Advanced Accounting (Advanced Accounts) | CRACKER

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CHAPTER-WISE COMPARISON WITH STUDY MATERIAL

Chapter Head

ICAI Study Material Chapter

Chapter 1: Introduction to Accounting Standards

Chapter 1

Chapter 2: Framework for Preparation and Presentation of Financial Statements

Chapter 2

Chapter 3: Applicability of Accounting Standards

Chapter 3

Chapter 4: Presentation & Disclosures Based Accounting Standards

Chapter 4

Unit 1: Accounting Standard 1 Disclosure of Accounting Policies

Chapter 4, Unit 1

Unit 2: Accounting Standard 3 Cash Flow Statement

Chapter 4, Unit 2

Unit 3: Accounting Standard 17 Segment Reporting

Chapter 4, Unit 3

Unit 4: Accounting Standard 18 Related Party Disclosures

Chapter 4, Unit 4

Unit 5: Accounting Standard 20 Earnings Per Share

Chapter 4, Unit 5

Unit 6: Accounting Standard 24 Discontinuing Operations

Chapter 4, Unit 6

Unit 7: Accounting Standard 25 Interim Financial Reporting

Chapter 4, Unit 7

Chapter 5: Assets Based Accounting Standards

Chapter 5

Unit 1: Accounting Standard 2 Valuation of Inventory

Chapter 5, Unit 1

Unit 2: Accounting Standard 10 Property, Plant and Equipment

Chapter 5, Unit 2

Unit 3: Accounting Standard 13 Accounting for Investments

Chapter 5, Unit 3

Unit 4: Accounting Standard 16 Borrowing Costs

Chapter 5, Unit 4

Unit 5: Accounting Standard 19 Leases

Chapter 5, Unit 5

Unit 6: Accounting Standard 26 Intangible Assets

Chapter 5, Unit 6

Unit 7: Accounting Standard 28 Impairment of Assets

Chapter 5, Unit 7

Chapter 6: Liabilities Based Accounting Standards

Chapter 6

Unit 1: Accounting Standard 15 Employee Benefits

Chapter 6, Unit 1

Unit 2: AS 29 (Revised) Provisions, Contingent Liabilities and Contingent Assets

Chapter 6, Unit 2

I-5

I-6

CHAPTER-WISE COMPARISON WITH STUDY MATERIAL

Chapter Head

ICAI Study Material Chapter

Chapter 7: Accounting Standards Based on Items Impacting Financial Statement

Chapter 7

Unit 1: Accounting Standard 4 Contingencies and Events occurring after the Balance Sheet Date

Chapter 7, Unit 1

Unit 2: Accounting Standard 5 Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies

Chapter 7, Unit 2

Unit 3: Accounting Standard 11 The Effects of Changes in Foreign Exchange Rates

Chapter 7, Unit 3

Unit 4: Accounting Standard 22 Accounting for Taxes on Income

Chapter 7, Unit 4

Chapter 8: Revenue Based Accounting Standards

Chapter 8

Unit 1: Accounting Standard 7 Construction Contracts

Chapter 8, Unit 1

Unit 2: Accounting Standard 9 Revenue Recognition

Chapter 8, Unit 2

Chapter 9: Other Accounting Standards

Chapter 9

Unit 1: Accounting Standard 12 Accounting for Government Grants

Chapter 9, Unit 1

Unit 2: Accounting Standard 14 Accounting for Amalgamations

Chapter 9, Unit 2

Chapter 10: Accounting Standards for Consolidated Financial Statement

Chapter 10

Unit 1: Accounting Standard 21 Consolidated Financial Statements

Chapter 10, Unit 1

Unit 2: Accounting Standard 23 Accounting for Investments in Associates in Consolidated Financial Statements

Chapter 10, Unit 2

Unit 3: Accounting Standard 27 Financial Reporting of Interests in Joint Ventures

