%]

Equity Shares

4,00,000

3,00,000

2,00,000

Preference Shares [1:1 Ratio]

2,40,000

1,20,000

1,20,000

5,70,000

4,20,000 ₹

Pre-acquisition GR Less

14,70,000

P Co.[75%]

Total

General Reserve (Opening Balance)

18,00,000

Bonus Shares

10,00,000

General Reserve (Closing Balance)

*

3,00,000

%

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠

P Co.[75%]

S Co.[25%]

7,50,000

2,50,000

8,00,000

General Reserve after Bonus Issue = (₹20,00,000 – ₹10,00,000)

Financial Accounting

6.37

(5)

Cost of Control

(6)

Cost of Acquisition

Book Value

Equity Shares

45,00,000

Equity Shares

10,00,000

Preference Shares

12,00,000

Preference Shares

10,00,000

Debentures

2,50,000

Capital Profit

59,50,000 1

Minority Interest

Book Value Equity Shares

30,00,000

Preference Shares

10,00,000

Debentures

3,00,000

Bonus Shares

2,50,000

Minority Interest (7)

Proposed Dividend 1,50,000

9,00,000

Preference

1,20,000

3

Bonus Shares

7,50,000

4

Dividend from Pre-acq Profit

4,20,000

Capital Reserve

63,20,000 3,70,000

Consolidated Balance Sheet of P Ltd

Note

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital

(b)

Reserves and surplus

(c)

Minority Interest

(2)

Non-current Liabilities [10% Debentures]

(3)

Current liabilities

P Co.

80,00,000

S Co.

Consol.

-

80,00,000

1

84,45,000 28,50,000 20,00,000

2,50,000

22,50,000

2

48,05,000

Total

2,63,50,000

II

ASSETS

(1)

Non-current assets

(a)

Tangible Assets

(b)

Investments in Govt. Securities

(2)

Current assets

3 4

90,00,000

70,00,000

1,60,00,000

10,50,000

20,00,000

30,50,000

40,00,000

33,00,000

73,00,000

Total 1

28,50,000

Equity

Capital Profit

(8)

Revenue Profit(2)

2,50,000

2

(2)

3,00,000

(2)

2,63,50,000 Reserves and surplus

P Ltd

Securities Premium

S Ltd

Consol.

10,00,000

10,00,000

Capital Reserve

3,70,000

3,70,000

General Reserve

36,00,000

36,00,000

Profit and Loss A/c

24,00,000

Pre-acquisition Dividend

(4,20,000)

(3)

Accrued Debenture Interest

14,70,000(2)

*

38,70,000 (4,20,000)

25,000

25,000 84,45,000

*

Cancellation of Mutual Owings

Financial Accounting

6.38

2

Current liabilities Proposed Dividend(7) (3) Equity

12,00,000

1,50,000

13,50,000

-

1,20,000

1,20,000

-

25,000

25,000

18,00,000

15,10,000

33,10,000

(4) Preference Accrued Debenture Interest Creditors

48,05,000 Non-current Assets 3

4

Tangible Assets Land and Building

50,00,000

40,00,000

90,00,000

Other Fixed Assets

40,00,000

30,00,000

70,00,000

90,00,000

70,00,000

1,60,00,000

Stocks

15,00,000

12,00,000

27,00,000

Debtors and Bank

25,00,000

21,00,000

46,00,000

40,00,000

33,00,000

73,00,000

Current Assets

[CMA FINAL, SY08, J12, 15 Marks] Question: the following are the Balance Sheets of H Ltd and S Ltd., as at 31.03.2012 Note

H Co.

S Co.

10,00,000

7,00,000

1,00,000

50,000

General Reserve

2,00,000

4,48,000

Profit and Loss A/c

3,60,000

1,77,000

(2)

Non-current liabilities [12% Debentures]

2,00,000

2,00,000

(3)

Current liabilities Sundry Creditors

3,00,000

5,35,000

Bills Payable

1,40,000

1,40,000

23,00,000

22,50,000

Land and Building

6,00,000

2,70,000

Plant and Machinery

2,00,000

2,70,000

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹10 each

(b)

12% Preference Shares of ₹10 each

(c)

Reserves and surplus

Total II

ASSETS

(1)

Non-current assets

(a)

Tangible Assets

(b)

Investments in S Ltd Shares in S Ltd 900, 12% Debentures in S Ltd

(2)

7,10,000 80,000

Current assets Stock

Financial Accounting

1,00,000

3,00,000

6.39

Debtors

4,00,000

10,10,000

60,000

2,75,000

1,00,000

1,00,000

50,000

25,000

Cash at Bank Bills Receivable Preliminary Expenses Total

Note: Contingent liability in respect of Bills discounted by H Ltd. ₹50,000. Contingent liability in respect of Bills discounted by S Ltd. ₹25,000 of which Bills of ₹5,000 were accepted by H Ltd. Additional Information: a) H Ltd. acquired 40,000 Equity Shares of S Ltd. and 2,000. 12% Pref. Shares in S Ltd. on 1.7.2011 at a cost of ₹6,80,000 and ₹30,000 respectively. The credit balance of Profit and Loss Account of S Ltd. as on 1.4.2011 was ₹2,25,000 and that of General Reserve on that date was ₹6,00,000. b) On 30.9.2011, S Ltd. declared dividend @ 20% on equity shares for the year 2010-2011. H Ltd. credited the receipt of dividend to its Profit and Loss Account. c) On 1.1.2012, S Ltd. issued 2 shares for every 5 shares held, as bonus shares. No entry has been made in the books of H Ltd. for the receipt of these bonus shares. d) H Ltd. purchased goods for ₹3 lakhs from S Ltd. which made at a profit of 20% on cost. 80% of these goods were sold by H Ltd. at a profit of 20% on cost till 31.03.2012. e) On 1.1.2012, H Ltd. sold to S Ltd. a Machine costing ₹2,40,000 at a profit of 25% on selling price. f) Depreciation at 10% p.a. was provided by S Ltd. on this Machine. g) H Ltd. owed S Ltd. ₹2,90,000 but S Ltd. is owed ₹3,00,000 by H Ltd. h) The Land and Building of S Ltd. which stood at ₹3,00,000 on 1.4.2011, was considered as worth of ₹6,92,500 on 1.7.2011, for which necessary adjustments are yet to be made. i) All the Bills Payables of S Ltd. were drawn upon by H Ltd. j) The management of H Ltd. and S Ltd. wish to recommend a dividend of 15% p.a. and 10% p.a. respectively on equity shares for the year 2011-2012. Required: Calculate Minority Interest, Cost of Control and the Balance of Consolidated Profit and Loss Account to be shown in the Consolidated Balance Sheet of H Ltd. and its subsidiary, as at 31 st March, 2012. Answer: Shares held by H Ltd. [including bonus shares of 2 for 5 shares held] = 56,000 (1)

Calculation of ratio of shares held by holding company and outsiders Share of Holding Company Minority Interest

(2)

Total

1

Profit or Loss

2

General Reserve

3

Miscel. Expenses

(3) (4)

𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑕𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

Capital

Revenue

Profit

Profit

% %

56,000 70,000 14,000 70,000

Prop. Pref. Divid. Total

Financial Accounting

80%

%

20%

H Co. [80%]

S Co. [20%]

CP

RP

CP

RP

1,71,000

1,34,200

36,800

1,07,360

29,440

26,840

7,360

4,48,000

4,12,000

36,000

3,29,600

28,800

82,400

7,200

(25,000)

(25,000)

-

(20,000)

-

(5,000)

-

H Co. [40%] 4

%

S Co. [60%]

6,000

1,500

4,500

600

1,800

900

2,700

6,00,000

5,22,700

77,300

4,17,560

60,040

1,05,140

17,260

6.40

(3)

Date

₹

01.04.2011

2,25,000

Pre-acquisition P/L Profit and Loss Less

Dividend Declared [5,00,000 × 20%]

H Co. [80%]

S Co. [20%]

80,000

20,000

1,00,000

Capital Profit and Loss after Dividend

01.04.2011

1,25,000

Profit and Loss after Pref Dividend

31.03.2012

1,71,000

2011-12

Profit for the year after dividend Total (4)

General Reserve Less

1,25,000

-

46,000

9,200

36,800

1,71,000

1,34,200

36,800

Date

₹

01.04.2011

6,00,000

Pre-acquisition GR Bonus Shares

Revenue

H Co. [80%]

S Co. [20%]

1,60,000

40,000

2,00,000

Capital 4,00,000

General Reserve after Bonus General Reserve

4,00,000

31.03.2012

4,48,000

2011-12

48,000

12,000

36,000

4,48,000

4,12,000

36,000

Transfer from P/L Total (5)

(a) Unrealised Profit on Unsold Stocks [Uptream] Proportion of unsold stock × Profit %

Revenue

H Co.

20

20

3,00,000× 100 × 120

10,000

Debit – Profit and Loss A/c Credit – Stock in Trade A/c

(b) Profit on assets transferred [Downstream] 25

Transfer Price – Cost Price

2,40,000× 75 –

– Depreciation

10% for 3 months

(6)

Revaluation of Assets

78,000

Date

Credit – Machinery A/c

Land and Building Book

Less

3,00,000

Value as on

01.07.2011

2,92,500

6,92,500

4,00,000

22,500

52,500

30,000

2,70,000

6,40,000

3,70,000

Depreciation

Change in value Change in depreciation

31.03.2012

Land and

Type

Financial Accounting

S Co. [20%]

Capital Profit (Loss)

4,00,000

3,20,000

80,000

Revenue Profit (Loss)

(30,000)

(24,000)

(6,000)

(9)

Cost of Acquisition Equity & Preference Shares

H Co. [80%]

Building

Cost of Control

Debentures

Change

01.04.2011

Revaluation of Assets(6)

(8)

Revised

Value as on

Value as on

(7)

Debit – Profit and Loss A/c

Minority Interest Book Value Plus Bonus

7,10,000

1.

Equity Shares

80,000

2.

Preference Shares

1,40,000 30,000

6.41

1

Book Value Plus Bonus

Capital Profit(2)

Equity Shares

5,60,000

1,05,140

Revenue Profit(2)

17,260

Preference Shares

20,000

Revaluation of Assets

80,000

Debentures

90,000

Revaluation of Depreciation

(6,000)

2

Capital Profit

3

Divid. from Pre-acq Profit

4

Revaluation of Assets

3,20,000

5

Revaluation of Depreciation

(24,000)

Minority Interest

4,17,560

(2)

3,66,400

80,000

Capital Reserve

14,63,560 6,73,560

[Dividend | Bonus Shares | Intercompany Owings | Unrealized Profit on unsold stock] [CMA FINAL D08, 5+3+2+1+2+2=15 Marks] The Balance sheet of Paragon Ltd. and its subsidiary, Axis Ltd., as at March 31, 2008 are as under: Note

P Co.

