Unit V | unit 5 accounts of holding companiesparent companies

Unit V

Accounts of Holding Companies/Parent Companies

Question Bank

Q1). Balance sheet of S Ltd. As on 31st March 2010 (Liabilities only)

Rs.

Share capital 40,000 Equity shares of Rs. 10/- each	4,00,000
Reserves and surpluses	2,50,000
Secured loan	2,50,000
Other Liabilities	1,00,000
	10,00,000

On the above date H Ltd. Acquired 30,000 Equity shares in S Ltd. On the above date for Rs. 7,50,000 fixed assets of S Ltd. Were appreciated by Rs. 1,50,000 find out cost of control / Goodwill.

A1).

Particulars	Rs	Rs
Cost of investment in S Ltd		7,50,000
Less: Share in share capital(4,00,000 x 3/4)	3,00,000
Share in Reserves & Surplus(2,50,000 x 3/4)	1,87,500
Share in capital profit(1,50,000 x 3/4)	1,12,500
(Appreciation in fixed assets)		6,00,000

Goodwill		1,50,000

Note: Suppose in above case, cost of investment amounted to Rs. 5,00,000 then instead of goodwill, there would be capital Reserve, Rs. 1,00,000.

Q.2) The following is the Balance sheet of S Ltd. As on 31st March, 2010.

Liabilities

Rs.

Assets

Rs.

Share capital

Equity shares of Rs. 10 each

Profit & Loss A/c

Current liabilities

2,70,000

3,60,000

85,000

Fixed Assets Investment

Current Assets

Preliminary Expenses

2,90,000

2,75,000

1,30,000

20,000

7,15,000

H Ltd. Acquired 25,000 shares in S Ltd. On 31st March, 2010 at a cost of Rs. 2,75,000. Fixed assets were revalued at Rs. 3,28,000. Find minority interest.

A2). Minority interest= 2000/27000 = 2/27

Particulars	Rs
Share in share capital(2,70,000 x 2/27)	20,000
Share in Reserves & Surplus(3,60,000 x 2/27)	20,000
Share in capital profit(3,78,000 x 2/27)	28,000
(Appreciation in fixed assets - 360000-20000+38000)

Minority interest	68,000

Q2). The following are summarized Balance Sheets of ‘X’ Ltd. And ‘Y’ Ltd. As on 31st December 2010.

Liabilities	X Ltd.	Y Ltd	Assets	X Ltd.	Y Ltd.
Paid up capital in			Freehold	4,50,000	1,20,000
Shares of Rs. 100			Premises
Each	10,00,000	3,00,000	Plant &	3,50,000	1,60,000
			Machinery
General reserve	4,00,000	1,25,000	Furniture	80,000	30,000
Profit and Loss A/c	3,00,000	1,75,000	Debtors	3,00,000	1,70,000
Sundry Creditors	1,00,000	70,000	Stock Investment	3,20,000	1,60,000
			In Shares in
			Y Ltd at cost	2,60,000	-

			Cash balance	40,000	30,000
	18,00,000	6,70,000		18,00,000	6,70,000

You are required to prepare a consolidated Balance Sheet as on 31st December 2010. Showing in detail necessary adjustments and taking into consideration the following information.

a) ‘X’ Ltd. Acquired the shares of Y Ltd. On 1.1.2010 when the balance on their profit and Loss account and general reserve were Rs. 75000 and Rs. 80000 respectively.

b) Stock of Rs. 1,60,000 held by ‘Y’ Ltd. Consists of Rs. 60,000 goods purchased from ‘X’ Ltd. Who has charges profit at 25% on cost.

c) Included in Debtors of X Ltd. Rs. 30000 due from Y Ltd.

A3).

Consolidated Balance Sheet of X Ltd. And Y. Ltd. As on 31.12.2010

Liabilities	Rs.	Assets	Rs.
Share capital in shares of Rs. 10 each	10,00,000	Fixed Assets

Reserves & Surplus		Freehold premises	5,70,000
Capital Reserve	43,333	(4,50,000 + 1,20,000)
General Reserve	4,30,000	Plant & Machinery	5,10,000
(4,00,000+30,000)		(3,50,000 + 1,60,000)
Profit & Loss A/c	3,58,667	Furniture (80,000 +30,000)	1,10,000
(2,92,000+66,667)
		Investment	NIL
Secured Loans	NIL	Current Assets
Current Liabilities	NIL	Loans & Advances
Provisions		Stock (320000 + 160000)
		480000
Creditors (1,00,000 + 70,000)	1,70,000	Less: Unrealised profit 12000	4,68,000

Minority Interest	2,00,000	Debtors(300000+ 170000)	4,70,000

		Cash (40000 + 30000)	70,000
	21,98,000		21,98,000

Notes:

Particulars	Rs	Rs
Calculation of Capital Reserve
Investment cost		2,60,000
Less : i) Share in share capital	2,00,000
Less : ii) Propionate Pre-acquisition profit	1,03,333	(3,03,333)
Capital Reserve		43,333

2. Minority Interest
Share in Share Capital		1,00,000
⅓ rd of General Reserve		41,667
⅓ rd of Profit & Loss A/c		58,333
		2,00,000
3. General Reserve
Of X Ltd.		4,00,000
Of Y Ltd. (125000- Pre-acquisition 8000)	45,000
Less : due to minority shareholders (⅓)	(15,000)	30,000
		4,30,000
4. Unrealized profit = 20% of 60,000		12,000

5. Profit & Loss Account
X Ltd. (300000-unrealised profit)		2,88,000
Y Ltd. (175000-Pre-acquisition 75000)	1,00,000
Less : ⅓ rd of minority	(33,333)	66,667
		3,54,667

Q3). H Ltd. Acquired 8,000 shares of Rs. 10 each in K Ltd. On 31st March 2011. The summarized Balance Sheets of the two companies as on that date were as follows :

Particulars		H Ltd. Rs.	K Ltd. Rs.
Liabilities :
Share Capital :
30,000 Shares of Rs. 10 each	… … … …	3,00,000
10,000 Shares of Rs. 10 each	… … … …	-	1,00,000
Capital Reserve	… … … …	-	52,000
General Reserve	… … … …	25,000	5,000
Profit & Loss Account	… … … …	38,200	18,000
Loan from I Ltd.	… … … …	2,100	-
Bills payable (including Rs.	… … … …	-	1,700
1,000 to H Ltd.)
Creditors	… … … …	17,900	5,000
		3,83,200	1,81,700
Assets :
Fixed Assets		1,50,000	1,44,700
Investments in K Ltd. At cost	… … … …	1,70,000	-
Stock-in-hand	… … … …	40,000	20,000
Loan to H Ltd.	… … … …	-	2,000
Bills Receivable (including Rs.	… … … …	1,200	-
700 from K Ltd.)
Debtors	… … … …	20,000	10,000
Bank	… … … …	2,000	5,000
		3,83,200	1,81,700

You are given the following information:

K Ltd. Made a bonus issue on 31st March 2011 of one share for every two shares held, reducing the capital reserve equivalently, but the transaction is not shown in the above Balance Sheets.

1) Interest receivable (Rs. 100) in respect of the loan due by H Ltd. To K Ltd. Has not been credited in the account of K Ltd.

2) The directors decided that the fixed assets of K Ltd. Were overvalued and should be written down by Rs. 5,000.