Chapter 10, Unit 3

Chapter 11: Financial Statements of Companies

Chapter 11

Unit 1: Preparation of Financial Statements

Chapter 11, Unit 1

Unit 2: Cash Flow Statement

Chapter 11, Unit 2

Chapter 12: Buyback of Securities

Chapter 12

Chapter 13: Amalgamation of Companies

Chapter 13

Chapter 14: Accounting for Reconstruction of Companies

Chapter 14

Chapter 15: Accounting for Branches including Foreign Branches

Chapter 15

Contents PAGE l Chapter-wise comparison with study material

I-5

Chapter 1 u

Introduction to Accounting Standards

1.1

Chapter 2 u

Framework for Preparation & Presentation of FS

2.1

Chapter 3 u

Applicability of Accounting Standards

3.1

Chapter 4 u

Presentation & Disclosures Based Accounting Standards

4.1

Chapter 5 u

Asset Based Accounting Standards

5.1

Chapter 6 u

Liabilities Based Accounting Standards

6.1

Chapter 7 u

Accounting Standards Based on Items Impacting Financial Statements

7.1

Chapter 8 u

Revenue Based Accounting Standards

8.1

Chapter 9 u

Other Accounting Standards

9.1

Chapter 10 u

Consolidated Financial Statements

I-7

10.1

I-8

CONTENTS PAGE

Chapter 11 u

Financial Statement of Companies

11.1

Chapter 12 u

Buy-Back & Equity Shares with Differential Rights

12.1

Chapter 13 u

Amalgamation

13.1

Chapter 14 u

Internal Reconstruction

14.1

Chapter 15 u

Branch Accounting

15.1

10 CHAPTER

CONSOLIDATED FINANCIAL STATEMENTS

SECTION I : CASE STUDIES ON RULES FOR PREPARING CONSOLIDATED BALANCE SHEET Q.1 A Ltd. holds 75% of the equity capital and voting power in B Ltd. A Ltd. purchases inventories costing ` 150 lacs from B Ltd. at a price of ` 200 lacs. The entire inventories remain unsold with A Ltd. at the financial year end i.e. 31st March, 2019.

Suggest the accounting treatment for this transaction in the consolidated financial statements of A Ltd. giving reference of the relevant accounting standard.

(RTP Nov. 2020) Ans. What AS-21 states?

As per para provisions of AS-21, intragroup balances and intragroup transactions and resulting unrealized profits should be eliminated in full. Unrealized losses resulting from intragroup transactions should also be eliminated unless cost cannot be recovered.

Interpretation: 1. Intragroup balances and intragroup transactions, including sales, expenses and dividends, are eliminated in full.

2. Unrealized profits resulting from intragroup transactions that are included in the carrying amount of assets, such as inventory and fixed assets, are eliminated in full.

3. Unrealized losses resulting from intragroup transactions that are deducted in arriving at the carrying amount of assets are also eliminated unless cost cannot be recovered.

Analysis: One also needs to see whether the intragroup transaction is “upstream” or “down-stream”.

10.1

10.2

CONSOLIDATED FINANCIAL STATEMENTS

Upstream transaction: Upstream transaction is a transaction in which the subsidiary company sells goods to holding company. While in the downstream transaction, holding company is the seller and subsidiary company is the buyer.

In the case of upstream transaction, since the goods are sold by the subsidiary to holding company; profit is made by the subsidiary company, which is ultimately shared by the holding company and the minority shareholders. In such a transaction, if some goods remain unsold at the balance sheet date, the unrealized profit on such goods should be eliminated from minority interest as well as from consolidated profit on the basis of their share-holding besides deducting the same from unsold inventory.

Downstream transaction: In the case of downstream transaction, the whole profit is earned by the holding company, therefore, whole unrealized profit should be adjusted from unsold inventory and consolidated profit and loss account only irrespective of the percentage of the shares held by the parent.

Conclusion: The case given in the question is the case of upstream transaction.

In the consolidated profit and loss account for the year ended on 31st March, 2019, entire transaction of sale and purchase of ` 200 lacs each, would be eliminated by reducing both sales and purchases (cost of sales).