A Co.

6,000

2,400

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹10 each

(b)

Reserves and surplus

1

2,749

1,500

(2)

Current liabilities

2

1,944

704

10,693

4,604

4,733

2,743

Total II

ASSETS

(1)

Non-current assets

(a)

Tangible Assets

(b)

Investments in shares in Axis Ltd

(2)

Current assets

3

1,500 4

Total 1

2

4,460

1,861

10,693

4,604

Reserves and surplus

P Ltd

A Ltd

General Reserve

1,392

690

Profit and Loss A/c

1,357

810

2,749

1,500

Bills Payable

186

80

Sundry Creditors

730

427

Provision for Taxation

428

197

Proposed Dividend

600

-

1,944

704

Land and Building

1,359

-

Plant and Machinery

2,452

2,450

922

293

Current liabilities

Non-current Assets 3

Tangible Assets

Furniture and Fittings

Financial Accounting

6.42

4

4,733

2,743

Stocks

1,975

978

Sundry Debtors

1,300

681

Bills Receivable

180

100

Sundry Advances

260

-

Cash and Bank Balances

745

102

4,460

1,861

Current Assets

Following additional information is available: a) Paragon Ltd. purchased 90 lacs shares in Axis Ltd. on April 1, 2007 when the balances in General Reserve and Profit and Loss Account of Axis Ltd. stood at ₹1,500 lacs and ₹600 lacs respectively. b) On July 4, 2007 Axis Ltd. declared a dividend @ 20% for the year ended March, 31.2007. Paragon Ltd. credited the dividend so received to its Profit and Loss Account. c) Out of the balance in its General Reserve Accounts on January 1, 2008 Axis Ltd. issued 3 fully paid- up bonus shares for every 5 movement in its General Reserve Account in 2007-08. d) On March 31, 2008 Axis Ltd‘s stock included goods which it had purchased for ₹50 lacs form Paragon Ltd. on which the latter made a profit of 25% on cost. e) On March 31, 2008 all the bills payable in Axis Ltd’s Balance Sheet were acceptances in favour of Paragon Ltd. But on that date, Paragon Ltd. held only ₹23 lacs of these acceptances in hand, the rest having been endorsed in favour of its creditors. Required: (i) Prepare Consolidated Balance sheet of Paragon Ltd. and its Subsidiary Axis Ltd. as at March 31, 2008. (ii) Analysis of pre-acquisition and Post- acquisition profits. (iii) Goodwill/Capital Reserve arising out of consolidation. (iv) Consolidated General Reserve. (v) Consolidated Profit and Loss Account. (vi) Minority Interest. Answer: Shares held by H Ltd. [including bonus shares of 3 for 5 shares held] = 144 lacs (1)

Calculation of ratio of shares held by holding company and outsiders 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑕𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

Share of Holding Company

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠

Minority Interest (2)

Total

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎 𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

Capital

Revenue

Profit

Profit

% %

P Co.[60%]

144 𝑙𝑎𝑐𝑠 240 𝑙𝑎𝑐𝑠 96 𝑙𝑎𝑐𝑠 240 𝑙𝑎𝑐𝑠

%

60%

%

40%

A Co.[40%]

CP

RP

CP

RP

1

Profit or Loss

810

300

510

180

306

120

204

2

Gen. Reserve(4)

690

600

90

360

54

240

36

1,500

900

600

540

360

360

240

Total (3)

Pre-acquisition P/L Less

Financial Accounting

₹

Profit or Loss (Opening Balance)

600

Pre-acquisition Dividend

300

Profit or Loss (Closing Balance)

300

P Co.[60%]

A Co.[40%]

180

120

6.43

(4)

₹

Pre-acquisition GR General Reserve (Opening Balance) Less

900

General Reserve (Closing Balance)

600

Cost of Control

(6)

Cost of Acquisition 1

Book Value of Shares

2

Capital Profit

3

Pre-acquisition Dividend

1,500 1,440 540

(2) (3)

180

A Co.[40%]

540

360

1,500

Bonus Shares

(5)

P Co.[60%]

Minority Interest Book Value of Shares

960

Capital Profit

(2)

360

Revenue Profit

240

2,160

Capital Reserve (7)

Consolidated Balance Sheet

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹10 each

(b)

Reserves and surplus

(c)

Minority Interest

(2)

Current liabilities

660

Minority Interest

Note

P Co.

A Co.

Consol

6,000

-

6,000

1

1,560 2

2,625 13,764

II

ASSETS

(1)

Non-current assets

(a)

Tangible Assets

3

(2)

Current assets

4

4,733

2,743

7,476 6,288

Total

13,764

Reserves and surplus

P Ltd

A Ltd

Consol.

General Reserve

1,392

54

1,446

Profit and Loss A/c

1,357

306

1,663

Pre-acquisition Dividend

(180)

(180)

(10)

(10)

Unrealised Profit on Unsold Stock(8)

1,560

3,579

Total

1

(2)

Capital Reserve

660 3,579

2

Current liabilities Bills Payable

186

80

Mutual Owings

266 (23)

Sundry Creditors

730

427

1,157

Provision for Taxation

428

197

625

Proposed Dividend

600

-

600 2,625

Financial Accounting

6.44

Non-current Assets 3

Tangible Assets

7,476

Land and Building

1,359

-

1,359

Plant and Machinery

2,452

2,450

4,902

922

293

1,215

4,733

2,743

7,476

1,975

978

2,953

Furniture and Fittings 4

Current Assets Stocks Unrealised Profit on Unsold Stock(8)

(10)

(10)

Sundry Debtors

1,300

681

1,981

Bills Receivable

180

100

280

Mutual Owings

(23)

Sundry Advances

260

-

260

Cash and Bank Balances

745

102

847 6,288

(8)

Unrealised Profit on Unsold Stocks [Downstream] Proportion of unsold stock × Profit %

25

50× 125

H Co.

10

Debit – Profit and Loss A/c Credit – Stock in Trade A/c

[Preference Shares | Dividend | Bonus Shares | Unrealised Loss on Unsold Stock upstream | Revaluation of Assets with Depreciation] [CMA FINAL SY12 D13, 15 Marks] Question: The balance sheets of A Ltd. and B Ltd. as at 31.03.2012 Note

A Ltd

B Ltd

40,00,000

8,00,000

-

5,00,000

General Reserve

18,00,000

50,000

Profit and Loss A/c

17,00,000

6,50,000

5,00,000

3,00,000

80,00,000

23,00,000

Plant and machinery

26,50,000

8,00,000

Furniture and fixtures

8,00,000

5,40,000

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital Equity shares of ₹10 each, fully paid up 14% Preference shares of ₹100 each, fully paid up

(b)

(2)

Reserves and surplus

Current liabilities [Trade Payables] Total

II

ASSETS

(1)

Non-current assets

(a)

Tangible assets

(b)

Non-current investments Equity shares in B Ltd

Financial Accounting

19,80,000

6.45

Preference shares in B Ltd (2)

4,00,000

Current assets Inventories

8,70,000

4,60,000

Trade receivables

7,50,000

3,70,000

Cash and Cash Equivalents

5,50,000

1,30,000

80,00,000

23,00,000

Total Additional information:

A Ltd. acquired 80% of both classes of shares in B Ltd on 01.04.2011. Additional information: i. ii. iii. iv. v.

vi. vii.

The balance in Profit and Loss A/c of B Ltd. on 01.04.2011 was ₹2,50,000, out of which dividend of 15% p.a. on the Equity Capital of ₹8,00,000 was paid for the year 2010-2011 General reserve balances of B Ltd. was the same as on 01.04.2011 The dividend in respect of preference shares of B Ltd. for the year 2011-12 was still payable as on 31.032012 A Ltd. credited its Profit and Loss A/c for the dividend received by it from B Ltd. for the year 2010-11. At the time of acquisition by A Ltd., while determining the price to be paid for the shares in B Ltd. it was decided that the value of plant and machinery was to be increased by 20% and that of furniture and fixtures to be reduced by 30%. There was no transaction of purchase or sale of these assets during the year. The effects to these revaluations are to be given in the consolidated balance sheet. Sundry creditors of A Ltd. included an amount of ₹2,20,000 for purchases from B ltd. on which B Ltd. made a loss of ₹20,000 60% of the above goods were still with the closing stock of A Ltd. as at 31.032012

Prepare the Consolidated Balance Sheet as at 31 st March, 2012, assuming the rate of depreciation charged as 20% p.a. on plant and machinery and 10% p.a. on furniture and fixtures. Workings should be part of the answer. Answer: (1)

Calculation of ratio of shares held by holding company and outsiders Given

Share of Holding Company Minority Interest (2)

Total

Capital

Revenue

Profit

Profit

60,000

(3)

5,20,000

50,000

50,000

-

20,000

20,000

P/L after Prop. P.Divd.

2

Gen. Reserve(4)

3

Change Assets

4

Change in Depreciation

(22,000)

Total

6,28,000

1,30,000

4,98,000

70,000

-

70,000

in

Value

Prop. Pref. Dividend (3)

**

5,80,000 of

Pre-acquisition Dividend

A Ltd [80%] CP

1

80% 20% B Ltd [20%]

RP

CP

RP

48,000

4,16,000

12,000

1,04,000

40,000

-

10,000

-

16,000 (22,000)

4,000 (17,600)

1,04,000

3,98,400 56,000

*

₹

A Ltd [80%]

(4,400) 26,000

99,600 14,000

B Ltd [20%]

Dividend receivable of A Ltd and payable by B Ltd are mutually cancelled

Financial Accounting

6.46

Pre-acquisition profit before dividend Less

Equity Shares

Less

Preference Shares Pre-acquisition profit after dividend

(4)

Revaluation of Assets

Date

-

01.04.11

(5)

Unrealised Stocks

Loss

on

24,000

70,000

56,000

14,000

60,000

1,52,000

01.04.2011

Furniture and Fixtures

Change

Book

Revised

Change

10,00,000

12,00,000

2,00,000

6,00,000

4,20,000

(1,80,000)

2,00,000

2,40,000

40,000

60,000

42,000

18,000

8,00,000

9,60,000

1,60,000

5,40,000

3,78,000

1,62,000

Plant and

Furniture and

Machinery

Fixtures

Capital Profit (Loss)

2,00,000

(1,80,000)

Revenue Profit (Loss)

(40,000)

18,000

Revaluation of Assets

Type

Change in value

(6)

96,000

Revised

31.03.12

Change in depreciation

1,20,000

Book

Depreciation 20%|10% Value given on

2,50,000

Plant and Machinery

Value→ Value on

01.04.2011

Unsold

Loss × Proportion of unsold stock

[Upstream] 20,000×60%

12,000

H Co.

