Consolidated Financial Statements (CFS) Explained

Consolidated Financial Statements (CFS)
1. CFS is Governed by AS 21, 23, 27

Means merging all Companies together at the end of each year. In other words, when
any Company holds control on another Company, it is known as Holding Company (H
Ltd.) and other Company on which control is established is known as Subsidiary
Company (S Ltd.). 1. 1
So, it is mandatory to consolidate both Company’s financial statements at the end
of each year in the books of H Ltd.
2. How to Become H Ltd.????

In simple words, when a Company acquires more than 50% of ordinary shares of any
Company, it becomes H Ltd.
But, many other ways are also there to become a Holding Company, like, holding
majority in directors/board etc. which is not useful from our exam point of view.
3. Holding Percentage and its Treatment

 Holds less than 25% - Investor (AS 13)
 Holds more than 25% but less than or equal to 50% - Associate Company (AS 23)
 Holds more than 50% - Holding Company (AS 21)
 Holds 100% - Holding Company (AS 21)
If merged, it goes into Liquidation
It becomes the case of Amalgamation (AS 14)
 Two or more persons together holds more than 50% - Jointly Controlled Company
(AS 27)
4. Types of Problems Covered under Holding Company (i.e. under AS 21, 23, and 27)
 Basic type of problems
 When Dividends are given
 When Bonus is given
 When Preference Shares are given
 When Debentures are given
 Subsequent Holding
 Chain Holding
 Cross Holding
 Disbursement of Holding/Reverse Holding
 Consolidation of P&L Account
 Consolidation of Cash Flow Statement
 Different Accounting Policies
 Associate Company (AS 23)
 Jointly Controlled Company (AS 27)
 All together (AS 21, 23 and 27)
 Any other
5. Accounting Treatment
It is done only to merge both Company’s Balance Sheet (H Ltd.’s and S Ltd.’s) in the
books of H Ltd. Each year for each type of above problems.
6. How to solve the problems?

Normally, we have to consolidate balance sheet only i.e. we consolidate total of both
1.2 Company’s assets and liabilities, but for that, the main difficult thing is to calculate
Pre and Post Acquisition Net Worth.
In each type of problem we discuss only on the topic of pre and post. Pre is capital in
nature, E.g. if we purchase an asset then all the cost incurred till the asset is ready to
use are to be capitalised i.e. used for calculation of Capital Reserve or Goodwill.
Post-Acquisition net worth means, after acquisition all Earnings/Reserves and Surplus
are revenue in nature and should be consolidated with H Ltd.’s Reserves and Surplus or
P&L account.
In Short,
Pre means – Net Worth till date of Acquisition
Post means – Net Worth after date of Acquisition
7. Method of Consolidation
Note: As per AS 21, there are 2 methods for consolidation – Direct and Indirect. We
are following direct method, which is more logical.
But if we want to follow indirect method, it is also same as direct except, in case of
change, we transfer pre-acquisition profit in previous subsidiary of next subsidiary also.
While analysis next subsidiary net worth same as we do to for post profit.
BASIC TYPE:
We solve problem in 3 Steps:
Step-1 : Analysis of net worth of S Ltd.
Step-2 : Valuation of Cost of Control (Goodwill/Capital Reserve, Consolidated
Reserves and P&L Account)
Step-3 : Final answer – Consolidated Balance Sheet
Let’s discuss these steps one by one:
 Step-1: Analysis of Net Worth of S Ltd.

Here, we bifurcate entire Net Worth/Net Assets/Shareholder’s Fund/Owner Fund/Capital
Employed/Proprietor’s Fund etc. in Pre and Post.
For that we follow simple rule i.e. Pre till date of Acquisition and Post after date of
Acquisition. If any confusion is there, Note should be made.
Important points for Pre and Post Assumptions:
 Asset Revaluation – Pre
 Depreciation and Revaluation – Post
 Stock Reserve – Post
 Miscellaneous Expenditure – Pre
 Unrealised profit on sale of fixed assets – Post
 Pre-acquisition dividend received by subsidiary from its subsidiaries – Reduce from Cost 1. 3
of Control and Consolidated P&L (Step-2)
Analysis of Net Worth of S Ltd. – Example 80%

Particulars Pre Post
Share Capital XX -
Reserves XX ?
P&L Account ? XX
Revaluation of XX -
Assets
Depreciation (On - XX/(XX)
Revaluation)
Miscellaneous (XX) (?)
Expenses
Total XX XX
TOTAL
Holding (80%)
Minority Interest (20%)
Pre (80%) Post (80%)
Reserves (80%) P&L (80%)
 Step-2: Valuation of Cost of Control (Goodwill/Capital Reserve, Consolidated

Reserves and P&L Account)
Valuation of many things because pre nature will be used to find Goodwill/Capital
Reserve i.e. we compare with Cost of Acquisition and Post will be directly added to the
Consolidated P&L and Reserves as – it is revenue in nature.
Valuation of Cost of Control (Goodwill/Capital Reserve)
Particulars Amount
Cost of Acquisition (From Balance Sheet) XX
(-) Pre-acquisition Net Worth (Step-1) (XX)
Goodwill/Capital Reserve XX/(XX)

1.4
Valuation of Cost of Control (Consolidated Reserves)

Particulars Amount
Reserves of H Ltd. XX
(+) Post-acquisition in S Ltd. (Step-1) (XX)
Total XX/(XX)
Valuation of Cost of Control (Consolidated P&L Account)

Particulars Amount
P&L of H Ltd. XX
(+) Post-acquisition in S Ltd. (Step-1) (XX)
Total XX/(XX)
Minority Interest (Step-2)
 Step-3: Consolidated Balance Sheet of H Ltd. & its Group Companies
It is a main answer where we will consolidate both Company’s Balance Sheet i.e. total
assets and liabilities subject to any common/inter co. transactions (it will get
cancelled). But, remember, for subsidiary companies, only real assets and real liabilities
will be added because internal assets and liabilities i.e. reserves and surplus, capital etc.
have already been considered in Step-2.
Whatever part we have not taken i.e. 20% in our example, It will be shown as minority
interest in liabilities and investment in subsidiary company will be removed and balance
sheet will tally.
The Balance sheet format should be as per Schedule III (Revised Companies Act, 2013).
Note: One common rule i.e. Adjustment should have 2 effect and balance sheet item
should have 1 effect.
Consolidated Balance Sheet Format
Particulars Notes Amount Amount
(CY) (PY)
I EQUITY AND LIABILITIES
1. 5
A SHAREHOLDER’S FUND
(a) Share Capital H
(b) Reserves and Surplus W.N.
B MINORITY INTEREST W.N.
C NON CURRENT LIABILITIES

(a) Secured (Debentures) H+S
(b) Unsecured H+S
D CURRENT LIABILITIES
(a) Creditors H+S
(b) Bills Payable H+S
(c) Outstanding Expenses H+S
Total XX XX
II ASSETS
A NON CURRENT ASSETS

(a) Fixed Assets
i) Tangible Fixed Assets H+S
Ii) Intangible Fixed Assets H+S
(b) Non-Current Investments H+S
B CURRENT ASSETS
(a) Stock in Trade H+S
(b) Sundry Debtors H+S
(c) Bills Receivables H+S
(d) Cash and Bank H+S
Total XX XX
Q-2:
Given: H 80% S Ltd.
DOA: 01.04.2011
DOC: 31.03.2012
Step-1:
Analysis of Net Worth of S Ltd.
1.6
Share capital 1,00,000 -
Reserve 25,000 (75,000 – 25,000) 50,000
P&L 15,000 (25,000 – 15,000) 10,000
Revaluation
Machinery 50,000 -
Furniture (5,000) -
Depreciation on Revaluation
Machinery (10%) - (5,000)
Furniture (15%) (saving) - 750
1,85,000 55,750
2,40,750
Holding 80% Minority Interest 20%