Further, the unrealized profits of ` 50 lacs (i.e. ` 200 lacs – ` 150 lacs), would be eliminated in the consolidated financial statements for financial year ended on 31st March, 2019, by reducing the value of closing inventories by ` 50 lacs as of 31st March, 2019.

In the consolidated balance sheet as of 31st March, 2019, A Ltd.’s share of profit from B Ltd. will be reduced by ` 37.50 lacs (being 75% of ` 50 lacs) and the minority’s share of the profits of B Ltd. would be reduced by ` 12.50 lacs (being 25% of ` 50 lacs).

Q.2 A Ltd. holds 80% of the equity capital and voting power in B Ltd. A Ltd. sells inventories costing ` 180 lacs to B Ltd. at a price of ` 200 lacs.

The entire inventories remain unsold with B Ltd. at the financial year end i.e. 31st March, 2020.

What will be the accounting treatment for this transaction in the consolidated financial statements of A Ltd.?

(MTP Oct. 2020) Ans. Analysis and Conclusion: The given transaction is a case of downstream transaction.

In the consolidated profit and loss account for the year ended on 31st March, 2020, entire transaction of sale and purchase of ` 200 lacs each, would be eliminated by reducing both sales and purchases (cost of sales). Further, the unrealized profits of ` 20 lacs (i.e. ` 200 lacs – ` 180 lacs), would be eliminated

10.3

CONSOLIDATED FINANCIAL STATEMENTS

from the consolidated financial statements for financial year ended 31st March, 2020, by reducing the consolidated profits/ increasing the consolidated losses, and reducing the value of closing inventories as of 31st March, 2020.

Q.3 From the following data, determine Minority Interest on the date of acquisition and on the date of consolidation in each case: Case

Subsidiary Company

%of Share Owned

Cost

Date of Acquisition

Consolidation date

01-01-2019

31-12-2019

Share Capital `

Profit and Loss A/c

Share Capital

Profit and Loss A/c

`

`

`

Case A

X

90%

2,00,000 1,50,000

75,000

1,50,000

85,000

Case B

Y

75%

1,75,000 1,40,000

60,000

1,40,000

20,000

Case C

Z

70%

98,000

40,000

20,000

40,000

20,000

Case D

M

95%

75,000

60,000

35,000

60,000

55,000

Case E

N

100%

1,00,000

40,000

40,000

40,000

65,000

(RTP November 2020) Ans. Minority Interest = Equity attributable to minorities Where, Equity is the residual interest in the assets of an enterprise after deducting all its liabilities.

In this case, it should be equal to Share Capital + Profit & Loss A/c Thus, let’s assume the following; A = Share capital on 1.1.2019 B = Profit & loss account balance on 1.1.2019 C = Share capital on 31.12.2019 D = Profit & loss account balance on 31.12.2019 Case

Minority % Shares Owned

Minority interest as at the date of acquisition

Minority interest as at the date of consolidation

[E]

[E] × [A + B]

[E] × [C + D]

Case A

10 %

22,500

23,500

Case B

25 %

50,000

40,000

Case C

30 %

18,000

18,000

Case D

5%

4,750

5,750

Case E

NIL

NIL

NIL

10.4

CONSOLIDATED FINANCIAL STATEMENTS

Q.4 Hemant Ltd. purchased 80% shares of Power Ltd. on 1st January, 2019 for ` 2,10,000. The issued capital of Power Ltd., on 1st January, 2019 was ` 1,50,000 and the balance in the Profit & Loss Account was ` 90,000.

During the year ended on 31st December, 2019, Power Ltd. earned a profit of ` 30,000 and at year end, declared and paid a dividend of ` 22,500.

What is the amount of minority interest as on 1st January, 2019 and 31st December, 2019?

Also compute goodwill/ capital reserve at the date of acquisition.

(MTP Oct. 2020) Ans. Total dividend paid is ` 22,500 (out of post-acquisition profits), hence dividend received by Hemant will be credited to P & L account.

