Sum -7

From the Balance sheets given below, prepare a consolidated balance sheets of M Itd and its subsidiary C ltd. The shares were acquired on 1.1.17

Balance sheet as on 30th June 2017 Liabilities M Ltd C Ltd Assets M Ltd C Ltd Share capital of Rs. 10 each 1,50,000 30,000 Land and buildings 1,20,000 20,000 General reserves 20,000 Nil Machinery 20,000 20,000 Profit and loss A/c on 1.7.16 Nil 4,500 Current assets 58,000 10,000 Profit for the year 30,000 6,000 Investment 2,000 27,000 Nil Creditors 25,000 9,500 shares in C ltd         2.25,000 50,000     2,25,000 50,000

Solution                                 

Consolidated Balance Sheet (As Per Revised Schedule VI)

Equity and Liabilities			No	Amount
i. Shareholders' Funds
Share capital			1	1,50,000
Reserves and Surplus			2	52,000
ii. Minority Interest (Ref. Note. 5)			---	13,500
iii. Non Current Liabilities
Long term borrowings			3	Nil
iv.Current Liabilities
Short term borrowings			4	Nil
Trade payables			5	34,500
Short term provisions			6	Nil
Other current liabilities			7	Nil
	Total (i + ii + iii + iv)			2,50,000
Assets			No	Amount
i.Non-Current Assets
Tangible assets			8	1,80,000
Intangible assets			9	2,000
Non-current investments			10	Nil
ii. Current Assets
Trade receivables			11	Nil
Short term loans & advances			12	Nil
Other current assets			13	68,000
Closing stock			14	Nil
Cash and cash equivalent			15	Nil
		Total (i + ii)		2,50,000

Notes to Accounts on Balance Sheet No Particulars Amount 1 Share Capital at Rs.10 each 1,50,000 2 Reserves And Surplus:         General reserves 20,000   Profit for the year 30,000   Revenue profits of M Ltd 2,000   Total 52,000 3 Long Term Borrowing     Nil 4 Short Term Borrowing     Nil 5 Trade payables: Creditors (25000 + 9, 500)   34,500 6 Short term provisions     Nil 7 Other current liabilities     Nil 8 Tangible Assets     Land and buildings (1, 20000 + 20000) 1,40,000   Machinery (20000 + 20000) 40,000   Total 1,80,000 9 Intangible Assets: Goodwill     2,000 10 Non-Current Investments     Nil 11 Trade Receivables     Nil 12 Short Term Loans & Advances     Nil 13 Other Current Assets: Current assets (58000 + 10000) 68,000 14 Closing Stock Or Inventory     Nil 15 Cash and cash equivalent     Nil

 Working Note

1 . Calculation of Share ratio:
Number of shares in C Ltd:
= Share capital amount in C Ltd / face value of equity shares
= 30,000/Rs.10 = 3,000 shares
Holding company: Minority Interest =2,000shares:1,000shares = 2:1
2. Calculation of Time ratio
Pre acquisition period: Post acquisition period
1.7.16 to 1.1.17: 1.1.17 to 30.6.2017 (Revenue profits period)
6 months : 6 months
3. Calculation of Revenue profits
Profits during the current year for post acqn. Period		(6,000 × 6/12)	=3000
Total revenue profits			=3000
M Ltd (transfer to Note No: 2)		Rs. 3,000* 2/3	= Rs. 2,000
Minority interest		Rs. 3,000 * 1/3	=Rs. 1,000
4. Calculation of capital profits
P&L A/c and Profit for the year of C ltd given in B/S liability side		(4,500 +6,000)	= 10,500
Less: Total revenue profits		= 3,000
Total capital profits		= 7,500
M Ltd	Rs. 7,500 × 2/3	= Rs. 5,000
Minority interest	Rs. 7,500 x 1/3	= Rs. 2,500
5. Minority interest
Nominal paid up share capital amount (1,000 shares x 10)		= 10,000
Revenue profits		= 1,000
Capital profits		= 2,500
Total minority interest (transfer to liabilities side)		= 13,500
6. Cost of Control: (M Ltd)
Nominal paid up share capital amount	(2,000×10)	= 20,000
Capital profits		= 5,000	=25,000
Less: Investment of shares in C ltd			=27,000
(-) Goodwill (transfer to Note No: 9)			=2,000