Prepare the Consolidated Balance Sheet as at 31st March 2011, showing your workings.

A4). Consolidated Balance Sheet of K Ltd. And its Subsidiary K Ltd. As at 31st March, 2011

LIABILITIES	Rs.	Rs.	ASSETS	Rs.	Rs.
Share Capital			Fixed Assets
Equity Share Capital			Goodwill (on consolidation)		33,920
30,000 Equity shares of Rs. 10 each fully paid		3,00,000	Other Fixed Assets	1,50,000 1,39,700	2,89,700
			Current Assets,
Reserves & Surplus			Loans & Advances
General Reserves	25,000		Stock	40,000
				20,000	60,000
P & L A/c H Ltd.	38,200	63,200	Debtors	20,000
Minority Interest		34,020		10,000	30,000
Current Liabilities & Provisions
Creditors			Bills Receivable	1,200
H Ltd.	17,900		Less: Mutual Dues	(200)	1,000
K Ltd.	5,000	22,900
Bills Payable	1,700
Less: Mutual Dues	(200)	1,500	Cash & Bank	2,000
				5,000	7,000

Total		4,21,620	Total		4,21,620

Notes:

Particulars	Rs	Rs
Holding Proportion
H Ltd = 12,000/15,000 = 4/5

Minority Interest = 3,000/15,000 = 1/5


2. Analysis of Profit	Capital Profit	Revenue Profit
P/L as on the date of acquisition 18,000
Add: Interest due 100	18,100

Reserve on the date of acquisition
Capital	52,000
General	5,000
	75,100
Less: Bonus Issue 50,000
Loss on Revaluation of Fixed Assets 5,000	(55,000)
	20,100
Holding Company (4/5)	16,080
Minority (1/5)	4,020

3. Cost of Control	Rs	Rs
Investment cost		1,70,000
Less : i) Share in share capital(including bonus)	1,20,000
Less : ii) Capital profit	16,080	(1,36,080)
Capital Reserve		33,920

4. Minority Interest
Share in Share Capital		30,000
Share in capital profit		4.020

		34,020

Q4). Following are the balance sheets of H Ltd. And its subsidiary S Ltd., as on 31st December 2010.

Liabilities	H Ltd. Rs.	S Ltd. Rs.	Assets	H Ltd. Rs.	S Ltd. Rs.
Share capital			Goodwill	40,000	30,000
Shares of Rs.10 each	5,00,000	2,00,000	Land & Buildings	2,00,000	1,30,000

General Reserve on			Plant & Machinery	1,60,000	90,000
January 1, 2003	1,00,000	60,000
Profit & Loss Account	1,40,000	90,000	Stock	1,00,000	90,000
Bills payable	-	40,000	Debtors	20,000	75,000
Creditors	80,000	50,000	1,500 Shares in S
			Ltd. At cost	2,40,000	-
			Cash at Bank	60,000	25,000
	8,20,000	4,40,000		8,20,000	4,40,000

Profit and loss account of S Ltd. Showed a balance of Rs. 50,000 on 1 January 2010.
A divided of 15% was paid in October, 2010 for the year 2009. This dividend was credited to profit and loss account by H Ltd.
H. Ltd. Acquired the shares in S Ltd., on 1 July 2010.
The bills payable to S. Ltd., were all issued in favour of H Ltd., which company got the bills discounted.
Included in the creditors of S Ltd. Are Rs. 20,000 for goods supplied by H Ltd. Included in the stock of S Ltd. Are goods to the value of Rs. 6,000 which were supplied by H Ltd. At a profit of 33 ⅓% on cost.
In arriving at the value of the S Ltd. Shares, the plant and machinery which then stood in the books at Rs. 1,00,000 was revalued at Rs. 1,50,000. The new value was not incorporated in the books. No changes in these assets have been made since that date.

Prepare a Consolidated Balance Sheet of H Ltd. And S Ltd. Show working in detail

A5).

Consolidated Balance Sheet of H Ltd. And its Subsidiary S Ltd. As at 31st December 2010.

LIABILITIES		Rs.	Rs.	ASSETS	Rs.	Rs.
Share Capital				Fixed Assets (Net)
Equity Share Capital 50,000 Equity shares of Rs. Each, fully paid			5,00,000	Goodwill H Ltd. S Ltd.	40,000 30,000 70,000
Reserves & surplus
General Reserves		1,00,000		Less: Capital Reserve(on consolidation)	(60,000)	10,000
Consolidated P & L A/c		1,40,375	2,40,375	Land/Bldg./Property H Ltd	2,00,000
Minority Interest			1,00,625	S Ltd	1,30,000	3,30,000
Current liabilities Provisions	&			Machinery ‘H’ ‘S’ Add: Revaluation	1,60,000 90,000 55,000
Creditors H Ltd. S Ltd.		80,000 50,000		(-) Add Dep	3,05,500 (2,500)	3,02,500
		1,30,000		Stock ‘H’ ‘S’	1,00,000 90,000
Less : Mutual Dues		(20,000)	1,10,000	(-) st Reserve	1,90,000 (1,500)	1,88,500
Bills Payable S Ltd.			40,000	Debtors ‘H’ ‘S’	20,000 75,000
				(-) Mutual Dues	(20,000)	75,000
				Cash & Bank		85,000
			9,91,000			9,91,000

Notes:

Particulars	Rs	Rs
Holding Proportion
H Ltd = 1,500/2,000 = 3/4

Minority Interest = 500/2,000 = 1/4

2. Time Ratio
Shares acquired on 1.7.2010
Pre Acq- 1.1.2011 to 30.6.2010 = 6 months
Post Acq- 1.7.2010 to 31.12.2010 = 6 months
Time ratio = 1:1

3. Analysis of Profit of S ltd	Capital Profit	Revenue Profit
General reserve (op. Bal)	60,000
P/L A/c (op. Bal) 50,000
Less: Pre Acq. Div (30,000)	20,000
P/L A/c closing. Bal 90,000
Less: Opening bal (20,000)
70,000
Profit earned during the year in T.R.	35,000	35,000
Increase in F.A. Value due to revaluation	55,000
Less: Depreciation on above		(2,500)
	1,70,000	32,500
Holding Company (3/4)	1,27,500	24,375
Minority (1/4)	42,500	8,125

4. Cost of Control	Rs	Rs
Investment cost		2,40,000
Less : i) Share in share capital	1,50,000
Less : ii) Capital profit	1,27,500
Less : iii) Pre acquisition div	22,500	3,00,000
Capital Reserve		60,000

5. Minority Interest
Share in Share Capital		50,000
Share in capital profit		42,500
Share in revenue profit		8,125
		1,10,625
6. Consolidated P/L A/c
P/L A/c bal in H Ltd		1,40,000
Add: Share in revenue profits of S Ltd		24,375
		1,64,375
Less: Div out of Pre-Acq profits
Credited to P/L A/c	22,500
Stock reserve	1,500	(24,000)
		1,40,375

7. Revaluation of plant & machinery
Book value on 1.1.2010		1,00,000
Less: Depn for 6 months		5,000
Book value on 1.7.2010		95,000
Revalued at		1,50,000
Profit on Revaluation		55,000

8. Additional Depreciation
On 1,00,000 for 6 month		5,000
On 1,50,000 for 6 month		7,500
		12,500
Less: Already provided		10,000
Additional depn to be provided		2,500