Hemant Ltd.’s share of dividend = ` 22,500 × 80% = ` 18,000 Computation of Goodwill on consolidation (at the date of acquisition): Particulars

`

Cost of shares

` 2,10,000

Less: Face value of capital i.e. 80% of capital

1,20,000

Add: Share of capital profit [90,000 × 80 %]

72,000

Goodwill

(1,92,000) 18,000

Computation of Minority interest: Particulars

`

`

On1st January, 2019: 20% of ` 2,40,000 [1,50,000 + 90,000]

48,000

On 31st December, 2019:

49,500

20% of ` 2,47,500 [1,50,000 + 90,000 + 30,000 – 22,500] Q.5 King Ltd. acquires 70% of equity shares of Queen Ltd. as on 31st March, 2020 at a cost of ` 140 lakhs. The following information is available from the balance sheet of Queen Ltd. as on 31st March, 2020: Particulars

` in lakhs

Property, plant and equipment

240

Investments

110

Current Assets

140

Loans & Advances

30

15% Debentures

180

Current Liabilities

100

10.5

CONSOLIDATED FINANCIAL STATEMENTS

The following revaluations have been agreed upon (not included in the above figures): Property, plant and equipment Up by 20% Investments

Down by 10%

Queen Ltd. declared and paid dividend @ 20% on its equity shares as on 31st March, 2020 (Face value - ` 10 per share). King Ltd. purchased the shares of Queen Ltd. @ ` 20 per share.

Calculate the amount of goodwill/capital reserve on acquisition of shares of Queen Ltd. (MTP Oct. 2020) Ans. Computation of Revalued Net Assets of Queen Ltd. as on 31st March, 2020 Particulars

` in lakhs

` in lakhs

PPE [240 × 120%]

288

Investments [110 × 90%]

99

Current Assets

140

Loans and Advances

30

Total Assets after revaluation

557

Less: 15% Debentures

180.0

Current Liabilities

100.0

(280)

Equity / Net Worth

277

King Ltd.’s share of net assets (70% of 277)

193.9

Computation of Goodwill on consolidation (at the date of acquisition): Particulars Cost of shares[` 140 lakhs – ` 14 lakhs (pre-acquisition dividend)]

` 126 lakhs

Less: King Ltd.’s share of net assets (193.9 lakhs) Capital Reserve

67.9 lakhs

Working Note: Computation of Pre-acquisition dividend: Purchase Price of each share = ` 20 Number of shares purchased = 7 lakhs [140 lakhs /` 20] Dividend @ 20 % i.e. ` 2 per share Thus, Total dividend = ` 14 lakhs (7 lakhs × 2)

10.6

CONSOLIDATED FINANCIAL STATEMENTS

Since dividend received is for pre-acquisition period, it has been reduced from the cost of investment in the subsidiary company.

Q.6 Long Limited acquired 60% stake in Short Limited for a consideration of ` 112 lakhs. On the date of acquisition Short Limited’s Equity Share Capital was ` 100 lakhs, Revenue Reserve was ` 40 lakhs and balance in Profit & Loss Account was ` 30 lakhs.

From the above information you are required to calculate Goodwill/ Capital Reserve in the following situations: (i) On consolidation of Balance Sheet. (ii) If Long Limited showed the investment in subsidiary at a carrying amount of ` 104 lakhs. (iii) If the consideration paid for acquiring the 60% stake was ` 92 lakhs.

(July 2021, 5 Marks) Ans. Particulars

`

60% of the Equity Share Capital ` 100 Lakhs

60

60% of Accumulated Reserve ` 70 Lakhs (40+30) Lakhs

42

Book value of shares of Short Ltd.

102

Computation of Goodwill/Capital Reserve: S. No. (i)

Particulars

Workings

On consolidation of Long Ltd. paid a positive differential of ` 10 Balance Sheet Lakhs (112 - 102).

This differential ` 10 Lakhs is called goodwill and is shown in the balance sheet under the head intangibles.

(ii)

If Long Ltd. showed Then the goodwill will be ` 2 Lakhs. the investment in (104 - 102).

Short Ltd. at carrying amount of ` 104 Lakhs

(iii)

If the consideration Then there would have been capital reserve paid is ` 92 lakhs amounting ` 10 Lakhs (102- 92).

