1. Advanced Financial Accounting
Lecture-41

2. 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

3. Question
The parent Co. (P) acquired 800 of the 1,000 Rs. 1 ordinary shares of subsidiary Co. (S) on 1st Jan 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

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

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

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

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

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

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

10. 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

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

12. 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

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

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

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

16. 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 = = 1,000

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

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

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

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

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

22. 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

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

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

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

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

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

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

29. Solution Consolidated Balance-sheet As at 31st Dec. 2008
Fixed assets (1, ) 1,600
Current assets ( )
Total assets ,100
Share capital ,200
Reserves
Minority interest
Current liabilities
Total liabilities & equities ,100