1,92,600 48,150
Pre 80% Post 80%

1,48,000 44,600
Reserve (80% of 50,000) P&L

40,000 [80% of (10,000 – 5,000 +750)]
4,600
WN1:
Cross check of Net Worth
Share Capital 1,00,000
Reserve 75,000
P&L 25,000
Revaluation (Net) ( 50,000 – 5,000 – 5,000 + 750) 40,750
2,40,750
Step-2:
Valuation of:
a) Cost of control:
Cost of Acquisition 1,60,000
(-)Pre Acquisition Net Worth (Step-2) (1,48,000)
Goodwill 12,000
1. 7
b) Consolidated Reserve
Reserve of H Ltd. 2,00,000
(+) Post Acquisition share in S Ltd. (Step-2) 40,000
2,40,000
c) Consolidated P&L
P&L of H Ltd. 1,00,000
(+)Post Share of S Ltd. (Step-2) 4,600
1,04,600
Minority Interest (Step-2) 48,150
Step-3:
Consolidated Balance Sheet of H Ltd. And its Component
(A) Share Funds
a) Share Capital 6,00,000
b) Reserve and Surplus 1 3,44,600
(B) Minority Interest 48,150
(C) Non Current Liability
a) Secured Debenture
b) Unsecured Debenture
(D) Current Liability
a) Creditors 2,07,000
b) Bills Payable _______
c) O/S Expenses 11,99,750
(E)Assets
(A) Non-Current Assets
a) Fixed Assets
i) Tangible 11,87,750
ii) Intangible 12,000
(B) Non Current Investment 7,000
(C) Current Assets
Debtor
B/R
Bank _______
11,99,750
i) Notes to A/C
Particulars Amount Amount
Consolidated P&L 1,04,600
Consolidated Reserve 2,40,000
______
1.8 ii) Tangible FA
Machinery H 3,00,000
(+) S 90,000 1,35,000
(+) Revaluation + 45,000 1,35,000
Furniture H 1,50,000
(+) S 17,000
(-) Revaluation ( - 5,000 + 750) 4,250 12,750
(+) Other Non Current Asset
H 4,40,000
S 1,50,000
11,87,750
Bonus Shares:
Bonus shares are issued to existing shares holders by company at free of cost. It’s a
method of capitalization of profit i.e.
Reserve A/C ……. Dr XX
To Share Capital A/C XX
Means reserve is decreased and capital is increased. But remember because of bonus
,holding percentage is not changed because it is given to all share holders including us.
That’s why while calculating holding percentage, we should be careful i.e. both share should
be either before bonus or after bonus.
i.e. Our holding shares before bonus × 100 Total
company shares before bonus
= Holding Percentage.
 Accounting Treatment:
Bonus shares can be given out of Pre-Profit or Post-Profit. In both cases we will
ignore bonus but remember if bonus entry has not been passed then we have to
pass the above entry.
Otherwise ignore.
Q-2(PM) (5.10)/Q-31:
I) DOA: 31/03/2011
DOC: 31/03/2017
P Ltd. 70%(105000/150000) Q Ltd.
Analysis of Net Worth of Q Ltd. (DOC)

Particulars Pre Post 1. 9
Pre Incorporation Profit 30,000 -
General Reserve - 19,05,000
P&L 60,000 3,60,000
15,90,000 22,65,000
Net Worth = 38,55,000

26,98,500 11,56,500
Pre 70%
11,13,000 Post 70%
15,85,500
Reserve (70%) P&L 70%

13,33,500 2,52,000
Step-2:
Calculation of
a) Cost of control/Goodwill:
Cost of Acquisition of Q Ltd. 12,00,000
(-)Pre Acquisition Net Worth 11,13,000
Goodwill 87,000
b) Consolidated Reserves
Reserve of P Ltd. 60,00,000
(+) Post Acquisition reserves in Q Ltd. 13,33,500
73,33,500
c) Consolidated P&L
Reserves of P Ltd. 15,75,000
(+)Post Acquisition P&L in Q Ltd. 2,52,000
18,27,000
Step-3:
Particulars Notes to A/C Amount CY
Equity and Liabilities
A) Shareholder Funds
i) Share Capital 45,00,000
ii) Reserve and Surplus 10,06,050
1.10
B) Minority Interest 11,56,500
C) Non Current Liabilities
D) Current Liabilities
Trade Payable 7,65,000
Total 1,64,82,000
Assets
a) Fixed Assets
i) Tangible 1,02,30,000
ii) Intangible 87,000
(B) Non Current Investment 7,000
(C) Current Assets 61,65,000
Total 1,64,82,000
WN:
Reserve and Surplus
Securities Premium 9,00,000
General Reserve 73,33,500
P&L 18,27,000
1,00,60,500
II) Immediately after the issue of Bonus Shares:
P Ltd. 70% Q Ltd.
Step-1:
Analysis of Net Worth of Q Ltd. (DOC)
Share capital 15,00,000 - 1. 11
(+) Bonus Shares (1:2) 7,50,000 -
22,50,000 -
Pre Incorporation Profit 30,000 -
(-) Bonus Shares (7,50,000) 11,55,000
23,40,000 1,51,500
Net Worth = 38,55,000

26,98,500 11,56,500
Pre 70% Post 70%

16,38,000 10,60,500
Reserve (70%)
8,08,500 P&L 70%
2,52,000
Step-2:
a) Calculation of Cost of control:
Cost of Acquisition of Q Ltd. 12,00,000
(-)Pre Acquisition Net Worth 16,38,000
Capital Reserve (4,38,000)
b) Calculation of Consolidated Reserves
Reserve of P Ltd. 60,00,000
(+) Post Acquisition reserves in Q Ltd. 8,08,500
68,08,500
c) Consolidated P&L
P&L of P Ltd. 15,75,000
(+)Post Acquisition P&L in Q Ltd. 2,52,000
18,27,000
Balance Sheet
Particulars Notes to A/C Amount CY
A) Shareholder Funds
i) Share Capital 45,00,000
ii) Reserve and Surplus 1 99,73,500
1.12
B) Minority Interest 11,56,500
C) Non Current Liabilities
Trade Payable 7,65,000
Total 1,63,95,000
Assets
A) Non-Current Assets
a) Fixed Assets
i) Tangible 1,02,30,000
ii) Intangible
b) Non Current Investment
B) Current Assets 61,65,000
Total 1,63,95,000
WN:
Reserve and Surplus
Securities Premium 9,00,000
P&L 18,27,000
Capital Reserve 4,38,000
99,73,500
3) When dividend is given:
Dividend is given by company to its shareholders in cash and receiver company credits it in
its P&L.
So subsidiary company can pay dividend out of its pre or post profit.
If paid out of pre profit it needs to rectify because pre Acquisition dividend is considered
Capital in nature as we discussed from beginning and it should be subtracted from COST 1. 13
OF ACQUISITION.
Therefore, in Step-2, we will subtract pre Acquisition dividend received by H Ltd. From
cost of Acquisition and also from P&L of H Ltd. (i.e. Consolidated P&L)
But if dividend is paid out of post profit it will be ignored.
Over all following cases of Dividend are possible:

S. No. Dividend Case Effect
A- Final Dividend/ interior Dividend
a) Paid by S Ltd.
i) Out of Pre Profit Need to rectify as above.
ii) Out of Post Profit Ignore
b) Paid by H Ltd. Ignore
B- Proposed Dividend Ignore
[ Now it is considered as part of reserves [As per amended AS-4]
if given in the Balance Sheet]
 How to solve a problem:

It is solved in some steps – 1, 2 and 3 except in Step-2, if given out of pre profit
needs to rectify as already discussed. But In addition we have to analyze P&L in
separate working Note while calculating Pre and Post Net Worth i.e.
Profit as on date of DOC = Rs, 4,20,000
Pre Post
60,000 4,00,000
(-)(40,000) (4,20,000 – 20,000)
Dividend20,000
Note: If DOA is between the years then that above P&L analysis will be further bifurcated
current year profit in 2 parts i.e. Pre and Post on time basis.
Note: Common Adjustment/Inter Company Transaction: If subsidiary and holding

company have transactions like Drs and Crs , bills payable. Receivable of each other
then, it will be cancelled from consolidated balance sheet in Step-3 from both sides
Assets and Liabilities. But no effect in 1 and 2.
Note: Stock Reserve/Unrealized Profit: If these companies sell goods to each other and
some part remains in stock so as per AS-2 valuation of Inventories stock should be
valued at cost or NRV, whichever is less, but not on selling price. That’s why, while
making consolidated Balance Sheet, we have to remove unrealized profit from Stock
and 2nd effect from the company P&L who had earned and if earned by subsidiary,
then will be subtracted from the “Post” P&L of Step-1. Analysis but ICAI did
subtract from consolidated B/S only in both cases.
Note: That above effect of common transaction/ intercompany transaction will only come
1.14 in consolidation B/S but no need to rectify any individual subsidiary or holding
company B/S. They continue as they are going without thinking whoever holds any
shares.
Q-2) DOA: 31/03/2011

DOC: 31/03/2012
H Ltd. 60% S Ltd.
Step-1:
Share capital 2,400 -
General Reserve (WN2) 600 90
P&L (WN3) 296 514
3,296 604
39,000

2,340 1,560
Pre 60% Post 60%

1,978 362.4
Reserve (60%×90) P&L (60%×514)

54 308.4
WN1:
Calculation of holding
1/04/2011 90,000 (Shares)
(+) Bonus (3÷5) 54,000
With Bonus 1,44,000
S Share Capital 2,40,000 (Given)
Because, 3 : 5 =8
? ? = 1,44,000
90 150
Therefore, Holding percentage = 90 × 100 = 60% or 144 × 100 = 60%
150 240 1. 15
WN2: Analysis of Reserve
690
Pre 600 90 (690 – 600)

(-) Bonus 1,500 +90
(3/5×1,500) 900 690
600
WN3: Analysis of Profit and Loss
810
Pre
633 Post 614
300 (1,500×20%) (810 – 296)
(-) Dividend 20%
(-) DDT (300×11/89) 37
296 296
+514
810
WN : Cross Check:
Cross check
Share Capital 2,400
Reserve 690
P&L 810
3,900
Step-2:
Valuation of:
a) Cost of control:
Cost of Acquisition 1,500
(-)Pre Acquisition dividend (300×60%) 180
1,320
(-)Pre Acquisition Net Worth (Step-2) 1,977.6
C.R. 12,000
Reserve of H Ltd. 928
Reserve of Post Share in S 54
982
c) Consolidated P&L
1.16 P&L of H Ltd. 1,305
Less: Pre Acquisition Dividend 180
Less: Unrealized Profit (50×1/5) 10
(+) Post Shares in S Ltd. 308.4
1,423.4
Minority Interest (Step-2) 1,560
Consolidated Balance Sheet (Amount in ‘000)

(A) Share holder Funds
a) Share Capital 4,000
b) Reserve and Surplus 1 8,063
(C) Non Current Liability
a) Secured Debenture
b) Unsecured Debenture

a) Creditors (487 + 427) 914
b) Bills Payable (124 + 80) 204
c) Other Provision (65 +17) 82
d) Provision for Taxation (220 + 400
100)
10,223
Assets
a) Fixed Assets
i) Tangible 2 5,904
ii) Intangible
b) Non Current Investment 7,000
(B) Current Assets
Stock 3 1,759
Debtor (700 + 683) 1,383
Cash (410 + 102) 512
B/R (120 + 95) 215
Sundry Advance (260 + 190) 450
10,223
Notes to A/C
1) Reserve and Surplus
Consolidated General Reserve 982
Consolidated P&L 1,428.4
Capital Reserve (Step-2) 657.6
3,063
1. 17
2) Tangible FA
Plant and machinery H 2,541
S 2,450
Furniture And Fitting H 615
S 298
5,904
3) Stock of H 983
S 786
(-) Unrealized Profit (10)
1,759
Subsequent holding/ holding on different dates:

It means company acquires shares in subsidiary company on different dates. It may
have following possibilities but in any case subsequent holding will consider only after
holding more than 50%, we acquire further.
 1st acquire 50% or less than and in subsequent year/ next year further acquire and
become holding. Then it is not considered subsequent holding case.
So we consider the date we become holding as 1st holding date.
 Holding more than 50%, then further acquire certain percentage of ordinary shares then
it’s a case of subsequent holding in subsequent year.
 Within a year we have acquired number of shares many time and become holding
company then it is a case of subsequent holding.
How to Solve Problem?

Same as 3 steps but while making Step-1 we will analyze net worth in number of
subsequent holding separately but in the same chart because pre is till date of
acquisition and have date of acquisition is more than one. That why we have to analyze
for each date and balance becomes minority interest.
(Pg. 47)(Q-3):- DOA
H 20% 1/07/11 S Ltd.
20% 1/10/11
20% 1/11/11
1.18 S Ltd. S Ltd.

DOC : 31/03/12
Step-2:
Particulars 1.07.11 1.10.11 1.11.11
Pre Post Pre Post Pre Post
Share 200 - 200 - 200 -
Capital
Reserve 75 45 90 30 95 25
P&L 3 9 6 6 7 5
278 54 296 36 302 30
332 332 332
20% holding 20% holding Minority

20% holding
66.4 66.4 Interest
66.4
40%
132.8
Post Pre Post Pre Post

Pre
10.8 592 7.2 60.4 60
55.6
Reserve P&L Reserve P&L Reserve P&L

(45×20%)9 (9×20%)1.8 6 1.2 5 1
WN1:
Calculation / Analysis of Reserve: 120
Current Year 1/04/11

60 60 (Given) 1. 19
1/07/11 1/10/11 1/11/11

3m 9m 6m 6m 7m 5m
15 45 30 30 35 25
60 -45 60 -30 60 -25
75 90 95
120 120 120
WN2:
Calculation / Analysis of P&L: 12

12 0
1/07/11 1/10/11 1/11/11

3 9 6 6 7 5
WN3:
Cross check
Share Capital 200
Reserve and Surplus 120
P&L 12
332
Step-2:
Valuation of:
a) Cost of control:
Cost of Acquisition 50 60 80
(-)Pre Acquisition Net Worth (Step-2) 55.6 59.2 604
5.6 0.8 19.6
1.20
Net Goodwill 14.8
Reserve of H Ltd. 400
(+) Post in S 1/07/11 9
1/10/11 6
1/11/11 5
420
c) Consolidated P&L
P&L of H Ltd. 10
(+) Post in S 1/07/11 1.8
1/10/11 1.2
1/11/11 1
14
d) Minority Interest (Step-2) 1,328
Step-2:
Consolidated Balance Sheet
(A) Share holder Funds
a) Share Capital 500
b) Reserve and Surplus
General Reserve 420
c) Minority Interest 132.8
d) Non Current Liability
e) Current Liability -
1,066.8
(B) Non-Current Assets
a) Fixed Assets
Tangible (5,700 + 320) 1,020
Intangible -
Goodwill 14.8
b) Investment -
c) Current Assets (20+12) 32
1,066.8
WN3:
Investment
Given 190
Inter company (50+60+80) 190
===
When Preference Share are there:
When Preference shares is also given in subsidiary company books then we have to
analyze preference share also same as equity because they are also owner but do not
have any voting rights. So it is not mandatory to take more than preference shares of S
Ltd. Whatever share we have taken is our holding even 0 also and whatever balance is
considered as minority interest.
1. 21
While analyzing Net Worth of preference shares only preference share capital is part of
it. Subject to any dividend in arrears or proposed dividend on equity.
e.g. Q-7(PM)(5.39)
 How to solve the problem:

Same steps 1,2 and 3 but in addition we have to make one more chart for analyzing
preference share net worth. Same as we do for equity shares.
& remaining steps are as usual but subject to any preference share cost of acquisition.
Note: If S Ltd. Had taken preference shares of H Ltd. Then it’s not a case of cross
holding. This is just holding of other company shares like H Ltd. Holds in S Ltd.
In this treatment is only in Step-2 will calculate cost of control for this Pre
Acquisition will be considered as face value and subtract same number of shares
from consolidated Balance Sheet.
Debentures are also given:

In this case debentures is outside liability so, it is not mandatory to take it and if not
taken it is like a outside liability shown as real liabilities but if taken then it becomes
holding so we have to calculate Goodwill/Capital Reserve for that Pre Acquisition will be
considered as face value.
& that much number of debenture will be cancelled from consolidated Balance Sheet.
Note: Same treatment for both companies either H Ltd. Hold in S Ltd. Or S Ltd. Hold in
H Ltd.
Different Accounting Policy:
It means accounting policies of both companies [H Ltd. and S Ltd.] are different
like Method of Depreciation, valuation of inventory etc. so before consolidation it is
mandatory to uniform Accounting Policy [some Accounting Policy]. That’s why
before starting consolidation procedure first we will make subsidiary company
balance sheet only as per holding companies Accounting Policy. For that we will use
P&L Adjustment A/C and all other items as per the given information converted i.e.
add or less.
e.g. Q-14 (SM)(5.42)
Pg. 48: Q No. 4
Journal Entries for Uniform Accounting Policies:
P/L Adjustment A/C Dr 34,000
To Stock A/C 34,000
(Being Stock is Reduced)
1.22
Note: Depreciation as per B Ltd. 15% = Difference in Deb × 100
Principle (old)
= 48,000 × 100 = 15%
3,20,000
But A Ltd. charges @10%
Difference in Dep. 15% 10%
2010 3,20,000 3,20,000
(-) Dep. 2010 48,000 32,000
(-) Dep. 2011 48,000 32,000
Balance as on 31.03.11 2,24,000 2,56,000
Therefore, as Dep. 32,000 _______
2,56,000 25,0000
Asset A/C Dr. 32,000
To P&L 32,000
Assumption: We assume that A will Not Deduct

Debtor A/C Dr. 9,000
To P&L Adjustment 9,000
Pre Acquisition A/C Dr. 30,000

To prepaid expenses 30,000
(Being Deferred Expenditure fully written
off)
Consolidated Balance Sheet of A Ltd. with B Ltd. as on 31/12/11
(A) Share Funds

A) Share Capital
a) Company share capital 5,00,000
b) Reserve and Surplus 6,91,000
(B) Non Current Liability
(C) Current Liability
a) Sundry Creditors 4,94,000
b) Bank OD 1,70,000
c) Provision for Tax 4,30,000
22,85,000
Assets
(A) Fixed Assets
i) Tangible 2,56,000
ii) Intangible
(B) Non Current Investment 4,00,000
(C) Current Assets
1. 23
Stock 7,08,000
Debtor 9,00,000
Prepaid Expenses 18,000
Cash at Bank 3,000
22,85,000
P&L Adjustment A/C

To stock 34,000 By Balance B/D 7,14,000
To prepaid Expenses 30,000 By Asset 32,000
To Balance C/D (BF) 6,91,000 By Debtor 9,000
7,55,000 7,55,000
Notes to A/C
1) Stock given 7,42,000
(-) P&L Adjustment 34,000
7,08,000
2) Asset Given 2,24,000
(+) P&L Adjustment 32,000
2,56,000
3) Debtor Given 3,91,000
(+)P&L Adjustment 9,000
9,00,000
4) Prepaid Expense Given 48,000
(-) P&L Adjustment 30,000
18,000
Note: While making consolidated Balance Sheet we need before consolidation balance sheet
of S Ltd. and H Ltd. as on the date of consolidation. If it is not given then our first
work is to make balance sheet of both companies before consolidation on the basis
of given information e.g. Q-5(PM)(5.27).’
Note: and for changing/making balance sheet we have to follow basic accounting principle
of final A/C or general provision i.e. accounting we always make 2 column and write
same figure in both side so always balance sheet will Tally e.g. Dr. Cr. , Assets,
Liabilities, Expenditure, income, loss, gain etc.
Chain Holding (Multiple Holding):
When there is more than one subsidiary then it is a case of chain holding. E.g.
Type 1: A Ltd. 60% B Ltd. 60% C Ltd.
Type 2: A Ltd. 60% B Ltd. 60% C Ltd.

1.24
20%
Type 3: A Ltd. 60% B Ltd.
60%
60% C Ltd. 20%
60%
D Ltd. 10% E Ltd.
In all our case, A Ltd. is the controller and we are in the books of A Ltd. so think from A
Ltd. point of view. So in our case A Ltd. is the controller of all group companies.
 How to solve the problem

In the same Step-1, 2 and 3 but remember we have to analyze all subsidiary network in
separate-separate chart in Step-1 start with last subsidiary e.g. C Ltd. then B Ltd.
but remember while analyzing B Ltd. if B Ltd. Holds some share in C Ltd. then share
of post Acquisition Net Worth in C Ltd. will be added in post share of B Ltd.
Step-2 and 3 will be same but in consolidated P&L or reserve we add only directly
held by A Ltd. But while calculating cost of control will write all the cost as usual
by making separate – separate column for each holding.
In Step-2 we will make one minority interest working Note i.e. add of all subsidiary
minority interest together.
In Step-3 we make total of all balance sheet items A Ltd. B Ltd. and C Ltd.
Q-15(SM)(5.46)/Q-41:
DOA- 30/06/16
DOC-31/12/16
A Ltd. 75% B Ltd. 2/3 C Ltd.
Analysis of Net Worth of C Ltd. (For C Ltd.)
Pre Post
Share Capital 60,000 -
Reserves (WN1) 6,600 600
P&L (WN2) 3,000 2,000
Unrealized profit on Stock - (600)
69,600 3,000
Total Net Worth
71,600
Holding (2/3) (1/3)Minority Interest

47,733 23,867
1. 25
Pre Post
46,400 1,333
General Reserve P&L

400 933
WN1: Analysis of Reserves

7,200
01.01.16 Current Year 1200

6,000 (on time basis)
6 months Pre 600 6 months

(1200×6/12) Post
Total Pre 6600 (600+6,000) 600
Total Post 600_ ____
7,200
WN2:
Analysis of P&L
5,000
01.01.16 Current Year

1,000 4,000
Pre 2,000 Post

(4,000×6/12) 2,000
Total Pre 3000 (2000+1000)
Total Post 2000_
____vcvvvv5,000
Step-1:
Analysis of Net Worth of B Ltd. (For B Ltd.)
Pre Post
Share Capital 1,00,000 -
Reserves (WN1) 9,000 1,400
P&L (WN2) 2,500 2,433
1.26
1,11,500 3,833
Total Net Worth

1,15,333
Holding (75%) (25%)Minority Interest

86,500 28,833
Pre
Post
83,625
2,875
(1,11,500×0.75)
Reserve 1050 P&L

(1,400×0.75) 1,825
(2,433×0.75)
WN1:
Analysis of Reserves
10,000

8,000 2,000
Pre Post
1,000 1,000
(2,000×6/12)
Total Pre 9000 (8000+1000)
Total Post 1400(1000+400)
10,400
WN2:
Analysis of P&L
4,000
1. 27
1,000 3,000
Pre Post
1,500 1,500
(3,000×6/12)
Total Pre 2500 (1000+1500)
Total Post 2433(1500+933)
4933
Step-2:
Calculation of Cost of Control
Held by Held by
A Ltd. B Ltd.
Cost of Acquisition 85,000 53,000
(-) Pre Acquisition Net Worth (83,625) (46,400)
Cost of Control (Goodwill) 1,375 6,600
Total = 7,975
Calculation of Consolidated Reserves

Reserve of A Ltd. 18,000
(+) Post Acquisition share in B Ltd. 1,050
19,050
Analysis of Consolidated P&L