Q5). The following are the Profit & Loss A/c of H. Ltd. & S. Ltd. For the year ended March 31st, 2011

Particulars	H. Ltd.	S. Ltd.		H. Ltd.	S. Ltd.
To Opening Stock	2,00,000	1,00,000	By Sales	19,80,000	14,00,000
To Purchases	12,00,000	7,50,000	By Closing Stock	2,10,000	60,000
To Carriage	20,000	10,000
To Wages	2,10,000	80,000
To Gross Profit c/d	5,60,000	5,20,000
	21,90,000			21,90,000	14,60,000
To Salaries	95,000	45,000	By Gross Profit	5,60,00	5,20,000
			b/d
To Rent	40,000	25,000	By Commission	1,00,000
To Commission	-	50,000	By Debenture	10,000
			Interest S Ltd.
To Sundry	65,000	25,000	By Rent	40,000
Expenses
To Debentures	-	25,000
Interest
To Provision for	1,90,000	1,10,000
Taxation
To Net Profit c/d	3,20,000	2,40,000
	7,10,000	5,20,000		7,10,000	5,20,000
To Preference	-	40,000	By Balance B/d	1,00,000	40,000
Dividend
To Proposed	90,000	60,000	By Net Profit B/fd	3,20,000	2,40,000
Dividend
To Corporate	15,021	16,690
Dividend Tax
To Balance carried	3,14,979	1,63,310
To Balance sheet
	4,20,000	2,80,000		4,20,000	2,80,000

You are given following additional information:

a) H. Ltd. Acquired 3000 Equity shares in S. Ltd. On 1st October 2010, of 4000 Equity shares of S. Ltd. However, Debentures were acquired on 1st April 2009.

b) During the year H. Ltd. sold goods to S Ltd. Costing 60,000 for

80,000. One fourth of the goods remained unsold on March 31st 2011. It is included in closing stock at cost to S. Ltd.

c) Commission, rent credited to profit & Loss A/c of H. Ltd. include

40,000, 10,000 received from S. Ltd.

Prepare a consolidated profit and Loss A/c for the year ended March 31st 2011.

A6). Consolidated profit and Loss A/c of H. Ltd. Its subsidiary

S. Ltd. For year ended March 31st 2011

Particulars		Rs.	Rs.	Particulars		Rs.	Rs.
To Opening Stock				By Sales
H. Ltd.		2,00,000		H. Ltd.		19,80,000
S. Ltd.		1,00,000	3,00,000	S. Ltd.		14,00,000
						33,80,000
To Purchases				Less : Inter Co.		80,000	33,00,000
H. Ltd.		12,00,000		Sales
S. Ltd.		7,50,000
		19,50,000
Less : Inter purchases	Co.	80,000	18,70,000	By Stock	Closing
				H. Ltd.		2,10,000
				S. Ltd.		60,000	2,70,000
To Carriage
H. Ltd.		20,000
S. Ltd.		40,000	30,000
To Wages
H. Ltd.		2,10,000
S. Ltd.		80,000	2,90,000
To Gross Profit c/d			10,80,000
			35,70,000				35,70,000
To Salaries				By Gross Profit			10,80,000
H. Ltd.		95,000	1,40,000	b/d
S. Ltd		45,000
To Rent H. Ltd.		40,000		By Commission of H. Ltd.		1,00,000
S. Ltd		25,000
		65,000
Less : Inter transactions	Co.	(10,000)	55,000	Less : Inter Co. Transaction		(40,000)	60,000
To Commission S. Ltd.		50,000		By Debenture Interest S Ltd.		10,000
Less : Inter transactions	Co.	(40,000)	10,000	Less : Inter Co. Transaction		(10,000)
To Sundry				By Rent H. Ltd.		40,000
Expenses
H. Ltd.		65,000
S. Ltd.		25,000	90,000
To Debentures Interest S. Ltd.		25,000		Less : Inter Co. Transaction		(10,000)	30,000

Less : Inter Co. Transactions	(10,000)	15,000
To Provision for Taxation
H. Ltd.	1,90,000
S. Ltd.	1,10,000	3,00,000
To Stock Reserve		5,000
To Balance c/d		5,55,000
		11,70,000			11,70,000
To Preference	-	40,000	By Balance B/d
Dividend			H. Ltd.	1,00,000
			S. Ltd.	40,000	1,40,000
To Proposed Dividend			By Net Profit B/fd		5,55,000
H. Ltd.	90,000
S. Ltd.	60,000
	1,50,000
Less : Dividend of S. Ltd. Due to H. Ltd.	45,000	1,05,000
To Corporate Dividend Tax
H. Ltd.	15,021
S. Ltd.	16,690	31,711
To Capital Reserve		1,02,497
To Minority Interest		40,828
Balance Sheet		3,74,964
		6,95,000			6,95,000

Q6). How does As 21 Defines

a) Minority Interest

b) Holding company

A7).

a) The claim of outside shareholders in the subsidiary company has to be assessed and shown as liability in the consolidated balance sheet. Minority interest in the net assets of the company is nothing but the proportionate share of aggregation of share capital, reserve surpluses funds etc. proportionate share of all assets should be deducted from the minority interest.

Thus, minority interest is the share of outsider in the following.

1) Share in share capital in subsidiary.

2) Share in reserves (Both pre- and post-acquisition of subsidiary).

3) Share in accumulated losses should be deducted.

4) Proportionate share of profit or loss on revaluation of assets.

5) Preference shares capital of subsidiary company held by outsiders and dividend due on such share capital, if there are profits.

Minority interest means outsider’s interest. It is treated as liability and shown in consolidated. Balance sheet as current liability. This amount is basically intrinsic value of shares held by minority.

b) Section 4 of the companies Act, 1956 defines a subsidiary company. A company is a subsidiary of another if and only if –

a) That other company controls the composition of its Board of Directors; or

b) That other –

i) Where the first mentioned company is an existing company in respect of which the holders of Preference shares issued before the commencement of this Act have the same voting rights in all respect as the holders of Equity shares exercises or controls more than half of the total voting power of such company.

Ii) Where the first mentioned company is any other company, holds more than half in nominal value of its Equity share capitals. OR

Iii) The company is a subsidiary of any company which is that other company’s subsidiary

Q7). What do you mean by consolidated profit and loss A/c?

A8). 21 come into effect in respect of accounting periods commencing on or after 1st April i.e., for year ending 31st March 2002. The A.S. 21 is applicable to all the enterprises that prepare consolidated financial statement. It is mandatory for Listed companies and Banking companies.

As per AS 21, The Consolidated financial statements would include:

i) Profit & Loss A/c

Ii) Balance sheet

Iii) Cash flow statement

Iv) Notes of Accounts except typical notes.

v) Segment reporting

AS 21 also desire various import terms, as well as treatment and same while preparing consolidated financial statement. Consolidated financial statements should be prepared for both domestic as well as foreign subsidiaries.