S Co

H Co. [80%]

9,600

2,400

Cr – P/ L A/c Dr – A/c

(7)

Cost of Control

(8)

Cost of Acquisition 19,80,000

Preference Shares

4,00,000

Book Value

S Co. [20%] Cr – MI A/c Dr – Stock A/c

Minority Interest Equity Shares

1,60,000

Preference Shares

1,00,000

Capital Profit

(2)

26,000 99,600

6,40,000

Revenue Profit

Preference Shares

4,00,000

Unrealised Loss

2

Capital Profit(2)

1,04,000

Minority Interest

3

Dividend from Pre-acq Profit Equity

96,000

Preference

56,000

Goodwill

(7) 12,96,000

(2)

2,400 3,88,000

Proposed Dividend Preference

14,000

10,84,000 Consolidated Balance Sheet of P Ltd

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital

(b)

Reserves and surplus

Financial Accounting

(22,000)

Stock

Equity Shares

(8)

20,000

Book Value

Equity Shares 1

Total

Note

Consol.

40,00,000 1

38,12,000

6.47

(c)

Minority Interest

(2)

Current liabilities

3,88,000

Trade Payables less Mutual Owings [8 lacs – 2.2 lacs] Preference Dividend Payable

5,80,000 14,000

Total

87,94,000

II

ASSETS

(1)

Non-current assets

(a)

Intangible Assets [Goodwill]

10,84,000

(b)

Tangible Assets

47,88,000

(2)

Current assets

29,22,000

Total

87,94,000

1

Reserves and surplus

A Ltd

General Reserve

18,00,000

Profit and Loss A/c

17,00,000

B Ltd

18,00,000 3,98,400

Proposed Dividend Pre-acquisition Dividend

Consol. 20,98,400 56,000 (1,52,000)

(3)

Unrealised Loss on Unsold Stock

9,600 38,12,000

Non-current Assets 2

Tangible Assets Plant and Machinery Furniture and Fixtures

26,50,000

9,60,000(4)

36,10,000

8,00,000

3,78,000(4)

11,78,000 47,88,000

3

Current Assets Inventories

8,70,000

4,60,000

Unrealised Loss Trade Receivable

12,000 7,50,000

3,70,000

Mutual Owings Cash and Cash Equivalent

13,30,000 11,20,000 (2,20,000)

5,50,000

1,30,000

6,80,000 29,22,000

[CMA INTER SY12, D13, 10 Marks] Question: In preparing the Consolidated Balance Sheet of A Ltd. as on 31.12.2012. You are required to show clearly what amount, if any, you would include in respect of B Ltd. with regard to: a. Cost of Control; b. Profit or Loss, and c. Minority Interest Under each of the following assumptions: 1. 2.

48,000 of the shares then in issue of B Ltd. were acquired at a cost of ₹75,000 on 1st March, 2010. A Ltd. participated in the proposed dividend of ₹8,000. 48,000 of the shares then in issue of B Ltd., were acquired at a cost of ₹60,000 on 31st Dec. 2010: A Ltd. participated in the bonus issue but not in the proposed dividend of ₹9,000.

Financial Accounting

6.48

60,000 of the shares then in issue of B Ltd. were acquired at a cost of ₹80,000 on 1st July, 2012. A Ltd. did not participate in the proposed dividend of ₹6,000.

3.

The Balance Sheet of B Ltd. as on 31st: December, 2012 showed: Particulars

Amount

(a)

Share Capital, authorized and issued of ₹1 each

₹80,000

(b)

Undistributed Profits

₹24,000

(c)

7% Debentures

₹40,000

The profit and loss appropriations, for the four years ending 31.12.2012 were as followings: Particulars

(a)

Balance at the beginning of the year

2009

2010

2011

2012

16,000

22,000

43,000

28,000

Nil

Nil

(16,000)

Nil

14,000

30,000

7,000

(4,000)

30,000

52,000

34,000

24,000

(b) Bonus Issue of 1 share for every 4 shares: 1st Jan. 2011 Profit for the year / (loss)

(c)

(d) Profits available for appropriation (e)

Proposed Dividends

(8,000)

(9,000)

(6,000)

Nil

(f)

Balance c/f

22,000

43,000

28,000

24,000

Answer: Case 1: Shares held by H Ltd. [including bonus shares of 1 for 4 shares held] = 60,000 (1)

Calculation of ratio of shares held by holding company and outsiders Share of Holding Company Minority Interest

(2)

𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑕𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

Total

1

Undistributed Profit

2 3

Capital

Revenue

Profit

Profit

%

60,000 80,000 20,000 80,000

%

75%%

%

25%

A Ltd [75%]

B Ltd [25%]

CP

RP

CP

RP

24,000

9,500(3)

14,500

7,125

10,875

2,375

3,625

Pre-acquisition Dividend 2009

8,000

8,000

-

6,000

-

2,000

-

Pre-acquisition Dividend 2010

9,000

1,500

7,500

1,125

Total (3)

14,250

Pre-acquisition Dividend Pre-acquisition Profit upto

Add

Pre-acquisition Profit after Dividend for

Less

Bonus issue Pre-acquisition Profit after Bonus Shares

(4)

Date

₹

31.12.09

22,000

2010

3,500*

01.01.11

16,000

01.04.2011

9,500

Cost of Control Cost of Acquisition

*

%

(5) 75,000

375 10,875

2,375

3,625

A Ltd [75%]

B Ltd [25%]

12,000

4,000

Minority Interest Book Value of Shares

16,000

2

[30,000 – 9,000]×12

Financial Accounting

6.49

1

Book Value of Shares(2)

48,000

Capital Profit(2)

2,375

2

Capital Profit & Pre-acq. Divid(2)

14,250

Revenue Profit(2)

3,625

3

Bonus Shares

12,000

Bonus Shares

4,000

(3)

74,250

Goodwill

750

(3)

Minority Interest

26,000

Case 2: Shares held by H Ltd. [including bonus shares of 1 for 4 shares held] = 60,000 (1)

Calculation of ratio of shares held by holding company and outsiders Share of Holding Company Minority Interest

(2)

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟 𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

Total

1

Undistributed Profit

𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑕𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠

24,000

Capital

Revenue

Profit

Profit

27,000(3)

(3,000)

Less

(2,250)

6,750

(750)

01.01.11

16,000

01.04.2011

27,000

Cost of Acquisition

60,000

B Ltd [25%]

20,250

Bonus issue

(5)

25%

RP

43,000

Cost of Control

%

CP

31.12.10

(4)

80,000

75%%

RP

Pre-acquisition Profit upto Pre-acquisition Profit after Bonus Shares

%

%

CP

₹

Pre-acquisition Dividend

80,000 20,000

A Ltd [75%]

Date

(3)

60,000

%

A Ltd [75%]

B Ltd [25%]

12,000

4,000

Minority Interest Book Value of Shares

16,000

1

Book Value of Shares

48,000

Capital Profit

2

Capital Profit(2)

20,250

Revenue Profit(2)

(750)

3

Bonus Shares(3)

12,000

80,250

Bonus Shares(3)

4,000

20,250

Minority Interest

Capital Reserve

6,750

(2)

26,000

Case 3: (1)

Calculation of ratio of shares held by holding company and outsiders Share of Holding Company Minority Interest

(2) 1

Total Undistributed Profit (3)

24,000

𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑕𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

Capital

Revenue

Profit

Profit

26,000

(3)

(2,000)

Pre-acquisition Dividend Pre-acquisition Profit upto

Add

Pre-acquisition Profit during Pre-acquisition Profit after Bonus Shares

(4)

Financial Accounting

Cost of Control

(5)

60,000

%

80,000 20,000

%

80,000

A Ltd [75%]

%

75%%

%

25%

B Ltd [25%]

CP

RP

CP

RP

19,500

(1,500)

6,500

(500)

Date

₹

31.12.11

28,000

01.01.12 – 01.07.12

(2,000)

01.04.201

26,000

Minority Interest

6.50

Cost of Acquisition

80,000

1

Book Value of Shares

60,000

2

Capital Profit

19,500

(2)

Goodwill

Book Value of Shares

79,500 500

20,000

Capital Profit(2)

6,500

Revenue Profit

(500)

(2)

Minority Interest

26,000

Chain Holding [CMA INTER D04, 6+2×5=16 Marks] Question: The summarized Balance sheets of X Ltd, Y Ltd. and Z Ltd. as at 31 st March, 2004 were as follows: Note

X Ltd

Y Ltd

Z Ltd

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹10 each

8,00,000

6,00,000

4,00,000

(b)

Reserves and surplus

9,60,000

4,80,000

3,20,000

(2)

Non-current liabilities [9% Debentures]

10,00,000

-

5,00,000

(3)

Current liabilities

4,40,000

2,20,000

1,80,000

32,00,000

13,00,000

14,00,000

17,00,000

6,00,000

10,00,000

(1) 48,000 shares in Y Ltd

7,60,000

-

-

(2) 24,000 shares in Z Ltd

-

3,84,000

-

7,40,000

3,16,000

4,00,000

32,00,000

13,00,000

14,00,000

Total II

ASSETS

(1)

Non-current assets

(a)

Tangible Assets

(b)

Investments

(2)

Current assets Total

The shares in subsidiary companies were acquired on 1st April, 2000. Balance in revenue reserve accounts as on 1st April, 2000 were as X Ltd.

Y Ltd.

Z Ltd.

₹

₹

₹

4,70,000

80,000

36,000

You are required to prepare the consolidated Balance Sheet of X Ltd. and its subsidiaries as on 31 st March, 2004. All relevant working must be shown. Answer: Indirect Method (1)

Calculation of ratio of shares held by holding company and outsiders Share of Holding Company [X Ltd] Minority Interest [X Ltd] Share of Holding Company [Y Ltd] Minority Interest [Y Ltd]

Financial Accounting

𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑕𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑕𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

% % % %

48,000

%

60,000 96 𝑙𝑎𝑐𝑠

240 𝑙𝑎𝑐𝑠 24,000 40,000 16,000 40,000

%

80% 20%

%

60%

%

40%

6.51

(2) 1

Z Ltd

Total

Gen. Reserve

Capital

Revenue

Profit

Profit

CP

RP

CP

RP

2,84,000

21,600

1,70,400

14,400

1,13,600

3,20,000

36,000

Y Co.[60%]

Y Ltd

Z Co.[80%]

Gen. Reserve

4,80,000

80,000

4,00,000

21,600

1,70,400

1,01,600

5,70,400

From Z Ltd 8,00,000 (3)

Cost of Control

14,400

1,13,600

4,56,320

20,320

1,14,080

81,280

4,56,320

34,720

2,27,680

Minority Interest Book Value of Shares

Shares in Y Ltd.

7,60,000

Y Ltd

1,20,000

Shares in Z Ltd.