P&L of A Ltd. 16,000
(+) Post Acquisition P&L in B Ltd. 1,825
12,745
Minority Interest
In C Ltd. 23,867
In B Ltd. 28,833
52,700
Particulars Notes to A/C Amount
1) EQUITY & LIABILITY
A) Shareholder’s Fund
1.28
b) Reserve and Surplus 1 36,875
B) Minority Interest 52,700
C) Non Current Liabilities -
D) Current Liability
a) Trade payable 2 10,000
2,24,575
TOTAL
2) ASSETS
A) Non Current Assets
a) Fixed Assets
1) Tangible 1,20,400
2) Intangible [Goodwill] 7,975
b) Non Current Investment -
B) Current Assets
a) Inventory 3 27,400
b) Trade Receivable 4 67,800
c) Cash in Transit [7,000 – 1,000
6,000]
TOTAL 2,24,575
Notes to A/C
NoteNo. Particular Amount Amount
1) Reserves and Surplus:
Reserve 19,050
P&L A/C 17,825 36,875
2) Trade payables:
Given (7,000+3,000) 10,000
(+) B Ltd. 7,000
(-) Mutual owning (7,000) 10,000
3) Inventory
Given [22,000+6,000] 28,000
(-) Unrealized Profit (600) 27,400
4) Trade Receivable
Given [26,300+10,000+ 31,500] 67,800
C Ltd. 3,300
(-) Mutual Owing (3,300) 67,800
Q-7(PM)(5.39)/Q-34:
DOA 01.04.16
Note: Because our holding crosses after 01/04/16. First time holding i.e. 01/04/15 will be
ignored.
DOC31.03.17
F Ltd. 75% H Ltd.
1. 29
Step-1:
Analysis of Net Worth of H Ltd. (Equity)
Pre Post
(+) Bonus Shares 20,00,000 -
General Reserve (2,00,000) 22,00,000 2,433
(-) Bonus Issue (2,00,000) - 2,20,000
P&L A/C [WN1] 1,00,000 5,00,000
Unrealized Profit Stock [1,00,000×0.4×0.2] - (8,000)
Preference Dividend - (38,000)
Revaluation Reserve [overvalued] (1,00,000) -
Depreciation@20% - 20,000
22,00,000 6,94,000
Total Net Worth

28,94,000
Holding (75%) (25%)Minority Interest

21,70,500 7,23,500
Pre Post
16,50,000 5,20,500
General Reserve P&L

1,65,000 3,55,500
Note:
Proposed dividend should be ignored as per revised A54 but preference dividend should be
proposed / accountable because it is mandatory to pay before proposing equity dividend.
WN1:
P&L A/C
6,00,000
1.30
Pre Post
3,00,000(2,00,000) 5,00,000
Dividend@10%1,00,000
Analysis of Net Worth of H Ltd. (Preference)

Pre Post
Dividend - 38,000
3,80,000 38,000
Total Net Worth

4,18,000
Holding (37.5%) Minority Interest (62.5%)

[14,250/38,000×100] 2,61,250
1,56,750
Pre Post
1,42,500 14,250
General Reserve P&L

- 14,250
(38,000×0.375)
 It is assumed that dividend is given out of Pre Acquisition profit.

Step-2:
Preference Equity
Cost of Acquisition 3,10,000 17,50,000
(-) Pre Acquisition Dividend - (1,70,000)
2,95,750 16,70,000
1. 31
(-) Pre Acquisition Net Worth (1,42,500) (16,50,000)
Cost of Control 1,67,500 30,000
Total = 7,975
(Goodwill) = 1,97,500
Calculation of Consolidated General Reserves

Reserve of F Ltd. 5,50,000
(+) Post Acquisition share in H Ltd. 1,65,000
7,15,000
Calculation of Consolidated P&L

P&L of F Ltd. 10,00,000
(+) Post Acquisition P&L in H Ltd. [14,250+3,55,500] 3,69,750
13,69,750
(-) Pre Acquisition Dividend (70,000)
12,99,750

S.No. Particulars Notes to A/C Amount
1) EQUITY & LIABILITY
A) Shareholder Fund
B) Minority Interest[7,23,500+2,61,250] 9,84,750
C) Non Current Liabilities -
a) Bank O/D 1,90,000
b) Trade Payable 2 9,25,000
TOTAL 96,14,500
2) ASSETS
A) Non Current Assets
a) Fixed Assets
i) Tangible 3 43,70,000
ii) Intangible 4 9,47,500
b) Non Current Investment 5 9,90,000
B) Current Assets
a) Inventory 6 11,62,000
b) Cash at bank 4,35,000
c) Trade Receivables 7 17,10,000
TOTAL 96,14,500
1.32
Notes to A/C
Note No. Particular Amount Amount
1) Reserves and Surplus:
General Reserve 7,15,000 20,14,750
P&L A/C 12,99,750
2) Trade payables:
Bills Payables
H Ltd. 1,60,000
(-) Mutual owning (1,45,000) 15,000
Sundry Creditor
F Ltd. 4,30,000
H Ltd. 6,80,000 9,10,000
9,25,000
3) Fixed Assets
Machinery [12,00,000 + 5,00,000] 17,00,000
Furniture & Fitting [6,50,000 + 4,00,000] 10,50,000
Motor Vehicle
F Ltd. 12,00,000
H Ltd. 5,00,000
(-) Net Revaluation [-1,00,000 + 20,000] (80,000) 16,20,000
4) Goodwill
F Ltd. 4,50,000
H Ltd. 30,00,000
Consolidation 1,97,500 9,47,500
5) Investment
Given [26,00,000 + 4,50,000] 30,50,000
(-) Mutual Owing (20,60,000) 9,90,000
6) Inventory [4,50,000+7,20,000] 11,70,000
(-) Unrealized Profit (8,000) 11,62,000
7) Trade Receivables
Debtor (9,30,000+7,80,000) 17,10,000
Trade Receivables 1,45,000
(-) Mutual Owing (1,45,000) 6
17,10,000
Consolidated P&L:
Here we have to consolidate only P&L A/C which is same as general concept i.e. we add
all items of P&L of both companies subject to any intercompany transaction. That will
be cancelled.
 How to solve a problem: 1. 33

It is based on general concept that’s why does not require steps but we have to take
care that consolidated profit at the end should be same as normal consolidated P&L
that we prepare at the time of regular sum i.e. we will adjust any Pre Acquisition Profit,
dividend and minority interest from S Ltd. Profit.
Note: Notes to A/C will prepare only if there is any intercompany transaction.
Note: If question is silent about DOA, then we assume entire profit is POST-PROFIT.
E.g. Q-10(SM)(5.28)
Format of P&L A/C

Particular H Ltd. S Ltd. Notes to A/C Amount
Income XX XX XX
Revenue from Operation XX XX XX
Total Income XX XX XX
A
Expenses
Cost of Material Consumed XX XX XX
Other Cost XX XX XX
Change in inventory (decrease) XX XX XX
Depreciation XX XX XX
Total Expenses XX XX XX
B
Profit before Tax (A-B) XX XX XX