Q8). The following are the Profit & Loss A/c of H. Ltd. & S. Ltd. For the year ended March 31st, 2011

Particulars	H. Ltd.	S. Ltd.		H. Ltd.	S. Ltd.
To Opening Stock	2,00,000	1,00,000	By Sales	19,80,000	14,00,000
To Purchases	12,00,000	7,50,000	By Closing Stock	2,10,000	60,000
To Carriage	20,000	10,000
To Wages	2,10,000	80,000
To Gross Profit c/d	5,60,000	5,20,000
	21,90,000			21,90,000	14,60,000
To Salaries	95,000	45,000	By Gross Profit	5,60,00	5,20,000
			b/d
To Rent	40,000	25,000	By Commission	1,00,000
To Commission	-	50,000	ByDebenture	10,000
			Interest S Ltd.
To Sundry	65,000	25,000	By Rent	40,000
Expenses
To Debentures	-	25,000
Interest
To Provision for	1,90,000	1,10,000
Taxation
To Net Profit c/d	3,20,000	2,40,000
	7,10,000	5,20,000		7,10,000	5,20,000
To Preference	-	40,000	By Balance B/d	1,00,000	40,000
Dividend
To Proposed	90,000	60,000	By Net Profit B/fd	3,20,000	2,40,000
Dividend
To Corporate	15,021	16,690
Dividend Tax
To Balance carried	3,14,979	1,63,310
To Balance sheet
	4,20,000	2,80,000		4,20,000	2,80,000

You are given following additional information:

H. Ltd. Acquired 3000 Equity shares in S. Ltd. On 1st October 2010, of 4000 Equity shares of S. Ltd. However, Debentures were acquired on 1st April 2009.
During the year H. Ltd. Sold goods to S Ltd.costing 60,000 for

80,000. One fourth of the goods remained unsold on March 31st 2011. It is included in closing stock at cost to S. Ltd.

3. Commission, Rent credited to profit & Loss A/c of H. Ltd. Include

40,000, 10,000 received from S. Ltd.

4. Prepare a consolidated profit and Loss A/c for the year ended March 31st 2011.

A9). Consolidated profit and Loss A/c of H. Ltd. Its subsidiary

S. Ltd. For year ended March 31st 2011.

Particulars		Rs.	Rs.	Particulars		Rs.	Rs.
To Opening Stock				By Sales
H. Ltd.		2,00,000		H. Ltd.		19,80,000
S. Ltd.		1,00,000	3,00,000	S. Ltd.		14,00,000
						33,80,000
To Purchases				Less : Inter Co.		80,000	33,00,000
H. Ltd.		12,00,000		Sales
S. Ltd.		7,50,000
		19,50,000
Less : Inter purchases	Co.	80,000	18,70,000	By Stock	Closing
				H. Ltd.		2,10,000
				S. Ltd.		60,000	2,70,000
To Carriage
H. Ltd.		20,000
S. Ltd.		40,000	30,000
To Wages
H. Ltd.		2,10,000
S. Ltd.		80,000	2,90,000
To Gross Profit c/d			10,80,000
			35,70,000				35,70,000
To Salaries				By Gross Profit			10,80,000
H. Ltd.		95,000	1,40,000	b/d
S. Ltd		45,000
To Rent H. Ltd.		40,000		By Commission of H. Ltd.		1,00,000
S. Ltd		25,000
		65,000
Less : Inter transactions	Co.	(10,000)	55,000	Less : Inter Co. Transaction		(40,000)	60,000
To Commission S. Ltd.		50,000		By Debenture Interest S Ltd.		10,000
Less : Inter transactions	Co.	(40,000)	10,000	Less : Inter Co. Transaction		(10,000)
To Sundry				By Rent H. Ltd.		40,000
Expenses
H. Ltd.		65,000
S. Ltd.		25,000	90,000
To Debentures Interest S. Ltd.		25,000		Less : Inter Co. Transaction		(10,000)	30,000
Less : Inter Co. Transactions		(10,000)	15,000
To Provision for Taxation
H. Ltd.		1,90,000
S. Ltd.		1,10,000	3,00,000
To Stock Reserve			5,000
To Balance c/d			5,55,000
			11,70,000				11,70,000
To Preference		-	40,000	By Balance B/d
Dividend				H. Ltd.		1,00,000
				S. Ltd.		40,000	1,40,000
To Proposed Dividend				By Net Profit B/fd			5,55,000
H. Ltd.		90,000
S. Ltd.		60,000
		1,50,000
Less : Dividend of S. Ltd. Due to H. Ltd.		45,000	1,05,000
To Corporate Dividend Tax
H. Ltd.		15,021
S. Ltd.		16,690	31,711
To Capital Reserve			1,02,497
To Minority Interest			40,828
Balance Sheet			3,74,964
			6,95,000				6,95,000

Q9). Balance sheet of H. Ltd. And S Ltd. As on 31.03.2010 were as under.

Liabilities	H. Ltd.	S. Ltd.	Assets	H. Ltd.	S. Ltd.
Equity share	10,00,000	5,00,000	Land & Build	3,00,000	1,80,000
Capital of Rs.
10 each
Reserves &	1,00,000	--	Plant &	5,75,000	5,05,000
Surplus :			Machinery
Capital
General	2,00,000	1,00,000	Investments	6,20,000
Reserve			(40000 shares
			In S. Ltd.)
Profit and	2,00,000	1,50,000	Stock	1,20,000	50,000
Loss A/c
Secured Loan			Sundry	2,00,000	1,20,000
			Debtors
15%	3,00,000	1,00,000	Bills	75,000	50,000
Debentures			Receivable
Current			Bank Balance	25,000	15,000
Liabilities :
Creditors	75,000	50,000
Bills payable	40,000	20,000
	19,25,000	9,20,000		19,25,000	9,20,000

Additional Information :

H. Ltd. Acquired shares on 1st October 2009 on which date General Reserve of S. Ltd. Was Rs. 1,00,000/- Balance in profit and loss A/c on 1.04.2009 was Rs. 80,000/-
S. Ltd. Paid interim dividend at 5% out of profits on 01.10.2009, which was credited by H. Ltd. To Profit and Loss A/c.
Sundry Debtors of H. Ltd. Includes Rs. 30,000/- dues from S Ltd. Similarly bills receivable includes Rs. 20,000/- accepted by S Ltd.
Stock of S. Ltd. Includes Rs. 25,000/- purchased from H. Ltd. On which profit made by H. Ltd. 25% of cost.
H. Ltd. Proposed 10% dividend S. Ltd. Proposed 5% dividend which was not accounted.
On date of take over land and building of S. Ltd. Revalued at 3,00,000/- Effect of which was not given by S Ltd. S. Ltd. Charged depreciation at 10% on land and building. Prepare consolidated Balance Sheet.