10.7

CONSOLIDATED FINANCIAL STATEMENTS

Q.7 H Ltd. and S Ltd. provide the following information as at 31st March, 2022 : H Ltd. `

S Ltd. `

Property, Plant and Equipment

2,00,000

2,60,000

Investments (14,000 Equity Shares of S Ltd.)

2,52,000

—

Current Assets

1,48,000

1,40,000

Share capital (Fully paid equity shares of ` 10 each)

3,00,000

2,00,000

Profit and loss account

1,00,000

80,000

Trade Payables

2,00,000

1,20,000

Additional information: H Ltd. acquired the shares of S Ltd. on 1st July, 2021 and Balance of profit and loss account of S Ltd. on 1st April, 2021 was ` 60,000.

Prepare consolidated balance sheet of H Ltd. and its subsidiary as at 31st March, 2022.

(May 2023, 15 Marks) Ans. Step 1: Date of Acquisition: 1st July, 2021 Step 2: % of Holding: 70% (14,000/20,000 × 100) Step 3: Analysis of Profit (AoP): Particulars

P&L

Pre-acquisition profits Pre-1st July, 2021

Post-Acquisition profits 1st July, 2021 to 31st March, 2022

60,000 Balance on 1st April, 2021

Increase in P&L i.e., Profit for the year = 80,000 – 60,000 = 20,000 In time ratio – 3 months: 9 months

5,000

15,000

Total

65,000

15,000

Holding company’s share (70%)

45,500

10,500

Minority’s share (30%)

19,500

4,500

10.8

CONSOLIDATED FINANCIAL STATEMENTS

Step 4: Minority Interest: Particulars

Amount

Paid-up share capital (2,00,000 × 30%)

60,000

Pre-acquisition profits (Step 3)

19,500

Post-acquisition profits (Step 3)

4,500

Total

84,000

Step 5: Cost of control: Particulars

Amount

Cost of shares

Amount 2,52,000

Paid-up share capital (2,00,000 × 70%)

1,40,000

Pre-acquisition profits (Step 3)

45,500

Goodwill

1,85,500 66,500

CONSOLIDATED BALANCE SHEET as at 31st March, 2022 Particulars

Note

`

I. EQUITY AND LIABILITIES 1. Shareholders’ Funds (a) Share Capital

3,00,000

(b) Reserve and Surplus [1,00,000 + 10,500]

1,10,500

2. Minority Interest

84,000

3. Current Liabilities Trade Payables

3,20,000

Total

8,14,500

II. ASSETS 1. Non-current Assets PPE (i) Tangible (ii) Intangible [Goodwill]

4,60,000 66,500

2. Current Assets

2,88,000

Total

8,14,500

10.9

CONSOLIDATED FINANCIAL STATEMENTS

Q.8 White Ltd. acquired 2,250 shares of Black Ltd. on 1st October, 2020.

The summarized balance sheets of both the companies as on 31st March, 2021 are given below: Particulars

White Ltd. (`)

Black Ltd. (`)

6,50,000

3,00,000

60,000

30,000

1,50,000

90,000

1,15,000

75,000

-

30,000

9,75,000

5,25,000

5,80,000

3,51,000

Equity and Liabilities: Shareholder’s fund Share capital (Equity shares of ` 100 each fully paid-up) Reserves and Surplus General Reserve Profit and loss account Current Liabilities Trade payables Due to White Ltd. Total Assets: Non-current assets Property, Plant and Equipment Investments Shares in Black Ltd. (2,250 shares)

2,70,000

Current assets Inventories

50,000

Due from Black Ltd.

36,000

Cash and Cash equivalents

39,000

54,000

9,75,000

5,25,000

Total

1,20,000

Other information: (i) During the year, Black Limited fabricated a machine, which is sold to White Ltd. for ` 39,000, the transaction being completed on 30th March,2021. (ii) Cash in transit from Black Ltd. to White Ltd. was ` 6,000 on 31st March,2021. (iii) Profits during the year 2020-21 were earned evenly. (iv) The balances of Reserve and Profit and Loss account as on 1st April,2020 were as follows:

10.10

CONSOLIDATED FINANCIAL STATEMENTS

Reserves

Profit and Loss A/c

`

`

White Ltd.

