undefined | unit 1 holding company accounts

CACC2

Unit 1

HOLDING COMPANY ACCOUNTS

Q1) (Cost of Control / Goodwill)

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
Total	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.

Q2) (Minority Interest)

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		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

Q3) 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: Unrealized 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

Q4) 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

Q5) 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 months		5,000
On 1,50,000 for 6 months		7,500
		12,500
Less: Already provided		10,000
Additional depn to be provided		2,500

Sign Up