A10). Consolidated M/S of H ltd as on 31.3.2010

Liabilities		Rs.	Rs.	Assets		Rs.	Rs.
Share capital, issued, Subscribed and paid up				Land and Building
1,00,000 Equity share of				H. Ltd.		3,00,000
Rs. 10/- Paid up	Fully		10,00,000	S. Ltd.		2,84,500	5,84,500
Reserves surplus	And			Plant Machinery	&
Capital Reserves Ltd.)	(H.	1,00,000		H. Ltd.		5,75,000
Capital Reserves		50,000		S. Ltd.		5,05,000	10,80,000
(Cost of control)
		1,50,000	1,50,000	Investments		NIL
General Reserve Ltd.)	(H.	2,00,000	2,00,000	Current Assets Stock :
Profit & A/c	Loss			H. Ltd.		1,20,000
H. Ltd.		2,00,000		S. Ltd.		50,000
						1,70,000
Less : acquisition	Pre-			Less Unrealised	:
Dividend		(20,000)		Profit		(4,000)	1,66,000
		1,80,000		Sundry Debtors :
				H. Ltd.		2,00,000
Less : Unrealised profit (stock)		4,000		S. Ltd.		1,20,000
		1,76,000				3,20,000

Add : Post			Less : Inter
Acquisition profit	33,600		Company owning	30,000	2,90,000
			Cash and Bank Balance
	2,09,600		H. Ltd.	25,000
Less : Proposed			S. Ltd.	15,000	40,000
Dividend (H. Ltd.)	1,00,000	1,09,600
Minority interest			Bills Receivable :
(as per working)	1,65,900		H. Ltd.	75,000
			S. Ltd.	50,000
Secured Loans:				1,25,000
15% Debentures			Less : Inter
H. Ltd.	3,00,000		Company owing	(20,000)	1,05,000
S. Ltd.	1,00,000	4,00,000
Current Liabilities.
Sundry Creditors
H. Ltd.	75,000
S. Ltd.	50,000
	1,25,000
Less : Inter company owing Proposed Dividend	(30,000)	95,000
H. Ltd.	1,00,000
S. Ltd.	5,000	1,05,000
Bills payable
H. Ltd.	40,000
S. Ltd.	20,000
Less : Inter company owing	(20,000)	40,000
		22,65,500			22,65,500

2. Analysis of profit of S. Ltd.

Particulars		Pre-acquisition Capital profit	Post – acquisition revenue profit
General Reserve as on 1.10.2009		1,00,000	-
Profit & Loss a/c as on 1/4/09	80,000
Less : Dividend	(25,000)	55,000	-
Profit for the year (on time basis)	95,000	47,500	47,500
Revaluation profit (Pre-		1,10,000	-
Acquisition)
Effect of additional depreciation
(Post-acquisition)			(5,500)
		3,12,500	42,000
Less : Minority interest (20%)		62,500	8,400
Holding company (80%)		2,50,000	3,360

		3. Cost of control		Rs.
		Price of 40000 Equity share		6,20,000
		Less : paid up value		(4,00,000)
				2,20,000
		Less : pre-acquisition profit		(2,50,000)
				30,000
		Less : pre-acquisition dividend		20,000
		Capital Reserve		50,000
		4. Minority Interest 10,000 Equity Shares fully paid up		1,00,000
		Proposed dividend		(5,000)
		Pre-acquisition profit		62,500
		Post-acquisition profit		8,400
				1,65,900
		5) Unrealized Profit H. Ltd. Stock sell value		25,000
		(25 of cost; 1/5 of selling price)		5,000
		Holding companies share (80)		4,000
		6) Proposed Dividend
		5 proposed dividend on 500000 × 5/100		25,000
		Holding companies share		20,000
		Minority share		5,000
		7) Profit of S. Ltd. As on 31/3/09		1,50,000
		Less : Revised opening Balance		55,000
		Profit for the year		95,000
		8) Assumed that profit accures evenly throughout the year
	50 of profit (1/4/09 to 30/09/09 is considered pre- acquisition		47,500
	Balance Profit (1/10/09 to 31/3/10) considered post acquisition		47,500
9)	Land and Building (Effect of Revaluation)
	Land and Building at W.D.V. On 31/3/10		1,80,000
	Rate of Depreciation		10
	Balance on 1/4/09
	18000 100		2,00,000

10. Computation of appreciation

W.D.V. Cost on 1/4/09 2,00,000

Less : Depreciation for 6 months

200000 × 6/12 × 10/100 10,000

W.D.V. On 1/10/09 1,90,000

Revaluation value 3,00,000

Appreciation (pre-acquisition) 1,10,000

W.D.V. On 1/10/09 3,00,000

Less : Depreciation on old value 15,500

2,84,500

Q10). More than one subsidiary company H. Ltd. Owns 80% of issued capital of A Ltd. And 90% of issued capital of B Ltd. The following are the balances of all companies as on 31.03.2010.

Assets Fixed Assets	H. Ltd. 3,40,000	A. Ltd. 20,000	B. Ltd. 54,000
Less : Provision for depreciation	1,40,000	12,000	18,000
	2,00,000	8,000	36,000
Current Assets	5,36,000	1,00,000	1,00,000
Investments
Shares in A. Ltd.	30,000
Shares in B Ltd.	50,000
Current Accounts
A. Ltd.	40,000
B. Ltd.	40,000
Liabilities	8,96,000	1,08,000	1,36,000
Share capital	6,40,000	40,000	50,000
Current Liabilities	80,000	12,000	20,000
Current Accounts	-----	44,000	36,000
Proposed dividend	40,000	-----	5,000
Revenue Reserve	1,36,000	12,000	25,000
	8,96,000	1,08,000	1,36,000

Additional Information :

At the time of acquiring the shares the subsidiaries had the following Revenue Reserves.

A. Ltd. Rs. 12,000
B. Ltd. Rs. 6,000

2. Neither of the subsidiaries has paid any dividend since acquisition of shares.

3. Payment of creditors of A. Ltd. H. Ltd. To the extent of Rs. 4,000 has not been considered in the books of A. Ltd.

4. A remittances of Rs. 4,000 by B. Ltd. To H. Ltd. Has not yet been adjusted in the books of H. Ltd.

5. The stock of H. Ltd. Includes Rs. 6,000 purchased from H. Ltd. Which made 25% profit on cost. H. Ltd. Stock includes Rs. 5,000 purchased from B. Ltd. Which made 20% profit on sales B. Ltd. Stock includes Rs. 8,000 (Cost of Rs. 6,000) purchased from A. Ltd.

Prepare the consolidated Balance Sheet of H. Ltd. And its subsidiaries A. Ltd. And B. Ltd.

A11).

Consolidated Balance Sheet of H. Ltd. & its subsidiaries A Ltd. & B. Ltd. As at 31st March 2010

Liabilities		Rs.	Assets		Rs.
Share Capital			Fixed Assets
Authorized Capital		?	H. Ltd.	240000
Issued, Subscribed & paid-up capital		640000	A. Ltd.	20000
Minority Interest			B. Ltd.	54000
A. Ltd.	10000	18400		414000
B. Ltd.	8000		Less : Pro for Depre.	170000	244000
Reserve & Surplus			Investments		-----
Capital Reserves on consolidation			Current Assets
A. Ltd.	11600		Loans & Advances
B. Ltd.	400	12000	A) Current Assets
Revenue Reserve	----	1,53,400	H. Ltd.	536000
Secured Loans	-----		A. Ltd.	100000
Unsecured loans	-----		B. Ltd.	100000
Current Liabilities & Provision	731800			736000
A) Current Liabilities			Less : Profit included in stock	4200
H. Ltd. 12000	40000			731800
A. Ltd. 4000	8000		Add : Cash in transit	4000	735800
Less : Payment by H. Ltd.			B) Loans & Advances	-----
B. Ltd.	(20000)	108000
B) Provision
Suspense Account		8000
Proposed dividend		40000
		979800			979800

Unexpected credit by H. To A

Note : Difference in current A/c has been treated as cash in transit.

