Advanced Financial Accounting Lecture-41

Question Balance Sheet As on 31st December 2008 P (Rs) S (Rs) Fixed assets 3,500 1,450 Investment in S 2,180 --- Current assets 2,700 1,250 Total assets 8,830 Share capital 5,000 1,000 Reserves 3,380 1,700 Total Data will appear first fixed assets Then 1000 will shown with highlighter Then 400 with highlighter

Question The parent Co. (P) acquired 800 of the 1,000 Rs. 1 ordinary shares of subsidiary Co. (S) on 1st Jan. 2008 for Rs. 2,500. S Co. balance sheet at 31st December 2007 showed a dividend payable of Rs. 400 and reserves Rs. 400 and reserves of Rs. 1,200. Goodwill impairment loss Rs. 105. Required: Prepare consolidated Balance sheet as on 31 Dec. 2008.

Working-1 Holding % = 800/100 x100 = 80% Minority % = 100% - 80% = 20%

Working-2 Pre-acquisition Post-acquisition Share capital 1,000 --- Reserves 1,200 500 Total 2,200

Working-3 Group Reserve All reserves of P Co. 3,380 Add Post acquisition of S Co. 400 3,780 Less Impairment loss 105 3,675

Working-4 Minority Interest Total owner’s equity of Subsidiary Co. x Minority interest 2,700 x 20% = 540

Working-5 Goodwill Cost of investment 2,500 Less Dividend pre-acquisition 320 2,180 Less Pre-acquisition reserve of owner’s equity to the extent of holding % (2,280 x 80%) 1,760 Goodwill 420 Less Goodwill impairment loss 105 315

Working Cost of investment 2,500 Less Pre-acquisition dividend (400 x 80%) 320 2,180

Working Investment A/c Dividend 320 Balance 2,180 Opening balance 2,500 Opening balance 2,500 Opening balance 2,500 2,500 2,500

Solution Consolidated Balance-sheet As at 31st Dec. 2008 Fixed assets 4,950 Goodwill 315 Current assets 3,950 Total assets 9,215 Share capital 5,000 Reserves 3,675 Minority interest 540 Total liabilities & equities 9,215

Question Balance Sheet As on 31st December 2008 P (Rs) S (Rs) Fixed assets 5,500 4,500 Investment in S 4,000 --- Current assets 2,500 1,500 Total assets 12,000 6,000 Share capital 8,000 3,000 Reserves 2,000 Current liabilities 1,000 Total liabilities & Equities Data will appear first fixed assets Then 1000 will shown with highlighter Then 400 with highlighter

Question The parent Co. (P) acquired 80% shares of the subsidiary Co. (S) on 1 Jan. 2008 when the reserves of the company were worth Rs. 1200 on 31st Dec. 2007. Assume that all profits of S accrue evenly throughout the year. Required: Prepare consolidated Balance sheet as on 31 Dec. 2008

Working Profit (Pre-acquisition) = 800 x 9/12 = 600 Profit (Post-acquisition) = 800 x 3/12 = 200

Working-1 Holding % = 80% Minority % = 20%

Working-2 Minority interest = 960 + 40 = 1,000 Pre-acquisition Post-acquisition Share capital 3,000 --- Reserves 1,200 Profit for the year 600 200 Total 4,800 Holding (80%) 3,840 160 Minority (20%) 960 40 Minority interest = 960 + 40 = 1,000

Working-2 Minority interest Total owner’s equity of Subsidiary Co. x Minority interest 5,000 x 20% = 1,000

Working-3 Goodwill Cost of investment 4,000 Less Pre-acquisition equity 3,840 Goodwill 160

Working-34 Group Reserves All reserves of P Co. 2,500 Add Pos- acquisition reserves of S Co. 160 2,660

Solution Consolidated Balance-sheet As at 31st Dec. 2008 Fixed assets (5,500 + 4,500) 10,000 Goodwill 160 Current assets (2,500 + 1,500) 4,000 Total assets 14,160 Share capital 8,000 Reserves 2,260 Minority interest 1,000 Total liabilities & equities 14,160

Solution Consolidated Balance-sheet As at 31st Dec. 2008 Fixed assets (5,500 + 4,500) 10,000 Goodwill 160 Current assets (2,500 + 1,500) 4,000 Total assets 14,160 Share capital 8,000 Reserves 2,260 Minority interest 1,000 Total liabilities & equities 14,160

Question Balance Sheet As on 31st December 2008 P (Rs) S (Rs) Fixed assets 1,000 600 Investment in S 400 --- Current assets 300 200 Total assets 1,700 800 Share capital 1,200 500 Reserves Current liabilities 100 Total liabilities & equities Data will appear first fixed assets Then 1000 will shown with highlighter Then 400 with highlighter

Question The parent Co. (P) acquired 80% shares of the subsidiary Co. (S) on 1 Jan. 2000 8when the reserves of the company were worth Rs. 120. Required: Prepare consolidated Balance sheet as on 31 Dec. 2008

Working-1 Holding % = 80% Minority % = 20%

Working-2 Pre-acquisition Post-acquisition Share capital 500 --- Reserves 120 80 Total 620

Working-3 Goodwill Cost of investment 400 Less Pre-acquisition (620x80%) 496 Negative goodwill 96

Working-4 Group Reserve All reserves of P Co. 400 Add Post acquisition of S Co. up-to Extent of holding % (80x80%) 64 464 Add Negative goodwill 96 560

Working-5 Minority Interest Total owner’s equity of Subsidiary Co. x Minority interest 700 x 20% = 140

Solution Consolidated Balance-sheet As at 31st Dec. 2008 Fixed assets (1,000 + 600) 1,600 Current assets (300 + 200) 500 Total assets 2,100 Share capital 1,200 Reserves 560 Minority interest 140 Current liabilities 200 Total liabilities & equities 2,100