(-) Tax (XX) (XX) (XX)
Profit After Tax XX XX XX
(+) Dividend Paid (XX) (XX) (XX)
(+) Dividend Received XX - XX
(-) Unrealized Profit (XX) (XX) (XX)
XX
(-) Minority Interest XX
(-) Capital Reserve (Pre Acquisition Profit) (XX)
Consolidated P&L transfer to Balance Sheet XX
Pg. 54 (Q-11)(Q-10)(SM)(Pg.6.28):
Consolidated P&L of H Ltd. and it’s Subsidiary S Ltd. For Year Engding 31.03.12
Particular H Ltd. S Ltd. Notes to A/C Amount
Income:- (5000-125) (1000-10)
Sales and other Income 4875 990 1 5,865
Increase in Stock 1,000 200 1,200
1.34
Total Income (A) 5,825 1,190 7,065
Expenses
Raw National Consumed 800 80 2 880
Wages and Salary 800 150 950
Production expenses 200 100 300
Administrative Expenses 200 95 3 295
Saving & Distribution 190 50 4 240
Investment 100 50 150
Depreciation 100 50 150
Total Expenses (B) 2,390 575 2,965
Profit before Tax (A-B) 3,485 615 4,100
(-) Tax (1,200) (200) (1,400)
Profit After Tax 2,285 415 2,700
(+) Dividend Declared Paid (1,200) (150) (1,350)
(+) Dividend Rcd (150×80%) 120 - - 120
1,205 265 1,470
(-) Unrealized Profit (24×1/6) (4)
(-) Minority Interest (265×20%) (53)
1,413
Notes to A/C
Note No. Particular Amount
1) Sales & other Income 6,000
(-) Sold to S Ltd. (120)
(-) Administration service given (5)
(-) Selling and Distribution OH (10)
5,865
2) Raw Material Consumed 1,000
(-) Purchase from H (120)
880
3) Administrative Service: (200+100) 300
(-) Given for H (5)
295
4) Selling distribution overhead: 250
(-) given to S (10)
240
Consolidated Cash Flow:
Cash flow is also now mandatory to prepare with financial statement. So
consolidation of cash flow is also required.
 How to Solve a Problem:

As per AS-3 cash flow statement is prepared by S Ltd. and H Ltd. individually
remains same in consolidated also. That’s why as per AS 21 we have to take just 1. 35
total of both individual items as per the given format and no need to cancel any
item also.
For format and problem we will solve
SM(2.12)(5.35):
Particulars Company A Company B Total

Cash from operating Activity - - -
Change in Reserve 0 1 1
Change in P&L A/C 22 - 22
Dividend Paid 20 1 21
Tax Provision 10 5 15
Depreciation 8 2 10
Interest (10) 10 0
50 19 69
Less:- Tax Paid (20) (1) (21)
30 18 48
Working Capital Adjustment (13) 12 (1)
(A) 17 30 47
Cash flow from Investing Activity
Sale of FA 30 0 30
Purchase of FA (30) (20) (50)
(B) 0 (20) (20)
Cash flow from finance Activity (22) (10) (32)
(C)
Net Cash Flow (A+B+C) (5) 0 (5)
As 27 – Jointly Controlled Company:
It means we hold 50% or less but our other friend also holds share and we have
alliance with him. So we have to consider this company as jointly controlled but
remember they will not given us other company holding percentage because it is jointly
controlled but remember they will not give us other company holding percentage
because it is irrelevant for us. They only mention it is jointly controlled.
1.36
 How to solve a Problem?

Same Step-1,2 and 3 but in addition we have to take care that we are not alone
holder/controller that’s why while preparing Step-1 we write our holding, remaining as
Balance Sheet Minority Interest because these are not minority. Step-2 same. In
Step-3, we will take assets and liabilities of jointly controlled only till the extent of our
holdings.
e.g. Q-22(PM)(5.116)[May 2017]
Same in May 2017: Q-45:

Q-22(PM)(5.116):
Journal Entries for Acquisition of investment is cold and dry:
1) Investment in Cold A/C Dr. 24,000
To 8% Debenture 14,000
To equity Share Capital (100+2.5) 4,000
To security Premium 6,000
(Being Invested in Cold Ltd.)
Total PC = 12 × 20 240
2) Investment in Dry Ltd. A/C Dr. 187.50
To Equity Share Capital (187.5÷25) 7,500
To Saving Premium 1,12,050
Total PC = (370 × 50) 187.5
Air Ltd. Hold 100% Cold
50% Dry
DOA = 01/04/11
DOC = 31/03/12
Step-2:
Analysis of Net Worth of Dry Ltd.
Pre Post
Retained Earning 2500 (4,500 – 2,000 (given)
2,000)
27,500 2,000
29,500
Holding (50%) Balance 50%

14,750 14,750
1. 37
Pre 50% of 27,500 Post 50% 2,000

13,750 1,000
Retained
Step-2:
Analysis of Net Worth of Cold Ltd.
Pre Post
Retained Earning 7,000 (15000–8000) 8,000
27,000 8,000
35,000
Holding (10%) Balance 0%

35,000
Pre 100% Post 100%

27,000 8,000
Retained
WN1:
Cross Check:
Share Capital 25,000
Retained Earning 4,500
29,500
WN2:
Cross Check:
35,000
Step-3:
Valuation of
Cost of Control Investment in Cold Investment in Dry
(-) Pre Acquisition (Step-2) 27,000 13,750
3,000 5,000
1.38
CR G/W
(-)Goodwill W/off (Given) ____ 1,000
3,000 4,000
Consolidated Retained Earning
Retained Earning of Air Ltd. 20,800
(+) Post Share in Cold 8,000
Dry 1,000
(-) G/W written off (Given) (1,000)
28,800
Minority Interest 0
Note:
Share Capital:-
Existing 10,000
Cold 4,000
Dry 7,500
27,500
Notes: 11,500 Share Capital issued for Considering other.
Reserve and Surplus:-
Consolidated R&S 28,800
Security Premium
(6,000 – 11,250) 17,250
Capital Reserve 3,000
49,050
Trade other than payable:-
Air 17,120
Cold 5,270
Dry 30% 7,050
29,440
Provision for Taxation:-
Air 5,640
Cold 2,400
Dry 50% 380
8,420
Tangible Assets:-
Air 34,260
Cold 27,000
Dry 50% 10,530
71,790
Inventory:-
Air 9,640
1. 39
Cold 7,200
Dry 50% 9,320
26,160
Debtor:
Air 11,200
Cold 5,060
Dry 50% 2,310
18,570
Cash:
Air -
Cold 3,410
Dry 50% 20
3,430

1) Share Funds Note:
a) Share Capital 1 21,500
(A) Minority Interest 0
(B) Non Current Liability
c) 8% Debenture 14,000
(C) Current Liability
a) Trades other than payable 3 29,440
b) Overdraft 1,540
c) Provision for Taxation 4 8,420
1,23,960
2) Assets
(D) Non-Current Assets
iii) Tangible 5 71,790
iv) Intangible 4,000
(E) Non Current Investment 7,000
(F) Current Assets
i) Inventories 26,160
ii) Debtor 18,570
iii) Cash 3,430
1,23,950
Associate Company:
In this case we alone hold 25% or more upto 50% but do not have alliance then it’s a
case of Associate Company.
How to solve a Problem:

Solve in same steps 1,2 and 3 but we have to keep investment in associate company as
1.40
investment only but at revalued value i.e.
Valuation of Investment:
Cost of Investment( Including Goodwill) XX
(+) Post Acquisition share in Associate company (Step-1) XX
XX
Pg. 54: Q-12

p 80% J A
40%
40%
DOA –Nothing but given directly reserves

DOC – 31/03/12
Step-2:
Calculation of Net Worth of A Associates
Pre in corporation Post in corporation
Share Capital 800 -
Retained Earning 400(Given) 3,200(3,600 –
400)
1,200 3,200
4,400
Holding by P Ltd. (40%)

1,760
Balance 60%
Pre (1,200×40%) Post (3,200×40%)

480 1,280
Fully Retained Earning

Step-2:
Analysis of Net Worth of I
Pre Post
Share Capital 800 -
Retained Earning 400 3,200(3,600 – 400)
1,200 3,200
1. 41
4,400
Holding by P Ltd. (40%) Balance 60%

1,760
Pre (1,200×40%) Post (3,200×40%)

480 1,280
Fully Retained Earning

WN1:
Cross Check:
Share Capital 800
4,400
Step-2:
Pre Post
Share Capital 400 -
Retained Earning 520 2,8880 (3,400 – 520)
920 2,880
38,000
Holding (80%) Minimum Interest 20%