Paid up value of shares held by outsiders 25000 × 1 10	5000
Add: 1 th share of pre-acquisition Revenue Reserve 10	600
Add : 1 th share of post acquisition Revenue Reserve 10	2400
	8000
5. Cost of control in B. Ltd. Intrinsic value of the shares in B. Ltd.
Paid up value of the shares held 910 × Rs. 50000	45000
Add : 910 th shares of pre-acquisition Revenue	5400
Reserve in B. Ltd.
Intrinsic value of the shares held	50400
Less : Price paid for the shares held	50000
Capital Reserve	400
6. Unrealised profit included in stock of B. Ltd. Unralised Profit = Rs. (8000-6000)	2000
H Ltd. Share of unrealized profit Rs. 1000 × 9/10 × 8/10	1440
C. H. Ltd.
1. Unrealised profit included in stock of H. Ltd. Cost price is the selling price of B Ltd. Unrealised profit = Rs. 10000 × 20/100 × 9/10 = 1800
2. Revenue Reserves of H. Ltd.
Revenue Reserves as per Balance sheet	136000
Add : 9/10 share of post-acquisition Revenue Reserve in A Ltd.	21600
	157600
Less : Unrealised profit included in stock (960+1440+1800)	(4200)
Adjusted Balane	153400

Q11). Balance Sheet as on 31st March, 2011

Liabilities	H Ltd. (Rs.)	S. Ltd. (Rs.)
Share capital :
6% Preference shares of Rs. 10 each	-----	1,60,000
Equity shares of Rs. 10 each	6,00,000	2,00,000
General Reserve	1,00,000	80,000
Profit and loss account	2,00,000	90,000
6% debentures of Rs. 10 each	-----	40,000
Proposed dividend :
On Equity shares	60,000	20,000
On Preference shares	-----	9,600
Debentures interest accrued	-----	2,400
Sundry creditors	2,94,000	1,25,000
	12,54,000	7,27,000
Assets
Fixed assets	5,00,000	4,40,000
15000 Equity shares in S Ltd.	3,30,000	-----
12000 Preference shares in S. Ltd.	1,20,000	-----
1000 6% debentures in S Ltd.	10,000	-----
Current assets	2,94,000	2,87,000
	12,54,000	7,27,000
Other information is as under :

i) The general reserve of S Ltd. As on 31.03.2010 was Rs. 80,000

Ii) H. Ltd. Acquired the shares in S Ltd. On 31.03.2010

Iii) The balance of profit and loss account of S Ltd. Is made up as follows :

Balance as on 31.03.2010	Rs. 56,000
Net profit for the year ended 31.03.2010	63,600
	1,19,600
Less : Provision for proposed dividend	29,600
	90,000

Iv) The balance of profit and loss account of S Ltd. As on 31.03.2010 is after providing for Preference dividend of Rs. 9,600 and proposed dividend of Rs. 10,000 both of which were subsequently paid and credited to profit and loss account of H. Ltd.

v) No entries have been made in the books of H. Ltd. For debentures interest due from or proposed dividend of S. Ltd. For the year ended on 31.03.2011.

Vi) S. Ltd. Has issued fully paid bonus shares of Rs. 40,000 on 31.03.2011 among the existing shareholders by drawing upon the general reserves. The transaction has not been given effect to in the books of S. Ltd.

You are required to prepare the consolidated balance sheet of H. Ltd. With its subsidiary S. Ltd. As on 31st March, 2011.

A12). H Ltd. Consolidated Balance Sheet with its Subsidiary S Ltd. As on 31st March, 2011

Liabilities		Rs.	Assets		Rs
Share capital :			Fixed Assets :
Equity shares of Rs. 10 each		6,00,000	Goodwill		63,300
Minority Interest		1,39,900	Other Fixed Assets :
Reserve and Surplus :			H. Ltd.	5,00,000
General Reserve		1,00,000	S. Ltd.	4,40,000	9,40,000
Profit & Loss A/c	2,00,000		Investments		--
Add: Deb. Interest	600		Current Assets
Profit from			Loans & Advances :
S. Ltd.	47,700		H. Ltd.	2,94,000
	2,48,300		S. Ltd.	2,87,000	5,81,000
Less : Dividend from S. Ltd. for 2010	14,700	2,33,600	A. Current Assets :
Less : Dividend from S. Ltd. for 2010	14,700	2,33,600	Deb. Interest due	600
			Less : Mutual obligation	600	---
Secured Loans :
6% Debentures	40,000		B. Loans and Advances		---
Less : Mutual obligation	10,000	30,000
Debenture Interest outstanding		1,800
Current Liabilities & Provisions
A. Current Liabilities
Creditors
H. Ltd.	2,94,000
S. Ltd.	1,25,000	4,19,000
B. Provisions
Proposed Dividend (H. Ltd.)		6,000
		1584300			1584300

Working Note

1.	Capital Profit General Reserve	Rs. 80,000
	Profit & Loss A/c	56,000
		1,36,000
	Less : Bonus Shares	40,000
		96,000
	Holding Company (¾)	72,000
	Minority Interest (¼)	24,000
2.	Revenue Profit Profit and Loss A/c	90,000
	Less : Balance on 1.04.2010	56,000
	Add: Proposed dividend for current year	34,000
Ad	Add: i.e. for the period after acquisition of shares	29,600
		63,600
	Holding Company (¾)	47,700
	Minority Interest (¼)	15,900
3.	Bonus Shares	40,000
	Holding Company (¾)	30,000
	Minority Interest (¼)	10,000
4.	Goodwill / Cost of Control Cost of shares acquired : Equity shares	3,30,000
	Preference shares	1,20,000
		4,50,000

Less : Dividend for 2009-10

Equity (10000 ×¾) 7500

Preference (9600 ×¾) 7200 14,700

4,35,300

Less : Paid-up value of shares acquired :

Equity Shares 1,50,000

Preference shares 1,20,000

Capital profit 72,000

Bonus shares (Equity) 30,000 3,72,000

Goodwill 63,300

5. Minority Interest

Share capital (Equity) 50,000

Bonus shares (Equity) 10,000

Preference capital 40,000

Capital profit 24,000

Revenue profit 15,900

1,39,900

Q12). Following are the Balance Sheets of H. Ltd. And S. Ltd. As at 31st March 2011

Liabilities	H Ltd. Rs.	S Ltd. Rs.	Assets	H Ltd. Rs.	S Ltd. Rs.
Share capital share of	5,00,000	2,00,000	Goodwill	40,000	30,000
Rs.10 each
General Reserve as	1,00,000	60,000	Land &	2,00,000	1,30,000
On 1.4.03			Building
Profit & Loss A/c	1,40,000	90,000	Plant &	1,60,000	90,000
			Machinery
Bills Payable	-	40,000	Stock in Trade	1,00,000	90,000
Creditor s	80,000	50,000	Shares in S.	2,40,000
			Ltd. 1500
			Shares (at
			Cost)
			Cash at Bank	60,000	25,000
	8,20,000	4,40,000		8,20,000	4,40,000

The Profit and Loss Account of S Ltd. Showed a credit balance of Rs. 50,000 on 1st April 2010. A dividend of 15% was paid in December 2010 for the year 2009-10. This dividend was credited to profit and loss account by H Ltd.

H Ltd. Acquired the shares in S. Ltd. On 1st October, 2010. The Bills Payable of S Ltd. Were all issued in favor of H Ltd. Which company got the bills discounted.

Included in the Creditors of S Ltd. Is Rs. 20,000 for goods supplied by H Ltd. Included in the stock of S Ltd. Are goods to the value of Rs. 8,000 which were supplied by H. Ltd. At a profit of 33⅓% on cost.