3,84,000

Z Ltd

1,60,000

Book Value of Shares Y Ltd Z Ltd

2

Y Co. MI [20%]

81,280

(4)

Cost of Acquisition

1

Z Co. MI [40%]

Capital Profit

Capital Profit(2) 4,80,000

Revenue Profit(2)

2,27,680

2,40,000

Minority Interest

5,42,400

(2)

81,280

Goodwill (5)

34,720

8,01,280 3,42,720

Consolidated Balance Sheet

Note

X Ltd

Y Ltd

Z Ltd

Consol.

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹10 each

8,00,000

-

-

8,00,000

(b)

Reserves and surplus

9,60,000

4,56,320

-

14,16,320

(c)

Minority Interest

(2)

Non-current liabilities [9% Debentures]

(3)

Current liabilities

5,42,400 10,00,000

-

5,00,000

15,00,000

4,40,000

2,20,000

1,80,000

8,40,000

Total

50,98,720

II

ASSETS

(1)

Non-current assets

(a)

Intangible Assets

(b)

Tangible Assets

(2)

Current assets

3,42,720 17,00,000

6,00,000

10,00,000

33,00,000

7,40,000

3,16,000

4,00,000

14,56,000

Total

50,98,720

Alternative Solution – Direct Method: (1)

Calculation of ratio of shares held by holding company and outsiders Share of Holding Company [X Ltd] Minority Interest [X Ltd] Share of Holding Company [Y Ltd]

Financial Accounting

𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑕𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑕𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

% % %

48,000

%

60,000 96 𝑙𝑎𝑐𝑠

240 𝑙𝑎𝑐𝑠 24,000 40,000

%

%

80% 20% 60%

6.52

𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠

Minority Interest [Y Ltd] (2) 1

Z Ltd

Total

Gen. Reserve

3,20,000

Profit

Profit

CP

RP

CP

RP

2,84,000

21,600

1,70,400

14,400

1,13,600

36,000

Y Co.[60%]

4,80,000

80,000

4,00,000

21,600

From Z Ltd Y Co’s Revenue Profit

1,16,000

6,84,000

Cost of Control

85,600

(4)

Shares in Z Ltd.

3,84,000

Z Ltd

Book Value of Shares

Capital Profit

16,000

80,000

14,400

1,13,600

4,56,320

34,080 30,400

2,27,680

Book Value of Shares Y Ltd

Z Ltd

3,20,000

Minority Interest

7,60,000

Y Ltd

Y Co. MI [20%]

1,36,320

Shares in Y Ltd.

1,20,000 1,60,000 (2)

Capital Profit

30,400

4,80,000

Revenue Profit

2,27,680

2,40,000

Minority Interest

(2)

85,600

Goodwill (5)

Z Co. MI [40%]

21,600

Cost of Acquisition

2

64,000

1,70,400 8,00,000

40%

%

Revenue

Z Co.[80%]

Gen. Reserve

1

40,000

Capital

Y Ltd

(3)

16,000

%

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

(2)

5,38,080

8,05,600 3,38,400

Consolidated Balance Sheet

Note

X Ltd

Y Ltd

Z Ltd

Consol.

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹10 each

8,00,000

-

-

8,00,000

(b)

Reserves and surplus

9,60,000

4,56,320

-

14,16,320

(c)

Minority Interest

(2)

Non-current liabilities [9% Debentures]

(3)

Current liabilities

5,38,080 10,00,000

-

5,00,000

15,00,000

4,40,000

2,20,000

1,80,000

8,40,000

Total II

ASSETS

(1)

Non-current assets

(a)

Intangible Assets

(b)

Tangible Assets

(2)

Current assets Total

50,94,400

3,38,400 17,00,000

6,00,000

10,00,000

33,00,000

7,40,000

3,16,000

4,00,000

14,56,000 50,94,400

Chain Holding [CMA FINAL J09, 15 Marks] Question: Given below are the balance sheets of A Ltd., B Ltd. and C Ltd as on 31 st March, 2008. You are required to prepare the Consolidated Balance Sheet of the holding company and its subsidiaries as

Financial Accounting

6.53

on 31st March, 2008, bear in mind that the acquisition of shares by the company was made on the same date. Note I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹1 each

A Ltd

Reserves and surplus [Profit or Loss A/c]

1,80,000

(2)

Non-current liabilities [Loan from B Ltd]

1,00,000

(3)

Current liabilities Total

(1)

Non-current assets

(a)

Tangible Assets

(b)

Investments at cost

1,00,000 5,00,000

(b)

ASSETS

C Ltd

7,00,000

Share capital of ₹10 each

II

B Ltd

(1) 40,000 shares in B Ltd

50,000

75,000

5,00,000

1,50,000

1,75,000

14,80,000

7,00,000

3,50,000

5,00,000

3,00,000

1,50,000

5,00,000

(2) 1,00,000 shares in C Ltd

80,000

(3) 5,000 shares in B Ltd (2)

60,000

Current assets Total

4,00,000

4,00,000

1,40,000

14,80,000

7,00,000

3,50,000

Note: B Ltd and C Ltd had ₹10,000 (Cr) and ₹15,000 (Dr) in Profit or Loss A/c on the date of acquisition Answer: Direct Method (1) C

Calculation of ratio of shares held by holding company and outsiders Share held by A Ltd Minority Interest Share held by A Ltd

B

Shares held by C Ltd Minority Interest

(2) 1

B Ltd

Total

P/L

50,000

𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑕𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑕𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

Capital

Revenue

Profit

Profit

10,000

40,000

C Ltd P/L

% % % % %

A Co.[80%] CP 8,000

RP 32,000

A Co.[100%] 75,000

(15,000)

90,000

(15,000)

1,00,000 1,00,000 0 1,00,000 40,000 50,000 5,000 40,000 5,000 40,000

%

100%

%

0%

%

80%

%

10%

%

10%

C Co.[10%]

MI [10%]

CP

RP

CP

RP

1,000

4,000

1,000

4,000

MI [0%]

90,000

From B Ltd

1,000

4,000

(1) A Ltd

8,000

32,000

8,000

32,000

-

-

(2) C Ltd

1,000

4,000

1,000

3,200

-

800

Financial Accounting

6.54

Total

1,25,000

(3)

(6,000)

1,26,000

(6,000)

Cost of Control

(4)

Cost of Acquisition

1

1,25,200

1,000

4,800

Minority Interest Book Value of Shares

Shares in B Ltd. by A Ltd

5,00,000

B Ltd

Shares in C Ltd. by A Ltd

80,000

Capital Profit(2)

1,000

Shares in B Lid. by C Ltd

60,000

Revenue Profit(2)

4,800

Minority Interest

55,800

Book Value of Shares of B Ltd held by A Ltd

4,00,000

C Ltd. held by A Ltd

1,00,000

B Ltd held by C Ltd

50,000

Capital Profit

(6,000)

Goodwill Consolidated Balance Sheet

50,000

5,44,000 96,000 Note

A Ltd

B Ltd

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹1 each

7,00,000

(b)

Reserves and surplus [Profit or Loss A/c]

1,80,000

(c)

Minority Interest

(2)

Current liabilities

C Ltd

Consol.

7,00,000 1,25,200

3,05,200 55,800

5,00,000

1,50,000

1,75,000

Total

8,25,000 18,86,000

II

ASSETS

(1)

Non-current assets

(a)

Intangible Assets [Goodwill]

(b)

Tangible Assets

5,00,000

3,00,000

1,50,000

9,50,000

(2)

Current Assets after Mutual Owings

4,00,000

4,00,000

1,40,000

8,40,000

96,000

Total

18,86,000

CMA FINAL SY08, D13, 10 Marks] Question: The following is an abstract of the Balance Sheet of Richa Ltd., Puru Ltd. and Sura Ltd as on March 31, 2013 Note I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹100 each

(b)

Reserves and surplus [Profit or Loss A/c]

(2)

Current liabilities Sundry Creditors Bills Payable Total

II

Richa

Puru

Sura

10,00,000

8,00,000

5,00,000

5,00,000

2,00,000

60,000

92,000

1,34,000

1,60,000

8,000

16,000

40,000

16,00,000

11,50,000

7,60,000

ASSETS

Financial Accounting

6.55

(1)

Non-current assets

(a)

Tangible Assets

(b)

Investments at cost

4,00,000

(1) 6,400 shares in Puru Ltd

7,00,000

(2) 3,000 shares in Sura Ltd

4,00,000

5,00,000

4,00,000

(3) 800 shares in Puru Ltd (2)

90,000

Current assets Debtors

40,000

1,80,000

80,000

Stock

40,000

1,40,000

1,00,000

Cash and Bank Balance

20,000

3,30,000

90,000

16,00,000

11,50,000

7,60,000

Total Additional Information:

Profit and Loss Account of Puru Ltd. includes ₹50,000 as pre-acquisition profits, the balance representing post-acquisition profits. ii. The balance in the Profit and Loss Account of Sura Ltd. is arrived at after setting off ₹15,000 being pre-acquisition loss against the post acquisition profit of ₹75,000 iii. Richa Ltd. and Sura Ltd. acquired the shares of Puru Ltd. on the same date. i.