30,000

15,000 Profit

Black Ltd.

30,000

10,000 Loss

You are required to prepare consolidated Balance Sheet of the group as on 31st March,2021 as per the requirement of Schedule III of the Companies Act, 2013.

(May 2022, 15 Marks) Ans. Working Note – I: Step 1: Date of Acquisition: 1st October, 2020 Step 2: % of Holding: 2,250/3,000 × 100 = 75% Step 3: Analysis of Profit (AOP): Particulars

General Reserve

Increase in General Reserve In time ratio – 6 months:6 months Surplus in P&L

Pre-acquisition profits Pre - 1st October, 2020

Post-Acquisition profits 1st October, 2020 to 31st March, 2021

30,000 Balance on 1st April, 2020 (Still available) Nil

Nil

(10,000) Balance on 1st April, 2020

Increase in Surplus in P&L i.e., Profit for the year = 1,00,000 [90,000 – (10,000)] In time ratio – 6 months:6 months

50,000

50,000

Total

70,000

50,000

Holding company’s share (75%)

52,500

37,500

Minority’s share (25%)

17,500

12,500

Step 4:

10.11

CONSOLIDATED FINANCIAL STATEMENTS

Minority Interest: Particulars

Amount

Paid-up share capital

75,000

Pre-acquisition profits (Step 3)

17,500

Post-acquisition profits (Step 3)

12,500

Total

1,05,000

Step 5: Cost of control: Particulars

Amount

Cost of shares

Amount 2,70,000

Paid-up share capital

2,25,000

Pre-acquisition profits (Step 3)

52,500

Capital Reserve

2,77,500 7,500

Consolidated Balance Sheet as at 31st March, 2021 Particulars

Note No.

(`)

Equity and Liabilities (1) Shareholder’s Funds (a) Share Capital

1

6,50,000

(b) Reserves and Surplus

2

2,55,000

3

1,05,000

4

1,90,000

(2) Minority Interest (3) Current Liabilities (a) Trade Payables Total

12,00,000

Assets (1) Non-current assets (a) Property, Plant and Equipment

5

9,31,000

(a) Inventory

6

1,70,000

(b) Cash & cash equivalent

7

99,000

(2) Current assets

Total

12,00,000

Notes to Accounts: No. 1.

Particulars

`

Share capital 6,500 equity shares of ` 100 each, fully paid-up

6,50,000

Total

6,50,000

10.12

CONSOLIDATED FINANCIAL STATEMENTS

No. 2.

Particulars

`

Reserves and Surplus General Reserves

60,000

Profit and Loss Account

1,50,000

Add: 75% share of Black Ltd.’s post-acquisition profits (Step 3)

37,500

Capital reserve (Step 5)

1,87,500 7,500

Total

2,55,000

3.

Minority interest in Black Ltd. (Step 4)

1,05,000

4.

Trade payables

5.

6.

7.

White Ltd.

1,15,000

Black Ltd.

75,000

1,90,000

Property, plant and equipment White Ltd.

5,80,000

Black Ltd.

3,51,000

9,31,000

Inventory White Ltd.

50,000

Black Ltd.

1,20,000

1,70,000

Cash & cash equivalent White Ltd.

39,000

Black Ltd.

54,000

Cash in transit

6,000

99,000

Q.9 H Ltd. acquired 15,000 shares in S Ltd. for ` 1,55,000 on July 1, 2022.

The Balance sheet of the two companies as on 31st March, 2023 were as follows: H Ltd.

S Ltd.

`

`

9,00,000

2,50,000

1,60,000

40,000

Surplus i.e., Balance in Statement of Profit and Loss

80,000

25,000

Bills Payable

40,000

20,000

Equity and Liabilities : Equity Share Capital (Fully paid shares of ` 10 each) General Reserve

Trade Creditors Total

50,000

30,000

12,30,000

3,65,000

10.13

CONSOLIDATED FINANCIAL STATEMENTS

H Ltd.