In arriving at the value of S. Ltd. Shares, the plant and machinery which then stood in the books at Rs. 1,00,000 on 1.4.2010 was revalued at Rs. 1,50,000. The new value was not incorporated in the books. No changes in these have been made since then in books of S. Ltd.

Prepare the consolidated balance sheet as on that date.

A13). Consolidated Balance Sheet of H. Ltd. And its Subsidiary S Ltd. As at 31.03.2011

Liabilities		Rs.	Assets		Rs.
Share capital :			Goodwill	70,000
5000 shares of Rs. 100 each		5,00,000	Less : Capital Reserve	60,000	10,000
Minority interest		1,00,562	Land & Building		3,30,000
General Reserve		1,00,000	Plant & Machinery
Profit & Loss A/c	1,40,000		H. Ltd.	1,60,000
Add : Post-acquisition	24,188		S. Ltd.	1,42,250	3,02,250
	1,64,188
Less: Pre-acquisitions dividend	22,500		Stock		1,88,500
	1,41,688		Sundry debtors		75,000
Less: Unrealized profit	1,500	1,40,188	Cash at Bank		85,000
Bills payable		40,000
Sundry creditors		1,10,000
		9,90,750			9,90,750

Q13). From the following Balance sheet of H Ltd. And its subsidiary S Ltd. As on 31st March 2011, and the additional information provided there after prepare consolidated Balance sheet on 31.3.11

Liabilities	H Ltd. Rs.	S Ltd. Rs.	Assets	H Ltd. Rs.	S Ltd. Rs.
Share capital (Rs.10)	25,00,000	5,00,000	Land	5,00,000	1,00,000
Reserve	2,00,000	-	Building	10,00,000	3,00,000
Profit & Loss A/c	3,00,000	4,00,000	Machinery	6,00,000	4,50,000
Current Liabilities	1,60,000	90,000	Investment	7,50,000	12,000
			Current Assets	3,10,000	1,28,000
	31,60,000	9,90,000		31,60,000	9,90,000

Additional Information:

1) H. Ltd. Acquired 40,000 Equity shares of S Ltd. For Rs. 7,00,000 on 1 July 2010.

2) Land of S Ltd. Was revolved as on 30.6.2010 Rs. 5,00,000

3) S Ltd. Declared & paid interim dividend @ 20% p.a. For 6 month ended on 30th September 2010. Dividend received by H Ltd., credited to profit a loss A/c

4) Profit & Loss A/c of S Ltd. As on 1st April 2010 showed Dr. Balance amounting Rs. 4,00,000

A14). Consolidated Balance Sheet of H Ltd. & its subsidiary S Ltd. As on March 31st 2011.

Liabilities	Rs.	Assets	Rs.	Rs.
I. Share Capital		Fixed Assets Goodwill Land : H Ltd. S Ltd. Building H Ltd. S. Ltd. Machinery H Ltd. S Ltd. II. Investment H Ltd. S. Ltd. III. Current Assets H Ltd. S Ltd.
2,50,000 Equity shares of Rs. 10 each fully paid up	25,00,000
II. Reserved & Surplus				1,25,000
Reserve	2,00,000		5,00,000
			5,00,000	10,00,000
Profit & Loss A/c	7,65,000		10,00,000
			3,00,000	13,00,000
III. Secured Loan	-		6,00,000
			4,50,000	10,50,000
Iv. Unsecured Loan	-
			50,000
			12,000	62,000
v. Current Liabilities
H. Ltd.. 1,60,000			3,10,000
S. Ltd. 90,000	2,50,000		1,28,000	4,28,000
Minority Interest	2,60,000
	39,75,000			39,75,000

1) Net Profit earned by Company:

Profit & Loss A/c (31.3.11)

To Balance B/d

To Interim Dividend To Balance C/d

4,00,000

50,000

4,00,000

By Net Profit for the year

8,50,000

3) Analysis Profit of S Ltd.	Capital profit	Revenue profit
Opening Dr. Balance in Profit & Loss A/c	(4,00,000)	--
Revaluation profit on land	4,00,000	--
Retained Net Profit for the year [8,00,000	2,12,500	6,37,500
+ 50,000]
8,50,000 in Time Ratio
Dividend paid for 6 month	(25,000)	(25,000)
5,00,000 × 20% × 612 = 50,000
Total Minority Int.  15 	1,87,500 (37,500)	6,12,500 (1,22,500)
Belonging to H Ltd.	1,50,000	4,90,000

4) Minority Interest : Share in Equity share capital		1,00,000
Share in capital profit		37,500
Share in Revenue profit		1,22,500
Total		2,60,000
5) Cost of Control :
Cost of investment in S Ltd.		7,00,000
Less : pre-acquisition dividend received		(25,000)
		6,75,000
Less : i) Share in Equity share capital	4,00,000
Ii) Share in Capital profit	1,50,000	(5,50,000)
Goodwill		1,25,000
6) Profit and Loss A/c Balance (H. Ltd.)

Balance as per Balance sheet 3,00,000

Less : Pre-Acquisition dividend wrongly credited (3 month)

(25,000)

Share in	2,75,000
Add : Revenue profit of S Ltd.	4,90,000
Balance carried to Balance sheet	7,65,000

Q14). A Ltd. Acquired 6,000 Equity shares of Rs. 10 each in S Ltd. On March 31, 2011. The summarized Balance Sheet of H Ltd. And S Ltd. As on that date were :

Liabilities	H Ltd. Rs.	S Ltd. Rs.	Assets	H Ltd. Rs.	S Ltd. Rs.
Capital :			Fixed Assets	2,53,000	1,28,000
Authorised	4,00,000	1,20,000	Investment in S Ltd. At cost	1,00,000	-
			6,000 shares of Rs. 10
			Each
Issued and paid up :			Stock in hand	30,000	10,000
30,000 shares of Rs. 10	3,00,000	-	Bills Receivable (including	2,000	-
Each			Rs. 1,000 from S Ltd.)
8,000 shares of Rs. 10	-	80,000	Debtors and Balance at	20,000	17,000
Each			Bank
Capital Reserve	-	34,000
General Reserve	20,000	10,000
Profit and Loss A/c	50,000	10,000
Bills payable (including	-	3,500
Rs. 1,000 to H Ltd.)
Creditors	35,000	17,500
	4,05,000	1,55,000		4,05,000	1,55,000

On 31-03-2011, S. Ltd. Proposes to utilize part of its Capital Reserve to make a Bonus issue of share for every four shares held.

You are required to prepare the Consolidated Balance Sheet as on 31-03-2011 and show therein how you figures are made up.

A15). Consolidated Balance Sheet of H Ltd. And its Subsidiary S Ltd. As at 31st March 2011

Liabilities	Rs.	Rs.	Assets	Rs.	Rs.
Share Capital :			Fixed Assets (Net)
Equity Share Capital		3,00,000	Other Fixed Assets
			H Ltd.	2,53,000
			S Ltd.	1,28,000	3,81,000
30,000 shares of Rs. 10			Current Assets, Loans &
Each fully paid			Advances
Reserves & Surplus			Stock
			H Ltd.	30,000
			S Ltd.	10,000	40,000
General Reserve	20,000		Debtors
			H Ltd.	20,000
			S Ltd.	17,000	37,000
Consolidated P & L A/c	50,000		Bills Receivable H Ltd.	2,000
Capital Reserve			Less : Mutual Dues	(1,000)	1,000
(on Consolidation)	500	70,500
Minority interest		33,500
Creditors
H Ltd.	35,000
S Ltd.	17,500	52,500
Bills Payable S Ltd.	3,500
Less : Mutual dues	(1,000)	2,500
		4,59,000			4,59,000

Working Notes :

Proportion of Holding

Shares held by H (Original + Bonus) = 7,500 / 10,000 = ¾ Shares held by Minority [Original + Bonus] = 2500/10,000 = ¼ acquisition is on last day of year hence there is no post acquisition, so there is no revenue profit.