Required: Prepare a consolidated Balance Sheet of Richa Ltd. and its subsidiaries Puru Ltd. and Sura Ltd. as on March 31, 2013 Answer: Direct Method (1) Sura

Calculation of ratio of shares held by holding company and outsiders Share held by Richa Ltd Minority Interest Share held by Richa Ltd

Puru

Shares held by Sura Ltd Minority Interest

(2) 1

Puru Ltd P/L

Total

𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑕𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑕𝑜𝑙𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑠𝑢𝑏𝑠𝑖𝑑𝑖𝑎𝑟𝑦 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

Capital

Revenue

Profit 50,000

2,00,000

% % % %

3,000 5,000 2,000

%

60%

%

40%

%

80%

%

10%

%

10%

5,000 6,,400 8,000 800 8,000 800 8,000

Richa [80%]

Sura [10%]

Profit

CP

RP

CP

RP

1,50,000

40,000

1,20,000

5,000

15,000

Sura Ltd P/L

%

MI [10%] CP 5,000

Richa [60%] 60,000

(15,000)

75,000

(9,000)

45,000

(1) Richa

40,000

1,20,000

40,000

1,20,000

(2) Sura

5,000

15,000

5,000

9,000

(3) MI

5,000

15,000

35,000

2,25,000

RP 15,000

MI [40%] (6,000)

30,000

-

6,000

5,000

15,000

(1,000)

51,000

From Puru

Total

2,60,000

(3)

36,000

Cost of Control

(4)

Cost of Acquisition Shares in Puru by Richa

Financial Accounting

1,74,000

Minority Interest Book Value of Shares

7,00,000

Puru

80,000

6.56

1

Shares in Sura by Richa

4,00,000

Shares in Puru by Sura

90,000

Book Value of Shares of Shares in Puru by Richa

6,40,000

Shares in Sura by Richa

3,00,000

Shares in Puru by Sura

80,000

Capital Profit

36,000

2,00,000

Capital Profit(2)

(1,000)

Revenue Profit

51,000

(2)

Minority Interest

3,30,000

10,56,000

Goodwill (5)

Sura

1,34,000

Consolidated Balance Sheet

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹100 each

(b)

Reserves and surplus [Profit or Loss A/c]

(c)

Minority Interest

(2)

Current liabilities

Note

Richa

Puru

Sura

10,00,000 5,00,000

10,00,000 1,74,000(2)

6,74,000 3,30,000

Sundry Creditors Bills Payable

92,000

1,34,000

1,60,000

3,86,000

8,000

16,000

40,000

64,000

Total

24,54,000

II

ASSETS

(1)

Non-current assets

(a)

Intangible Assets (Goodwill)

(b)

Tangible Assets

(2)

Current assets

1,34,000 4,00,000

5,00,000

4,00,000

13,00,000

Debtors

40,000

1,80,000

80,000

3,00,000

Stock

40,000

1,40,000

1,00,000

2,80,000

Cash and Bank Balance

20,000

3,30,000

90,000

4,40,000

Total

24,54,000

[CMA FINAL SY08 J14, 15 Marks] Question: The summarized Balance Sheet of Apple Ltd., Orange Ltd., and Banana Ltd. as on 31st March, 2014 are given below ₹in ‘000 Note

Apple

Banana

Orange

300

200

120

Reserves

100

80

60

Profit or Loss A/c

120

100

80

60

70

50

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹10 each

(b)

Reserves and surplus

(2)

Current liabilities Sundry Creditors

Financial Accounting

6.57

Apple Ltd Total II

ASSETS

(1)

Non-current assets

(a)

Tangible Assets

(b)

Investment at cost

(2)

-

20

16

580

470

326

140

240

206

Shares in Orange Ltd.

180

Shares in Banana Ltd.

80

100

Stock –in-trade

80

60

40

Debtors

40

50

60

Current assets

Due from: Orange

24

Banana

16

Cash in Hand

20

20

20

580

470

326

Additional information: (1) (2) (3) (4)

Apple Ltd. held 16,000 shares of Orange Ltd., and 3,600 shares of Banana Ltd., Orange Ltd. held 7,200 shares of Banana Ltd. All investments were made on 1st July, 2013 The following were the balances on 1st July, 2013: Orange Ltd

Banana Ltd

Reserves

50,000

30,000

Profit & Loss A/c

40,000

50,000

(5) Orange Ltd. invoiced goods to Apple Ltd. for ₹8,000 at a cost plus 25% in December, 2013. The closing stock of Apple Ltd. includes such goods valued at ₹10,000 (6) Apple Ltd. proposed dividend at 15%. Prepare the consolidated Balance Sheet as per Revised Schedule VI of the group as on 31st March, 2014. Working notes should form part of the answer. Answer: Direct Method (1) O

Calculation of ratio of shares held by holding company and outsiders Share held by A Ltd Minority Interest Share held by A Ltd

B

Shares held by O Ltd Minority Interest

(2) 1

B Ltd P/L

Financial Accounting

Total 80

𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝐴 𝐿𝑡𝑑

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑂 𝐿𝑡𝑑 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝐴 𝐿𝑡𝑑 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝐵 𝐿𝑡𝑑 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑂 𝐿𝑡𝑑

Profit

Profit

50

30

%

20,000 3,600 12,000 7,200

%

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝐵 𝐿𝑡𝑑

Revenue

20,000 4,000

%

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝐵 𝐿𝑡𝑑 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠

Capital

16,000

%

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑂 𝐿𝑡𝑑 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠

12,000 1,200

%

12,000

A [30%] CP 15

RP 9

%

80%

%

20%

%

30%

%

60%

%

10%

O [60%]

MI [10%]

CP

RP

CP

RP

30

18

5

3

6.58

2

Reserves

60

30

30

9

9

18

18

3

3

140

80

60

24

18

48

36

8

6

O Ltd 1

P/L

2

Reserves

A [80%] 100

40

60

32.0

48.0

8.0

12.0

80

50

30

40.0

24.0

10.0

6.0

8

6

8.0

6.0

(1) A Ltd

24

18

24.0

18.0

(2) O Ltd

48

36

48.0

28.8

-

7.2

170

150

144.0

118.8

26.0

31.2

H Co.

S Co

1,600

400

From B Ltd

Total (3)

Unrealised Stocks

Profit

320 on

Unsold

Proportion of unsold stock × Profit %

(4)

[Upstream] 10,000 25 %

×

2,000

H Co. [80%] Dr – P/ L A/c Cr – Stock A/c

125

Cost of Control

(5)

Cost of Acquisition

Less

MI [20%]

S Co. [20%] Dr – MI A/c Cr – Stock A/c

Minority Interest Book Value of Shares

Shares in O Ltd. by A Ltd

180.0

O Ltd

Shares in B Ltd. by A Ltd

80.0

B Ltd

Shares in B Lid. by O Ltd

100.0

Book Value of Shares of

40.0 12.0

Capital Profit

(2)

26.0

Revenue Profit(2)

31.2

Shares in O Ltd. by A Ltd

160.0

Unrealised Profit(3)

(0.4)

Shares in B Ltd. by A Ltd

36.0

Minority Interest

108.8

Shares in B Lid. by O Ltd

72.0

Capital Profit

144.0

412.0

Capital Reserve

52.0

Consolidated Balance Sheet I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹10 each

(b)

Reserves and surplus

(c)

Minority Interest

(2)

Current liabilities

Note

300.0 1

180.0

Proposed Dividend

45.0

Total ASSETS

(1)

Non-current assets

(2)

Current assets

344.2 108.8

Sundry Creditors

II

₹in ‘000

978.0 586.0 2

392.0 978.0

Financial Accounting

6.59

1

Reserves and surplus

Total

Capital Reserve

52.0

Reserves Profit or Loss A/c

100.0 120

118.8

(2)

Unrealised Profit

238.8 (1.6)

Proposed Dividend

(45.0) 344.2

2

Current Assets Stock –in-trade

180

(2)(3)

Debtors

178.0 150.0

Cash in hand

60

4*

64.0 392.0

[CMA FINAL SY12 J14, 15 Marks] Question: M Ltd. is a holding company and N Ltd. and O Ltd. are subsidiaries of M Ltd. Their Balance Sheet as on 31st March, 2013 are given below In ₹ Note

M Ltd

N Ltd

O Ltd

6,00,000

6,00,000

3,60,000

2,88,000

60,000

54,000

96,000

72,000

54,000

Sundry Creditors

42,000

30,000

-

O Ltd. Balance

18,000

-

-

M Ltd. Balance

-

42,000

-

10,44,000

8,04,000

4,68,000

1,20,000

3,60,000

2,58,000

Shares in N Ltd.

5,70,000

-

-

Shares in O Ltd.

78,000

3,18,000

-

1,56,000

1,26,000

1,92,000

48,000

-

-

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital

(b)

Reserves and surplus Reserves Profit or Loss A/c

(2)

Current liabilities

Total II

ASSETS

(1)

Non-current assets

(a)

Tangible Assets

(b)

Investment at cost

(2)

Current assets Stock –in-trade Debtors N Ltd Balance

*

72,000

Cash in transit arrived by cancelling mutual Owings

Financial Accounting

6.60

M Ltd Balance

-

-

18,000

10,44,000

8,04,000

4,68,000

The following particulars are given: (1) (2) (3) (4) (5)

The share capital of all companies is divided into shares of ₹10 M Ltd. held 48,000 shares of N Ltd., and 6,000 shares of O Ltd., N Ltd. held 24,000 shares of O Ltd. All these investments were made on 30.06.2013 On 31.12.2012, the position was as shown below: N Ltd

O Ltd

Reserves

48,000

45,000

Profit & Loss A/c

24,000

18,000

Sundry Creditors

30,000

6,000

3,60,000

2,58,000

24,000

2,13,000

2,88,000

1,98,000

Fixed Assets Stock in Trade Sundry Debtors

(6) The whole of stock in trade of N Ltd as on 30.06.2013 (₹24,000) was later sold to M Ltd. for ₹26,400 and remained unsold by M Ltd. as on 31.12.2013 (7) Cash in transit from N Ltd. to M Ltd. was ₹6,000 as at the close of the year. You are required to prepare a consolidated Balance Sheet of M Ltd and its subsidiaries N Ltd. and O Ltd as at 31.12.2013. Answer: Direct Method (1) N

Calculation of ratio of shares held by holding company and outsiders Share held by M Ltd Minority Interest Share held by M Ltd

O

Shares held by N Ltd Minority Interest

(2)

O Ltd

Total

𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑀 𝐿𝑡𝑑

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑁 𝐿𝑡𝑑 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑀 𝐿𝑡𝑑

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑂 𝐿𝑡𝑑

Profit(3)

Profit(3)

60,000 12,000 60,000 6,000 36,000 24,000

%

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑂 𝐿𝑡𝑑 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠

Revenue

%

%

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑂 𝐿𝑡𝑑 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑁 𝐿𝑡𝑑

Capital

48,000

%

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑁 𝐿𝑡𝑑 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠

%

80%

%

20% 1

%

6 4

% 36,000 %

6,000

36,000

𝟏

6 1

%

6

𝟒

M [𝟔]

𝟏

O [𝟔]

MI [𝟔]

CP

RP

CP

RP

CP

RP

1

P/L

54,000

36,000

18,000

6,000

3,000

24,000

12,000

6,000

3,000

2

Reserves

54,000

49,500

4,500

8,250

750

33,000

3,000

8,250

750

N Ltd 1

P/L

A [80%] 72,000

48,000

24,000

38,400

19,200

(1) M Ltd

6,000

3,000

6,000

3,000

(2) O Ltd

24,000

12,000

24,000

9,600

6,000

3,000

54,000

6,000

MI [20%] 9,600

4,800

From O

(3) MI 2

Reserves

60,000

Financial Accounting

43,200

4,800

2,400 6,000

3,000

10,800

1,200

6.61

From O (1) M Ltd

8,250

750

8,250

750

(2) O Ltd

33,000

3,000

33,000

2,400

8,250

750

(3) MI Total

2,40,000

1,52,850

39,750

72,000

Profit

Up to 31.12.12

24,000

24,000

2012-13

48,000

24,000

24,000

48,000

24,000

As on 31.12.13

60,000

Reserve

Up to 31.12.12

48,000

48,000

2012-13

12,000

6,000

6,000

54,000

6,000

Profit and Loss A/c

As on 31.12.13

54,000

Profit

Up to 31.12.12

18,000

18,000

2012-13

36,000

18,000

18,000

36,000

18,000

Current Year Total Less

Reserve

As on 31.12.13

54,000

Reserve

Up to 31.12.12

45,000

45,000

2012-13

9,000

4,500

4,500

49,500

4,500

Current Year Total (4)

Unrealised [Upstream]

Profit

Transfer Price – Cost

on

Unsold

Stocks

H Co.