S Ltd.

`

`

Machinery

7,00,000

1,50,000

Furniture

1,00,000

70,000

Investment in Equity Shares of S Ltd.

1,55,000

-

Stock-in-Trade

1,00,000

50,000

Trade Debtors

60,000

35,000

Bills Receivable

25,000

20,000

Cash at Bank

90,000

40,000

12,30,000

3,65,000

Assets:

Total

The following additional information is provided to you : (i) General reserve appearing in the Balance Sheet of S Ltd. remained unchanged since 31st March, 2022. (ii) Profit earned by S Ltd. for the year ended on 31st March, 2023 amounted to ` 20,000. (iii) H Ltd. sold goods to S Ltd. costing ` 8,000 for ` 10,000, 25% of these goods remained unsold with S Ltd. on 31st March, 2023. (iv) Creditors of S Ltd. include ` 4000 due to H Ltd. on account of these goods. (v) Out of Bills payable issued by S Ltd. ` 15,000 are those which have been accepted in favour of H Ltd. Out of these, H Ltd. had endorsed by 31st March, 2023, ` 8000 worth of bills receivable in favour of its creditors.

You are required to draw a consolidated Balance Sheet as on 31st March, 2023. (May 2023, 15 Marks) Ans. Step 1: Date of Acquisition: 1st July, 2015 Step 2: % of Holding: 60% i.e. [15,000/25,000 × 100] Step 3: Analysis of Profit (AoP):

10.14

CONSOLIDATED FINANCIAL STATEMENTS

Particulars

General Reserve

Pre-acquisition profits 1st July, 2015

Post-acquisition profits 1st July, 2015 to 31st March, 2016

40,000 Balance on 1st April, 2015

Nil

Nil

Nil

Increase in General Reserve (40,000 – 40,000 = Nil) In time ratio – 3 months : 9 months Surplus in P&L

5,000 (25,000 – 5,000) Balance on 1st April, 2015

Increase in Surplus in P&L i.e., Profit for the year = 20,000

5,000

15,000

Total

50,000

15,000

Holding company’s share (60%)

30,000

9,000

Minority’s share (40%)

20,000

6,000

In time ratio – 3 months : 9 months

Step 4: Minority Interest: Particulars

Amount

Paid-up share capital (2,50,000 × 40%)

1,00,000

Pre-acquisition profits (Step 3)

20,000

Post-acquisition profits (Step 3)

6,000

Total

1,26,000

Step 5: Cost of control: Particulars

Amount

Cost of shares

1,55,000

Paid-up share capital (2,50,000 × 60%)

1,50,000

Pre-acquisition profits (Step 3)

30,000

Capital Reserve

Amount

1,80,000 25,000

10.15

CONSOLIDATED FINANCIAL STATEMENTS

Step 6: Special Issues: 1. Eliminate ` 4,000 from debtors and creditors in the Balance Sheet.

2. Eliminate ` 7,000 from B/R and B/P in the Balance Sheet.

3. Reduce stock reserve i.e., ` 2000 × 25% = 500; from both Surplus in Balance sheet and from stock in the Balance sheet as it is a downstream transaction.

CONSOLIDATED BALANCE SHEET OF H LTD. AND ITS SUBSIDIARY S LTD. as at 31st March, 2016 Particulars I.

Note

`

EQUITY AND LIABILITIES 1. Shareholders’ Funds (a) Share Capital

1

9,00,000

(b) Reserve and Surplus

2

2,73,500

3

1,26,000

4

1,29,000

2. Minority Interest 3. Current Liabilities Trade Payables Total

14,28,500

II. ASSETS 1. Non-current Assets (a) Fixed Assets (i) Tangible

5

10,20,000

2. Current Assets (a) Inventories

6

1,49,500

(b) Trade Receivables

7

1,29,000

(c) Cash and Cash Equivalents

8

1,30,000

Total

14,28,500

Notes to Accounts: Particulars 1.

`

Share Capital Authorised Capital Issued, Subscribed and Fully paid 90,000 Equity Shares of `10 each

2.