2. Analysis of Profits Capital Profits

Profit & Loss A/c on Date of Acquisition Reserves on Date of Acquisition Revenue Reserves	10,000 10,000
Capital Reserves	34,000	54,000
Profit during the year		54,000
Less: Bonus from CP (to be declared)		(20,000)
Total Capital Profit		34,000
Minority Interest [¼]		8,500
Holding Co. [3/4]		25,500

3. Cost of Control Cost of investment of H		1,00,000
Share in share capital	75,000
Share of capital profits	25,500
		(1,00,500)
Capital Reserve 4. Minority Interest Share in share capital		500 25,000
Share of Capital Profits		8,500
Total		33,500

Q15). The following are the summarized Balance Sheets of X Ltd. And Y Ltd. As at 31st December 2010.

Liabilities	X Ltd. Rs.	Y Ltd. Rs.	Assets	X Ltd. Rs.	Y Ltd. Rs.
Authorized, issued and paid			Fixed Assets	10,15,000	8,09,000
Up capital :
Equity shares of Rs. 10 each	8,00,000	4,00,000	Investments :
12% Preference shares of
Rs. 10 each		2,00,000
General Reserve	3,60,000	2,00,000	In Y Ltd. 30,000 Equity	4,50,000	-
			Shares
			15,000 Preference Shares	1,80,000	-
Profit & Loss Account Balance	2,40,000	1,40,000	250-10% Debentures
			(at face value)	25,000	-
10% Debenture of Rs. 100	-	50,000	Current Assets	2,60,000	4,80,000
Each
Proposed Dividends :
- on Equity shares	1,20,000	60,000
- on Preference shares	-	24,000
Debenture interest acrued	-	5,000
Trade creditors	4,10,000	2,10,000
	19,30,000	12,89,000		19,30,000	12,89,000

1) X Ltd. Acquired its interest in Y Ltd. On 1st January, 2010 when the balance to the General Reserve Account of Y Ltd. Was Rs. 1,80,000.

2) The Balance to the Profit & Loss Account of Y Ltd. As on 31st December, 2010 was arrived at as under :

Rs. Rs.

Balance on 1-1-2010 40,000

Current Profit (including dividends) 2,04,000 2,44,000

Deduct : Transfer to General Reserve 20,000

Proposed Dividends 84,000 (1,04,000) Balance as on 31-12-2010 1,40,000

3) Balance to the Profit and Loss Account of Y Ltd. As on 1-1- 2010 was after providing for dividends on Preference shares and 10% dividends on Equity shares for the year ended 31st December, 2009, these dividends were paid in cash by Y Ltd. In May 2010.

4) No entries have been made in the books of X Ltd. For debenture interest due or for proposed dividends of Y Ltd. For the year ended 31-12-2010.

5) Mutual indebtedness of Rs. 24,000 is reflected in the balances shown in the Balance Sheets.

6) Y Ltd. In October 2010 issued fully paid up bonus shares in the ratio of one share for every four shares held – by utilising its general reserve. This was not recorded in the books of both the companies.

7) Dividend paid by Y Ltd. For 2009 was credited to profit & Loss A/c of X Ltd. Instead of crediting to investments in Subsidiary Company A/c.

8) X Ltd. Acquired both the Equity shares and Preference shares of Y Ltd. On 1st January, 2010.

From the above information, you are required to prepare the Consolidated Balance Sheet of X Ltd. And its subsidiary Y Ltd. As at 31st December, 2010. All workings are to form part of your answer.

A16). Consolidated Balance Sheet of X Ltd. And its Subsidiary Y Ltd. As at 31st December 2010.

Liabilities	Rs.	Rs.	Assets	Rs.	Rs.
Share Capital
Equity share capital 80,000 Equity Shares of Rs. 10 each, fully paid		8,00,000
Reserves & Surplus			Other Fixed Assets	10,15,000
General Reserve	3,60,000			8,09,000	18,24,000
Consolidated P & L A/c	3,47,500
Capital Reserve
(on consolidation)	33,000	7,40,500
Minority Interest		2,56,000	Investments Current Assets, Loans & Advances Other Current Assets / Adv. Less : Mutual Dues		NIL
Secured Loans
Debentures Y Ltd.	50,000
Less : Mutual Dues	(25,000)	25,000		2,60,000
Interest O/S on Debentures Y Ltd.	5,000			4,80,000 7,40,000
Less : Mutual Dues	(2,500)	2,500		(24,000)	7,16,000
Current Liabilities & Provisions			Misc. Exp. Not W/O		NIL
Creditors
X Ltd.	4,10,000
Y Ltd.	2,10,000
	6,20,000
Less : Mutual Dues	(24,000)	5,96,000
Proposed Dividends X Ltd.		1,20,000
Total		25,40,000	Total		25,40,000

Working Notes : 1) Holding proportion
Before Bonus	X Ltd 30,000	Minority 1,00,000	Total = 40,000
Bonus	7,500	2,500	= 10,000
After Bonus	37,500	12,500	= 50,000

2) The acquisition is one the first day of the year, hence all profits during the year are Revenue / previous years profit post

3) Analysis of Profits	Capital Profits Revenue Profits
Reserve (opening)	1,80,000
Profit & Loss A/c (Opening)	40,000
Undistributed Profits (opening)	2,20,000
Less : Bonus from capital profit	1,00,000
Undistributed Profits (On Date of Acquisition)			1,20,000
Profit for the year [2,04,000 – 84,000]					1,20,000
Basic CP/RP			1,20,000		1,20,000
Minority Interest			30,000		30,000
Holding Co.			90,000		90,000
4) Cost of Control
Cost of investment of X Ltd.
Equity			4,50,000
Preference			1,80,000		6,30,000
Less : Dividend declared out of capital profit
Equity			18,000
Preference			30,000		48,000
Carrying Amount of investment					5,82,000
Paid up value of shares
Equity (Incl. Bonus) share capital		3,75,000
Preference Share capital		1,50,000	5,25,000
Share of capital profits			90,000
Share of carrying Amount of Equity of Y Ltd.					6,15,000
					(33,000)
5) Minority Interest
Share in Share Capital					1,25,000
Equity (Incl. Bonus)					50,000
Preference					30,000
Share of Capital Profits					30,000
Share of Revenue Profits
Share of Proposed Dividends			15,000
Equity (Incl. Bonus)			6,000		21,000
Preference
Total Minority Interest					2,56,000

6) Consolidated P & L A/c Profit & Loss of X Ltd.				2,40,000
Add : Share of Revenue Profit				90,000
Share of proposed dividend				45,000
Equity (Incl. Bonus)				18,000
Preference				2,500
Interest due on debentures in Y Ltd. Held by X				3,95,500
Less : Dividend out of capital profit				(48,000)
Credited to Profit and Loss A/c instead of investment
Balance carried to Balance sheet				3,47,500

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