S Co

2,400

1,920

480

26,400 – 24,000

H Co. [80%] Dr – P/ L A/c Cr – A/c

(5)

Cost of Control

(6)

Cost of Acquisition

Less

After 01.07.13

Reserve

Total

O Ltd

12,750

As on 31.12.13

Current Year

Less

34,650

Profit and Loss A/c

Upto 30.06.13

Total Less

750

₹

Current Year N Ltd

8,250

Duration

(3) Less

600

Stock

Cr – Stock A/c

Book Value of Shares 5,70,000

N Ltd

Shares in O Ltd. by M Ltd

78,000

O Ltd

Shares in O Lid. by N Ltd

3,18,000

Book Value of Shares of

Capital Profit

1,20,000 60,000 34,650

(2)

Revenue Profit

12,750

(2)

Shares in N Ltd. by M Ltd

4,80,000

Unrealised Profit

Shares in O Ltd. by M Ltd

60,000

Minority Interest

Shares in O Lid. by N Ltd

2,40,000

Capital Profit

1,52,850

Financial Accounting

Dr – MI A/c

Minority Interest

Shares in N Ltd. by M Ltd

Goodwill

S Co. [20%]

(3)

(480) 2,26,920

9,32,850 33,150

6.62

Consolidated Balance Sheet

In ₹

Note

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹10 each

(b)

Reserves and surplus

(c)

Minority Interest

(2)

Current liabilities [Trade Payables]

6,00,000 1

4,21,830 2,26,920 72,000

Total II

ASSETS

(1)

Non-current assets

13,20,750

Intangible assets (Goodwill)

33,150

Tangible assets (2)

7,38,000

Current assets

2

5,49,600 13,20,750

1

Reserves and surplus Reserves Profit or Loss A/c

Total 2,88,000 96,000

2,88,000 39,750

1,35,750

Unrealised Profit

(1,920) 4,21,830

2

Current Assets Inventories Debtors

72,000

2,400

4,74,000

69,600 4,74,000

Cash in transit

6,000 5,49,600

[CMA FINAL SY08 D13, 15 Marks] Question: The Balance Sheet of Big Ltd., Small Ltd., and Little Ltd., as at 31 st March, 2013 are given below Note

Big

Small

2,00,000

1,00,000

60,000

General Reserves

60,000

50,000

40,000

Profit or Loss A/c

50,000

40,000

30,000

35,000

30,000

40,000

-

15,000

5,000

3,45,000

2,35,000

1,75,000

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹10 each

(b)

Reserves and surplus

(2)

Little

Current liabilities Trade payables Big Ltd Total

II

ASSETS

(1)

Non-current assets

Financial Accounting

6.63

(a)

Tangible Assets [Plant and Machinery]

(b)

Investment at cost

(2)

80,000

1,10,000

1,15,000

Equity Shares in Small Ltd.

90,000

Equity Shares in Little Ltd.

40,000

60,000

Inventories

60,000

35,000

35,000

Trade Receivables

35,000

20,000

15,000

15,000

10,000

10,000

3,45,000

2,35,000

1,75,000

Current assets

Due from: Small Ltd.

18,000

Little Ltd

7,000

Cash and Cash Equivalent

Additional information: (1) (2) (3) (4)

Big Ltd. held 8,000 shares of Small Ltd., and 1,800 shares of Little Ltd., Small Ltd. held 3,600 shares of Little Ltd. All investments were made on 1st July, 2012 The following were the balances on 1st July, 2012: Small Ltd

Little Ltd

Reserves

25,000

15,000

Profit & Loss A/c

30,000

25,000

(5) Small Ltd. invoiced goods to Big Ltd. at a cost plus 25% in December, 2012. The closing stock of Big Ltd. includes goods with invoice value at ₹6,000 (6) Little Ltd., sold to Small Ltd., an equipment costing ₹24,000 at a profit of 25% on selling price on 1st January 2013. Depreciation at 10% p.a. was provided by Small Ltd. on this equipment. (7) Big Ltd. proposed dividend at 10%. Prepare the consolidated Balance Sheet of the group as at 31st March 2013 by the direct approach. Working should form part of the answer. Present the Balance Sheet as per revised format. Answer: Direct Method (1) Small

Calculation of ratio of shares held by holding company and outsiders 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝐵𝑖𝑔 𝐿𝑡𝑑

Share held by Big Ltd

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑆𝑚𝑎𝑙𝑙 𝐿𝑡𝑑 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠

Minority Interest

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑆𝑚𝑎𝑙𝑙 𝐿𝑡𝑑 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝐵𝑖𝑔 𝐿𝑡𝑑

Share held by Big Ltd Little

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝐿𝑖𝑡𝑡𝑙𝑒 𝐿𝑡𝑑 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑆𝑚𝑎𝑙𝑙 𝐿𝑡𝑑

Shares held by Small Ltd

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝐿𝑖𝑡𝑡𝑙𝑒 𝐿𝑡𝑑 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠

Minority Interest (2)

Little Ltd

Total

Capital Profit

(3)

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝐿𝑖𝑡𝑡𝑙𝑒 𝐿𝑡𝑑

Revenue Profit

(3)

Big 30%

8,000

%

10,000 2,000

%

10,000 1,800

%

6,000 3,600

%

6,000 600

%

6,000

%

80%

%

20%

%

30%

%

60%

%

10%

Small 60%

MI 10%

CP

RP

CP

RP

CP

RP

1

P/L

30,000

25,000

5,000

7,500

1,500

15,000

3,000

2,500

500

2

Reserves

40,000

15,000

25,000

4,500

7,500

9,000

15,000

1,500

2,500

Small Ltd

Financial Accounting

Big [80%]

MI [20%]

6.64

1

P/L

40,000

30,000

10,000

24,000

8,000

7,500

1,500

7,500

1,500

15,000

3,000

15,000

2,400

2,500

500

25,000

25,000

20,000

20,000

(1) Big

4,500

7,500

4,500

7,500

(2) Small

9,000

15,000

9,000

12,000

(3) MI

1,500

2,500

6,000

2,000

From Little (1) Big (2) Small (3) MI 2

Reserves

50,000

600 2,500

500

5,000

5,000

From Little

Total (3)

1,60,000

80,000

Unrealised Profit

Stock

[Upstream]

Unsold stock × Profit %

6,000 ×

25 125

%

3,000

41,400

H Co.

MI

H Co.

960

240

Dr – P/ L A/c

1,200

Cr – A/c

[ratio: 80:20] Assets

Profit – Depreciation %

8,000 – 2.5%

7,800

7,020

780

(5)

Cost of Acquisition

Less

15,000

13,600 MI

Dr – MI A/c

Stock

Cr – A/c Cost of Control

2,500

Dr – P/ L A/c

[ratio: 90:10]

(4)

1,500

Cr – Stock A/c Dr – MI A/c

Stock

Cr – Stock A/c

Minority Interest Book Value of Shares

Shares in Small by Big

90,000

Small

Shares in Little by Big

40,000

Little

Shares in Little by Small

60,000

Capital Profit

Book Value of Shares of

20,000 6,000 (2)

Revenue Profit(2)

15,000 13,600

Shares in Small by Big

80,000

Unrealised Profit(3)

Shares in Little by Big

18,000

(1) Stock

(240)

Shares in Little by Small

36,000

(2) Asset

(780)

Capital Profit(2)

80,000

Minority Interest

53,580

Capital Reserve (6)

2,14,000 24,000

Consolidated Balance Sheet

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital

(b)

Reserves and surplus

(c)

Minority Interest

(2)

Current liabilities

(5)

Proposed Dividend

Financial Accounting

In ₹

2,00,000

Trade Payables Total

Note

1

1,57,420 53,580 1,05,000 20,000 5,36,000

6.65

II

ASSETS

(1)

Non-current assets [Tangible assets]

1

2,97,200

(2)

Current assets

2

2,38,800 5,36,000

1

Reserves and surplus

(a)

Capital Reserve(4)

(b)

Reserves

(c)

Profit or Loss A/c Proposed Dividend

Big

Small

Little

Total 24,000

60,000 50,000

32,000

7,500

99,500

10,400

1,500

61,900

(20,000)

(20,000)

Unrealised Profit – Equipment

(7,020)

Unrealised Profit – Stock

(960) 1,57,420

2

Non-current Assets [Equipment]

80,000

1,10,000

1,15,000

Unrealised Profit – Equipment

3,05,000 (7,800) 2,97,200

3

Current Assets Inventories

60,000

35,000

35,000

Unrealised Profit – Stock

1,30,000 (1,200)

Debtors

35,000

20,000

15,000

70,000

Cash and Cash Equivalents

15,000

10,000

10,000

35,000

Cash in transit [mutual owings]

5,000 2,38,800

[CMA FINAL SY08 D12, 15 Marks] Question: The following is an abstract of the Balance Sheets of H Ltd., S Ltd. and D Ltd. as on 31 March 31, 2012: Note

H Ltd

S Ltd

D Ltd

20,00,000

10,00,000

6,00,000

General Reserves

1,80,000

2,00,000

1,44,000

Profit or Loss A/c

2,00,000

40,000

1,02,000

60,000

60,000

20,000

24,40,000

13,00,000

8,66,000

11,00,000

6,00,000

8,00,000

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹10 each fully paid

(b)

Reserves and surplus

(2)

Current liabilities (Creditors) Total

II

ASSETS

(1)

Non-current assets

(a)

Tangible Assets

(b)

Investment at cost 75,000 Shares in S Ltd.

Financial Accounting

10,00,000

6.66

15,000 Shares in D Ltd.