9,00,000

Reserve and Surplus Capital Reserve

25,000

10.16

CONSOLIDATED FINANCIAL STATEMENTS

Particulars

`

General Reserve

1,60,000

Surplus, i.e., Balance in Statement of Profit and Loss H Ltd.

90,000

Share in S Ltd.

9,000 89,000

Less: Unrealised Profit

500

88,500 2,73,500

3.

Minority Interest Paid-up equity share capital

1,00,000

Add: Share in pre and post-acquisition profits 4.

6.

1,26,000

Trade Payables Trade creditors

Bills receivable

H Ltd.

50,000

40,000

S Ltd.

30,000

20,000

80,000

60,000

4,000

7,000

76,000

53,000

Less: Intragroup balances 5.

26,000

Tangible Assets

Machinery

Furniture

H Ltd.

7,00,000

1,00,000

S Ltd.

1,50,000

70,000

8,50,000

1,70,000

1,29,000

10,20,000

Inventories Stock-in-trade: H Ltd.

1,00,000

S Ltd.

50,000 1,50,000

Less: Unrealised profit 7.

Trade Receivables

500 Trade debtors

Bills receivable

H Ltd.

60,000

25,000

S Ltd.

35,000

20,000

95,000

45,000

Less: Intragroup balances

4,000

7,000

91,000

38,000

1,49,500

1,29,000

10.17

CONSOLIDATED FINANCIAL STATEMENTS

Particulars 8.

`

Cash and Cash Equivalents H Ltd.

90,000

S Ltd.

40,000 1,30,000

Q.10 [80% Shares + Consolidated Balance Sheet after 1 year] From the following summarized balance sheets of Kedar Ltd. and its subsidiary Vijay Ltd. drawn up at 31st March, 2019, prepare a consolidated balance sheet as at that date, having regard to the following: (i) Reserves and Profit and Loss Account of Vijay Ltd. stood at ` 62,500 and ` 37,500 respectively on the date of acquisition of its 80% shares by Kedar Ltd. on 1st April, 2018. (ii) Machinery (Book-value ` 2,50,000) and Furniture (Book value ` 50,000) of Vijay Ltd. were revalued at ` 3,75,000 and ` 37,500 respectively on 1st April, 2018 for the purpose of fixing the price of its shares. [Rates of depreciation computed on the basis of useful lives: Machinery 10%, Furniture 15%.]

Summarized Balance Sheet of Kedar Ltd. and Vijay Ltd. as on 31st March, 2019 Liabilities

Kedar Ltd.

Vijay Ltd.

`

`

Assets

Equity and Liabilities

Non-current assets

Shareholder’s funds

Fixed assets

Share Capital

Machinery

Shares of ` 100 each 15,00,000 2,50,000 Furniture

Kedar Ltd.

Vijay Ltd.

`

`

7,50,000 2,25,000 3,75,000

42,500

Reserves

5,00,000 1,87,500 Other non-current assets 11,00,000 3,75,000

Profit and Loss A/c

2,50,000

62,500 Non-current Investments

Account Trade Payables

Shares in Vijay Ltd.: 3,75,000 1,42,500 2,000 shares at ` 200 each

4,00,000

26,25,000 6,42,500

26,25,000 6,42,500

(RTP May 2020)

Advanced Accounting (Advanced Accounts) | CRACKER AUTHOR PUBLISHER DATE OF PUBLICATION EDITION ISBN NO NO. OF PAGES BINDING TYPE

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PARVEEN SHARMA, KAPILESHWAR BHALLA TAXMANN 01/01/2024 8TH EDITION 9789357787673 928 PAPERBACK

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Description This book is prepared exclusively for the Intermediate Level of Chartered Accountancy Examination requirement. It covers the questions & detailed answers for the past exams strictly as per the new syllabus of ICAI. The Present Publication is the 8th Edition for the CA Inter | New Syllabus | May 2024 Exam. This book is authored by CA Parveen Sharma & CA Kapileshwar Bhalla, with the following noteworthy features: 

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