8,040 760
Pre 80% Post 80%

736 2,304
Retained
WN2:
Cross Check:
Share Capital 400
3,800
1.42
Valuation of
Cost of Control
Particulars Investment in S Investment in J Investment in A
(-) Pre Acquisition
Net Worth (Step-2) 736 480 480
Goodwill 64 120 120
(-) W/off (Given) (64) ___ ___
0 120 120
Consolidated Retained earning
Retained Earning of P Ltd. 4,000
(+) Post Share in S (Step-2) 2,304
(+) Post Share in J (Step-2) 1,280
(+) Post Share in A (Step-2) 1,280
Less: Goodwill Written off (64)
8,800
Minority Interest only in S Ltd. 760
Retained Investment value in A Ltd.
Cost of Investment including Goodwill 600
(+) Post sharing A Ltd. 1,280
1,280
Consolidated Balance Sheet as on 31.03.12

Equity and Liabilities Note:
Shareholder Funds
a) Share Capital 1,000
b) Reserve and Surplus 8,800
Minority Interest 760
Non Current Liability
Current Liability(Creditors) 1 600
11,160
Assets
a) Non-Current Assets
Fixed Assets:
Tangible 2 2,360
Intangible 120
b) Non Current Investment
Investment in A Ltd. 1,880
Current Assets 6,800
11,160
Notes to A/C:
1. 43
Creditors
P 200
S 300
J (250×40%) 100
A -
600
Fixed Asset
P 1,000
S 800
J (1,400×40%) 560
A -
2,360
Current Asset
P 2,200
S 3,300
J (3,250×40%) 1,300
A -
6,800
Q-16(SM)(5.55)/Q-21:
P&L Adjustment A/C 5,000
Cash A/C 15,000
To inventory A/C 20,000
Purchase Account 1,80,000

(1,50,000+30,000)
To A Ltd. 1,80,000
A Ltd. 1,20,000
To sales A/C [90,000 cost] 1,20,000
[1,80,000 – 60,000 balance Due]
Balance Sheet
Liabilities Amount Assets Amount
Share Capital 5,00,000 Fixed Assets 4,05,000
R&S[2,05,000- 2,30,000 Inventory[350000+180000- 4,20,000
5,000+30,000] 1290000-20000]
13% Debentures 3,00,000
Trade Payables Trade Receivables 2,65,000
Others 80,000 Cash & Bank 1,20,000
A Ltd. 60,000 1,40,000
Other Liabilities 40,000 12,10,000
1.44 12,10,000
Step-2:
Analysis of Net Worth of B Ltd.
R&S 75,000 1,55,000
5,75,000 1,55,000
Net Worth = 7,30,000

5,84,000 1,46,000
Pre Post
4,60,000 1,24,000
Reserve P&L
1,24,000 ---
Step-2:
a) Cost of control:
Debenture For Equity
(-)Pre Acquisition Net Worth (1,00,000)Face 4,60,000
Value
50,000 34,000
Total Cost of Control = 3,90,000
b) Consolidated Reserve and Surplus
Reserve of A Ltd. 4,50,000
(+) Post Acquisition share in B Ltd. 1,24,000
(-) Unrealized Profit on Stock [(1,80,000 – 80,000) × 1,24,000
0.2/1.2]
5,59,000
Step-3:
Consolidated Balance Sheet as on 31.03.12
Equity and Liabilities Note:
Shareholder Funds
b) Reserve and Surplus 5,59,000
1. 45
Minority Interest 1,46,000
Non Current Liability[3,00,000 – 1,00,000] 2,00,000
Current Liability
Trade payables [3,80,000 + 1,40,000 - 60,000] 4,60,000
Other Liabilities[2,00,000 + 40,000] 2,40,000
TOTAL 2,60,500
Assets
Fixed Assets:
Tangible 10,55,000
Intangible 3,90,000
B) Non Current Investment
Inventory [2,00,000 + 4,20,000 – 15,000] 6,05,000
Trade Receivable [1,50,000 + 2,65,000 – 60,000] 13,55,000
Cash and Bank [80,000 + 1,20,000] 2,00,000
Total 26,05,000
CROSS HOLDINGS:
It means H Ltd. holds in S Ltd. and S Ltd. holds in H Ltd.
e.g. H Ltd. 80% S Ltd.
10%
So in this case for calculation/Revaluation of Net Worth we have to revaluate Assets and
1.46
Liabilities including Inter Company Investment. But for valuing it we need value of each
other so we have to apply simultaneous equation to solve/Find Net Worth of each other.
 How to solve a Problem:

Same Step-1,2 and 3 but in addition we have to analyze net worth of S Ltd. and H
Ltd. both other than share capital and we apply simultaneous equation to get overall
value of subsidiary company net worth.
In Step-2, we also include cost of acquisition in H Ltd. by S Ltd. For that pre
acquisition Net Worth is considered only share capital and that much number of share
will cancelled from consolidated Balance Sheet and also while calculating consolidated
P&L we have to subtract transfer profit to S Ltd. from H Ltd. Step-3 is as usual.
2 Things:
1) Share Capital should be reduced by hold by S Ltd.
2) Inter Company investment in both companies cancelled.
e.g. Q15(SM(5.51)
Pg. 51: Q-8

A Ltd. 80% B Ltd.
20%
DOA – Not required
DOC – 31/12/11
Step-2:
Analysis of Net Worth of B Ltd. (other than Share Capital)
Capital Profit 80,000 -
Revenue Profit - 50,000
80,000 50,000
Analysis of Net Worth of A Ltd. (other than Share Capital)

Capital Profit 10,000 -
Revenue Profit - 3,00,000
10,00,000 3,00,000
Let Total Profit of A Ltd. = X

Let Total Profit of B Ltd. = Y
X = 1,00,000 + 0.8Y ….(1)
Y = 80,000 + 0.2X …..(2)
Y = 80,000 + 0.2(1,00,000 + 0.84)
= 80,000 + 20,000 + 0.16 Y
Therefore, Y = 80,000 + 0.2 (1,00,000 + 8.4)
Y - 0.16Y = 1,00,000
Y = 1,00,000
.84 1. 47
1,19,048

15,238 23,810
Let Total Profit of A Ltd. = X

Let Total Profit of B Ltd. = Y
X = 3,00,000 + 0.8Y ….(1)
Y = 50,000 + 0.2X …..(2)
Y = 50,000 + 0.2(3,00,000 + 0.84)
Y = 1,10,000
.804
1,30,952

1,04,769 26,190
Total Pre Acquisition Holding

Share capital 2,00,000 × 80% 1,60,000
Pre Profit 95,238
Pre Acquisition Net Worth 2,55,238
Total Minority Interest
Post Profit 23,810
Pre Profit 26,190
90,000
Valuation of
Cost of Control
Particulars A to B B to A
(-) Pre Acquisition Net Worth 2,55,238 1,00,000
1.48 (35,238) 50,000
Consolidated Capital Profit
Capital Profit of A 1,00,000
(1,19,048 – 80,000) (59,048)
66,952
Consolidated revenue Profit
Revenue profit A 3,00,000
(+) Post share in B 1,04,762
(-) Transfer to B Ltd. (13,952 – 50,000) (80,952)
3,23,810
Step-3:
Consolidated Balance Sheet of B Ltd.
Shareholder Funds
Minority Interest 90,000
Non Current Investment -
Current Liability
Creditor 2,10,000
10,84,762
Non-Current Assets
a) Fixed Assets:
Tangible 10,70,000
Intangible 14,762
Note to A/C
Hold by B Ltd. 1,00,000
4,00,000
Reserve & Surplus
Consolidated Capital Reserve 60,952
Consolidated Revenue Reserve 3,23,810
3,84,762
Q-6(PM)(5.34):
DOA – 01/10/16
DOC – 31/03/17
Major Ltd. 90% Minor Ltd.
1/9th
Analysis of Net Worth of Minor Ltd. (other than Share) 1. 49

Pre Post
Reserves 60,000 -
P&L A/C [WN1] 28,000 12,000
Revaluation [WN2] 13,600 -
Depreciation [WN2] - (680)
1,01,600 11,320
Revaluation of Plant and Machinery

01/04/16 1,12,000
Depreciation @10% 01/10/16 (5,600) 6 Months
1,06,400
Revalued Value 1,20,000
Gain on Revaluation 13,600
Depreciation on Revaluation 680
WN1: Analysis of P&L A/C of Minor Ltd.