2,00,000

40,000 Shares in D Ltd. (2)

5,60,000

Current assets Stock

1,20,000

1,00,000

56,000

20,000

40,000

10,000

24,40,000

13,00,000

8,66,000

Cash at Bank

H Ltd. purchased the shares in S Ltd. and in D Ltd on September 30, 2011, and S Ltd. also purchased the shares in D Ltd. on the same day. The following are the balances at the beginning of the year (01.04.2011): Reserves Profit & Loss A/c

S Ltd

D Ltd

1,80,000

1,20,000

20,000

16,800

You are to assume that profits accrue uniformly every month. Required: Prepare the consolidated Balance Sheet of H ltd. and its Subsidiaries as at March 31, 2012. Answer: Direct Method (1)

Calculation of ratio of shares held by holding company and outsiders

S Ltd

Share held by H Ltd Minority Interest Share held by H Ltd

D Ltd

Shares held by S Ltd Minority Interest

(2)

S Ltd

Total

𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝐵𝑖𝑔 𝐿𝑡𝑑

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑆𝑚𝑎𝑙𝑙 𝐿𝑡𝑑 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝐵𝑖𝑔 𝐿𝑡𝑑 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝐿𝑖𝑡𝑡𝑙𝑒 𝐿𝑡𝑑 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑆𝑚𝑎𝑙𝑙 𝐿𝑡𝑑 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝐿𝑖𝑡𝑡𝑙𝑒 𝐿𝑡𝑑 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝐿𝑖𝑡𝑡𝑙𝑒 𝐿𝑡𝑑

Capital

Revenue

Profit(3)

Profit(3)

H Ltd CP

75,000

%

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑆𝑚𝑎𝑙𝑙 𝐿𝑡𝑑 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠

1,00,000 25,000

%

1,00,000 15,000

%

60,000 40,000

%

60,000 5,000

%

𝟑 𝟏𝟐

RP

60,000

%

75%

%

25%

% % % 𝟖

S Ltd [𝟏𝟐] CP

3 12 8 12 1 12 𝟏

MI [𝟏𝟐]

RP

CP

RP

1

P/L

1,02,000

59,400

42,600

14,850

10,650

39,600

28,400

4,950

3,550

2

Reserves

1,44,000

1,32,000

12,000

33,000

3,000

88,000

8,000

11,000

1,000

2,46,000

1,91,400

54,600

47,850

13,650

1,27,600

36,400

15,950

4,550

D Ltd 1

P/L

H Ltd [75%] 40,000

30,000

10,000

22,500

7,500

(1) H

14,850

10,650

14,850

10,650

(2) S

39,600

28,400

39,600

21,300

(3) MI

4,950

3,550

1,90,000

10,000

1,42,500

7,500

(1) H

33,000

3,000

33,000

3,000

(2) S

88,000

8,000

88,000

6,000

(3) MI

11,000

1,000

4,11,400

74,600

MI [25%] 7,500

2,500

-

7,100

4,950

3,550

47,500

2,500

-

2,000

11,000

1,000

70,950

18,650

From S

2

Reserves

2,00,000

From S

Total

4,86,000

Financial Accounting

3,40,450

55,950

6.67

(3)

Cost of Control

(4)

Cost of Acquisition

Less

Minority Interest Book Value of Shares

Shares in S by H

10,00,000

S

Shares in D by H

2,00,000

D

Shares in D by S

5,60,000

Capital Profit

Book Value of Shares of 7,50,000

Shares in D by H

1,50,000

Shares in D by S

4,00,000

Capital Profit

3,40,450

Goodwill (5)

50,000 70,950

(2)

Revenue Profit(2)

Shares in S by H

(2)

2,50,000

Consolidated Balance Sheets

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹10 each fully paid

(b)

Reserves and surplus

Minority Interest

1,19,550 Note

H Ltd

Profit or Loss A/c

2,00,000

(2)

Current liabilities (Creditors)

S Ltd

20,00,000 1,80,000

Minority Interest

3,89,600

16,40,450

General Reserves (c)

18,650

D Ltd

-

Consol

-

1,80,000 55,950(2)

2,55,950 3,89,600

60,000

60,000

20,000

Total II

ASSETS

(1)

Non-current assets

(a)

Intangible Assets [Goodwill]

(b)

Tangible Assets

(2)

Current assets Stock

20,00,000

1,40,000 29,65,550

1,19,550 11,00,000

6,00,000

8,00,000

25,00,000

1,20,000

1,00,000

56,000

2,76,000

20,000

40,000

10,000

70,000

Cash at Bank

29,65,550 [CMA FINAL SY08 J13, 15 Marks] Question: The following is an abstract of the Balance Sheets of H Ltd. and its two subsidiaries (B Ltd. and C Ltd.) as on 31 March 31, 2013: Note I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹100 each fully paid

(b)

Reserves and surplus Capital Reserve Revenue Reserve

Financial Accounting

H Ltd

B Ltd

D Ltd

50,00,000

25,00,000

10,00,000

5,00,000

1,50,000

1,00,000

10,00,000

7,50,000

6,00,000

6.68

(2)

Current liabilities (Creditors) Creditors

20,00,000

10,00,000

3,00,000

5,00,000

3,50,000

3,00,000

90,00,000

47,50,000

23,00,000

32,00,000

16,00,000

3,00,000

Income Tax Total II

ASSETS

(1)

Non-current assets

(a)

Tangible Assets

(b)

Investment at cost

(2)

Shares in B Ltd.

45,00,000

Shares in C Ltd.

5,00,000

10,00,000

Stock

2,00,000

9,00,000

7,00,000

Debtors

4,00,000

10,50,000

11,50,000

Cash at Bank

2,00,000

2,00,000

1,50,000

90,00,000

47,50,000

23,00,000

Current assets

Additional Information: a.

B Ltd. acquired 6,000 shares in C Ltd on 01.04.2011 when the balance on capital reserve had been ₹1,00,000 and revenue reserve ₹1,50,000. b. H Ltd. purchased 20,000 shares in B Ltd. on 01.04.2011 when the latter’s balance on consolidated revenue reserve had been ₹5,50,000. The Balance of Capital Reserve in B Ltd. at that time was ₹1,50,000 c. H Ltd. also acquired 3,000 shares in C Ltd. on 01.04.2011 when the balance on capital reserve had been ₹1,00,000 and revenue reserve ₹3,50,000 Required: Prepare a consolidated balance sheet of H Ltd and its subsidiaries as on March 31, 2013 together with consolidated schedules. Answer: Direct Method (1)

Calculation of ratio of shares held by holding company and outsiders

B Ltd

Share held by H Ltd Minority Interest Share held by H Ltd

C Ltd

Shares held by B Ltd Minority Interest

𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝐵𝑖𝑔 𝐿𝑡𝑑 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑆𝑚𝑎𝑙𝑙 𝐿𝑡𝑑 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑆𝑚𝑎𝑙𝑙 𝐿𝑡𝑑 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝐵𝑖𝑔 𝐿𝑡𝑑 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝐿𝑖𝑡𝑡𝑙𝑒 𝐿𝑡𝑑 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑆𝑚𝑎𝑙𝑙 𝐿𝑡𝑑 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝐿𝑖𝑡𝑡𝑙𝑒 𝐿𝑡𝑑 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝐿𝑖𝑡𝑡𝑙𝑒 𝐿𝑡𝑑

20,000

%

25,000 5,000

%

25,000 3,000

%

10,000 6,000

%

10,000 1,000

%

10,000

%

80%

%

20%

%

30%

%

60%

%

10% ₹in ‘000

(2)

C Ltd

Total

Capital Profit

1 2

CR RR

Financial Accounting

100

H

100

B

100

600

H

350

700

B

150

H Ltd [30%]

B Ltd [60%]

MI [10%]

Total

CP

RP

Total

CP

RP

Total

30

30

-

60

60

-

10

180

105

75

360

90

270

60

135

75

150

270

70

6.69

₹in ‘000 (3)

B Ltd

1

Total

Cap. Reserve

Capital

Revenue

Profit

Profit

150

H Ltd [80%] CP

150

MI [20%]

RP

Total

120

30

From C (1) H

30

-

30

-

(2) B

60

-

60

-

(3) MI 2

10

Rev. Reserve

750

550

200

440

160

(1) H

105

75

105

75

(2) B

90

270

90

216

150

From C 54

(3) MI

60

Total

1,600

845

451

304 ₹in ‘000

(4)

Cost of Control

(5)

Cost of Acquisition

Less

Book Value of Shares

Shares in B by H

4,500

B

500

Shares in C by H

500

C

100

Shares in C by B

1,000

Profit(3)

304

Minority Interest

904

Book Value of Shares of Shares in B by H

2000

Shares in C by H

300

Shares in C by B

600

Capital Profit

845

(3)

Goodwill Consolidated Balance Sheet I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹100 each fully paid

(b)

Reserves and surplus Capital Reserve Revenue Reserve

(c)

Minority Interest

(2)

Current liabilities (Creditors) Creditors Income Tax Total

II

Minority Interest

3,745 2,255

Note

H Ltd

B Ltd

D Ltd

Consol

50,00,000

5,00,000

5,00,000

5,00,000

10,00,000

4,51,000(3)

14,51,000 9,04,000

20,00,000

10,00,000

3,00,000

33,00,000

5,00,000

3,50,000

3,00,000

11,50,000 1,23,05,000

ASSETS

Financial Accounting

6.70

(1)

Non-current assets

(a)

Intangible Assets [Goodwill]

(b)

Tangible Assets

(2)

Current assets

22,50,000 32,00,000

16,00,000

3,00,000

51,00,000

Stock

2,00,000

9,00,000

7,00,000

18,00,000

Debtors

4,00,000

10,50,000

11,50,000

26,00,000

Cash at Bank

2,00,000

2,00,000

1,50,000

5,50,000 1,23,05,000

[CMA FINAL D09, 15 Marks] Question: The following summarized Balance Sheet of X Ltd. and its subsidiaries, Y Ltd. and Z Ltd., have been prepared at 31st March, 2009 Note

X Ltd

Y Ltd

Z Ltd

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹10 each

30,00,000

20,00,000

2,00,000

(b)

Reserves and surplus [Profit or Loss A/c]

28,00,000

16,00,000

1,20,000

(2)

Non-current liabilities

(a)

Secured loan

15,00,000

8,00,000

2,00,000

(b)

Unsecured loan

5,00,000

2,00,000

--

(3)

Current liabilities

12,00,000

14,00,000

2,80,000

Total

90,00,000

60,00,000

8,00,000

Land and building at cost less depreciation

10,00,000

8,00,000

2,00,000

Plant and equipment at cost less depreciation

14,00,000

22,00,000

1,00,000

(b)

Investment

34,00,000

2,20,000

50,000

(2)

Current assets Stock

12,00,000

14,00,000

2,50,000

Debtors

16,00,000

12,00,000

1,75,000

4,00,000

1,80,000

25,000

90,00,000

60,00,000

8,00,000

II

ASSETS

(1)

Non-current assets

(a)

Tangible Assets

Cash and Bank

Additional information: (1)

Particular of investments are as follows Investment in 1,60,000 Shares in Y Ltd. X Ltd.

Investment in 5,000 Shares in Z Ltd.

₹ 33,60,000 40,000 34,00,000

Y Ltd.

Investment in 12,000 shares in Z Ltd.

Z Ltd.

Investment in Growth Sectors Bonds (F.V. ₹50,000)

Financial Accounting

2,20,000 50,000

6.71

(2) The acquisition of investments took place in the manner indicated below: Balance in P/L A/c

X Ltd. Y Ltd.

Date

Y Ltd. ₹

Z Ltd. ₹

1,60,000 share in Y Ltd.

1 April 2008

14,00,000

1,00,000

5,000 share in Z Ltd

1 April 2006

-

20,000

12,000 shares in Z Ltd.

1 April 2007

-

72,000

(3) X Ltd. has proposed 15% dividend for the accounting year ended on 31 March, 2009. This amount is included in sundry creditors (4) Sundry debtors of Y Ltd. include ₹30,000 representing sum due from X Ltd. Sundry creditors of X Ltd. include ₹20,000, which represents the amount due to Y Ltd. it is discovered that X Ltd. sent a cheque for ₹10,000 to Y Ltd. on 30 March, 2009 which was not received until 3 April, 2009. Prepare a consolidated Balance Sheet of X Ltd. and its subsidiaries as at 31 st March, 2009 Answer: Direct Method (1)

Calculation of ratio of shares held by holding company and outsiders 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑋 𝐿𝑡𝑑

Share held by X Ltd

Y

Minority Interest

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑍 𝐿𝑡𝑑 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑌 𝐿𝑡𝑑

Shares held by Y Ltd

(2) 1

Z Ltd P/L

(3) 1

Total 1,20,000

20,000 12,000

%

20,000 3,000

%

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑍 𝐿𝑡𝑑

Capital

1,00,000 5,000

%

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑍 𝐿𝑡𝑑 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠

Minority Interest

2,00,000 40,000

%

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑌 𝐿𝑡𝑑 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑋 𝐿𝑡𝑑

Share held by X Ltd Z

1,60,000

%

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑌 𝐿𝑡𝑑 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠

X Ltd [25%]

20,000

%

80%

%

20%

%

25%

%

60%

%

15%

Y Ltd [60%]

Profit

Total

CP

RP

Total

CP

RP

X

20,000

30,000

5,000

25,000

72,000

43,200

28,800

Y

72,000

B Ltd

Capital

Revenue

Profit

Profit

CP

RP

16,00,000

14,00,000

2,00,000

11,20,000

1,60,000

(1) X

30,000

5,000

25,000

5,000

25,000

(2) Y

72,000

43,200

28,800

43,200

23,040

(3) MI

18,000

P/L

MI [15%]

Total

X Ltd [80%]

Total 18,000

MI [20%] Total 3,20,000

From Z

Total (4)

18,000

17,20,000

11,68,200

Cost of Control

2,08,040

(5)

Cost of Acquisition

Less

5,760 3,43,760

Minority Interest Book Value of Shares

Shares in Y by X

33,60,000

Y

Shares in Z by X

40,000

Z

Shares in Z by Y

2,20,000

Profit

4,00,000 30,000 (3)

3,43,760

Book Value of Shares of

Financial Accounting

6.72

Shares in Y by X

16,00,000

Shares in Z by X

50,000

Shares in Z by Y

1,20,000

Capital Profit

(3)

11,68,200

Goodwill (6)

Minority Interest

29,38,200 6,81,800

Consolidated Balance Sheet

Note

X Ltd

Y Ltd

I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital of ₹10 each

30,00,000

(b)

Reserves and surplus [Profit or Loss A/c]

23,50,000

(c)

Minority Interest

(2)

Non-current liabilities

(a)

Secured loan

(b)

Unsecured loan

(3)

Current liabilities Sundry Creditors Proposed Dividend

7,73,760

Z Ltd

-

Consol

2,08,040(3)

7,73,760 15,00,000

8,00,000

2,00,000

25,00,000

5,00,000

2,00,000

--

7,00,000

12,00,000

14,00,000

2,80,000

28,60,000†

4,50,000

4,50,000

Total II

ASSETS

(1)

Non-current assets

(a)

Intangible Assets

(b)

Tangible Assets

30,00,000 25,58,040

*

1,28,41,800

6,81,800

Land and building

10,00,000

8,00,000

2,00,000

20,00,000

Plant and equipment

14,00,000

22,00,000

1,00,000

37,00,000

-

-

50,000

50,000

Stock

12,00,000

14,00,000

2,50,000

28,50,000

Debtors

16,00,000

12,00,000

1,75,000

29,55,000‡

4,00,000

1,80,000

25,000

6,05,000

(c)

Investment

(2)

Current assets

Cash and Bank

1,28,41,800 [CMA FINAL D10, 8 Marks] Question: AIR LTD, SEA LTD and RAIL LTD are members of a group. AIR LTD bought 70% of the shares of SEA LTD on October, 1.2008 and 30% of shares of RAIL LTD on 1st January, 2010. SEA LTD bought 60% of the shares of RAIL LTD on October 1, 2009. Profit and Loss Account

*

After proposed dividend of X Ltd After Mutual Owings of ₹20,000 ‡ After Mutual Owings of ₹20,000 †

Financial Accounting

6.73

Balance as on

Profit / (Loss)

Balance as on

Company

1.4.2009

for 2009-10

31.3.2010

Formed

₹

₹

₹

AIR LTD

55,000

25,000

80,000

April 1,2007

SEA LTD

20,000 (Dr.)

47,500

27,500

April 1,2008

-

24,000 (Loss)

24,000 (Dr)

April 1,2009

RAIL LTD.

State how the profit/ (loss) will be reflected in the consolidated Balance sheet. Answer: Direct Method (1)

Calculation of ratio of shares held by holding company and outsiders Share held by AIR Ltd

SEA

Minority Interest Share held by AIR Ltd

RAIL

Shares held by SEA Ltd Minority Interest

(2)

RAIL

Total

Date

𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝐴𝐼𝑅 𝐿𝑡𝑑

%

01.10.08

70%

-

30%

%

01.01.10

30%

%

01.10.09

60%

-

10%

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑆𝐸𝐴 𝐿𝑡𝑑 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑆𝐸𝐴 𝐿𝑡𝑑 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑋 𝐿𝑡𝑑 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑍 𝐿𝑡𝑑 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑌 𝐿𝑡𝑑

𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑍 𝐿𝑡𝑑 𝑆𝑕𝑎𝑟𝑒𝑠 𝑕𝑒𝑙𝑑 𝑏𝑦 𝑜𝑢𝑡𝑠𝑖𝑑𝑒𝑟𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑕𝑎𝑟𝑒𝑠 𝑖𝑛 𝑍 𝐿𝑡𝑑

Capital

%

%

AIR [30%]

SEA [60%]

MI [10%]

Loss 1

Loss

24,000

(3) 1

AIR

01.01.10

18,000

SEA

01.10.09

12,000

SEA

Total

P/(L)

Total

CP

RP

Total

CP

RP

Total

7,200

5,400

1,800

14,400

7,200

7,200

2,400

Capital

Revenue

Profit

Profit

AIR Ltd [70%] CP

RP

27,500

(10,000)*

37,500

(7,000)

26,250

(1) AIR

(7,200)

(5,400)

(1,800)

(5,400)

(1,800)

(2) SEA

(14,400)

(7,200)

(7,200)

(7,200)

(5,040)

MI [30%] Total 8,250

From RAIL

(3) MI

(2,400)

Total

(2,160)

(2,400)

3,500

(19,360)

22,860

(2,400) (19,600)

19,410

3,690

[CMA FINAL J11] a) Calculate the Minority Interest and Cost of Control form the following Balance Sheets of A Ltd. and B Ltd. as at 31st March 2011: Liabilities Share each)

Capital

(₹100

Profit:

*

A Ltd.

B Ltd.

Assets

₹

₹

5,00,000

2,00,000

Investment: 1,600 share in B Ltd.

1,00,000

80,000

1,000 Shares in A Ltd.

A Ltd.

B Ltd.

₹

₹

2,20,000

1,50,000

Capital Loss upto the period 01.10.08 = 6 months loss out of one year’s loss as on 01.04.2009 is ₹20,000

Financial Accounting

6.74

Capital Profit

1,00,000

80,000

Revenue Profit

3,00,000

50,000

Creditors

1,50,000

60,000

10,50,000

3,90,000

Sundry Assets

8,30,000

2,40,000

10,50,000

3,90,000

(b) A Ltd. purchased 40% stake of B Ltd. for ₹12 per share. After two years A Ltd. decided to purchase another 40% share in B Ltd. B Ltd. has 1, 00, 00,000 equity shares of ₹10 each as fully paid up shares. The purchase deal was finalized on the following terms: Purchase price per share to be calculated on the basis of average profit of last three years capitalized at 7.5%. profit for last three years are ₹35 lacs. ₹lacs and ₹89 lacs. Total assets of B Ltd. of ₹11,50,00,000. Assets to be appreciated by ₹40,00,000. Of the External Creditors for ₹2,50,00,000 one creditor to whom ₹10,00,000 was due has expired and nothing is to be paid to settle this liability B Ltd. will declare dividend @ 15%. Calculation the Goodwill or Capital Reserve for A Ltd. in Consolidated Financial Statement. Green Limited Balance Sheet as at 31st March 2000 (Rupees in…………) Particulars Figures as at the

Note

CY

PY

3

4

No. 1 I

EQUITY AND LIABILITIES

(1)

Shareholders’ funds

(a)

Share capital Authorized: 1,50,000 Equity shares of ₹50 each

2

75,00,000

Subscribed and paid up Capital: 50,000 Equity shares of ₹50 each

25,00,000

1,00,000 Equity shares of ₹50 each, ₹40 per share paid up

40,00,000

(b)

Reserves and surplus: Profit and Loss A/c

(c)

Money received against share warrants

(2)

Share application money pending allotment

(3)

Non-current liabilities

(a)

Long-term borrowings 12% First Debentures 12% Second Debentures

(b)

Deferred tax liabilities (Net)

(c)

Other Long term liabilities

(d)

Long-term provisions

(4)

Current liabilities

(a)

Short-term borrowings

(b)

Trade payables

Financial Accounting

65,00,000 (20,00,000)

5,00,000 10,00,000

15,00,000

6.75

(c)

Other current liabilities

(d)

Short-term provisions

5,00,000

Total II

ASSETS

(1)

Non-current assets

(a)

Fixed assets

(i)

Tangible assets

65,00,000

Building

10,00,000

Plant

10,00,000

Computers

25,00,000

(ii)

Intangible assets – Goodwill

(iii)

Capital work-in-progress

(iv)

Intangible assets under development

(b)

Non-current investments

(c)

Deferred tax assets (net)

(d)

Long-term loans and advances

(e)

Other non-current assets [AAA]

(2)

Current assets

(a)

Current investments

(b)

Inventories

(c)

Trade receivables

(d)

Cash and cash equivalents

(e)

Short-term loans and advances

(f)

Other current assets Total

Financial Accounting

5,00,000

45,00,000 20,00,000

65,00,000

6.76