40,000

24,000 16,000
Pre Post
12,000 12,000
(24,000×6/12)
Total Pre 28,000
Total Post 12,000
Total 40,000
Analysis of Net Worth of Major Ltd.

Pre Post
Reserves 52,000 -
P&L A/C [WN3] 37,250 82,750
89,250 85,750
WN1: Analysis of P&L A/C of Major Ltd.
1,20,000

1.50 1,65,500 (45,500)
Pre Post
82,750 82,750
(82,750 – 45,500)
Total Pre 37,250

Total Post 82,750
Total 1,20,000
Let Pre Net Worth of Major Ltd. = X

Let Net Worth of Minor Ltd. = Y
X = 89,250 + 0.9Y ….(1)
Y = 1,01,600 + 1/9X …..(2)
Y = 1,01,600 + 1/9(89,250 + 0.90Y)
= 1,01,600 + 9,917 + 0.1 Y
0.9Y = 1,11,517
Y = 1,23,908
Total Pre Net Worth of Minor Ltd.

1,23,908

1,11,517 12,391
Analysis of Net Worth of Minor Ltd.

Pre Post
1,60,000 -
1,60,000

1,60,000
Let Pre Net Worth of Major Ltd. = X
Let Net Worth of Minor Ltd. = Y
X = 82,750 + 0.9Y ….(1)
Y = 11,320 + 1/9X …..(2)
Y = 11,320 + 1/9(82,750 + 0.90Y)
= 11,320 + 9.94 + 0.1 Y
0.9Y = 20,514
Y = 22,793
Total Pre Net Worth of Minor Ltd.
22,793 1. 51
Holding Minority Interest 10%

20,514 2,279
Minority Interest
Pre Acquisition in Minor Ltd. 12,391
Post Acquisition in Minor Ltd. 2,279
Preference share Capital in Minor Ltd. 1,60,000
Equity Share Capital in Minor Ltd. 20,000
1,94,670
Pre Acquisition Net Worth in Minor Ltd. (including Share Capital)

Share Capital [2,00,000×90%] 1,80,000
Net Worth excluding Share Capital 1,71,517
2,91,517
Valuation of
a) Cost of control:
Particulars Investment in Investment in Minor
Major Ltd. Ltd.
(-)Pre Acquisition Net Worth (40,000) (29,517)
8,000 (51,517)
(-) Transfer to B Ltd. (22,308)
[1,23,908 – 1,01,600] 29,692
c) Consolidated P&L
P&L of A Ltd. 1,20,000
(+)Post Acquisition of Minor Ltd. 20,514
Transfer to B Ltd. [22,793 – 11,320] (11,473)
1,29,041
Step-3:

Equity and Liabilities Note: Amount
Shareholder Funds
a) Share Capital [3,60,000 + 3,00,000 – 40,000] 6,20,000
1.52
b) Reserve and Surplus [43,517 + 29,692 + 2,02,250
12,904]
Non Current Liability -
Current Liability
Trade payables 2,28,000
TOTAL 12,44,920
Assets
Fixed Assets:
Tangible 1 5,50,920
Intangible -
B) Current Assets
Inventory In Trade[96,000 + 2,28,000] 3,24,000
Trade Receivable [1,40,000 + 1,70,000] 3,10,000
Cash and Bank [34,000 + 26,000] 60,000
TOTAL 12,44,920
Notes
Tangible Fixed Asset
Plant and Machinery
Major Ltd. 4,41,000
Minor Ltd. 1,00,800
(+) Revaluation [13,600 – 680] 12,920
Furniture [14,000 + 9,200] 23,200
5,50,920
Disposal of Holding:
It means some part of holding share they disposes into market i.e. indirectly solo of
investment in S Ltd. for that we pass Journal Entry.
Cash A/C XX
[Proportionate] to Investment in S Ltd. XX
To P&L A/C (Profit) XX
1. 53
After side of investment we have to check we come under which category i.e. A5 21,23 or
27,13.
The rules for this A5 are same as we discussed below.
 How to Solve a Problem:

Solve in some steps 1,2 and 3 but in addition we have to pass one extra entry of
sale of investment as above in the books of H Ltd. e.g. Q-27(SM)(5.99)
Note: Pre-Post will not change because of disposal because remaining shares are out of
original holdings.
Q-27(SM)(5.99)Q-10:
DOA –
DOC – 31/03/17 A Ltd. 60% B Ltd.

Pre Post
P&L A/C 4,400 7,600
24,400 7,600
Total Net Worth = 32,000
Holding (60%) Minority Interest (40%)

19,200 12,800
Pre Post
14,640 4,560
P&L
4,560
(-) Pre Acquisition Net Worth (14,640)
3,360
Calculation of Consolidated P&L
1.54
P&L A/C of A Ltd. [3,000 + 6,000 + 12,000] 11,000
(+) Post Acquisition Net Worth 4,560
15,560

NTA Amount
EQUITY AND LIABILITIES
Shareholder Funds
b) Reserve and Surplus 15,560
Current Liability -
TOTAL 1,20,360
ASSETS
Non-Current Assets
a) Fixed Assets:
Tangible [93,000 – 32,000] 1,25,000
Intangible 3,360
Current Assets -
TOTAL 1,20,360
Que-5)
A Ltd. Holds 75% in B Ltd. i.e. 750/1000
And B Ltd. Holds 66.67% in C Ltd. i.e. 400/600
DOA: 30-06-2011
DOC: 31-12-2011
1. 55
Step-1: Analysis of Net Worth of C Ltd.:
Reserve (WN1) 6,600 600
P&L A/C (WN2) 3,000 2,000
Unrealized Profit - (600)
69,600 2,000
TOTAL = 71,600
B Ltd. 66.67% Minority Interest

(47,733) 33.33% (23,867)
Pre Post
66.67×69600 1,333
= 46400
General Reserve P&L

(600x66.67%) 933
400 (1400×66.67%)
WN-1: Analysis of Reserve
Reserve
7,200
1.56
As on 01.01.11 During the Year

6,000 1,200 (7200-6000)
Therefore, Pre = 6,000+600 = 6600
Post = 600 Pre (30/6) Post

600 600
7200
WN-2: P&L A/C

5,000

1,000 4,000
Therefore, Pre=1000+2000 = 3000
Post = 2000 Pre (30/6) Post

2,000 2,000
5000
WN3: we had assumed that unrealized profit on stock sold by C Ltd. Had been
assumed is post because it sell recently then only it is remain in the stock.
Cross check: Share capital 60,000
Reserve 7,200
P&L 5,000
Unrealized Profit (600)
71,600
Step-1) b) Analysis of Net Worth of B Ltd.
Pre (1,00,000 (S/C) + 9,000 Post (1,000 + 400 = 1400)(S/C)(1500 + 933 = 2433)
(R&S) + 2,500 (P&L)) (R/S)(=3,833)
(= 1,11,500)
1. 57
1,15,333
Minority (25%) Holding by H (75%)

28,832 86500
Pre 83,625 Post 2,874

(1,11,500×75%) (3,833×75%)
Reserve 1,050 P&L 1,825

(1,400×75%) (2,433×75%)
WN3: Analysis of Reserve: 10,000
01.01.11 Current
8,000 2,000
Total Pre 9,000 Pos

Post 1,000 Pre 30.06.11 Post
10,000 1,000 1,000
WN4: Analysis of P&L:

4,000
Total, Pre 2,500 01.01.11 Current

PPost 1,500 1,000 3,000
4,000
Pre 30/6 Post

1500 1,500
WN5:
Cross Check
Reserve 10,000
P&L 4,000
Post in C (400+933) 1,333
1.58
1,15,333
Step-2) Valuation of
Cost of Control Hold by A Hold by B
(a) Cost of Acquisition 85,000 53,000
(-) Pre Acquisition of Net (83,625) (46,400)
Worth of S
1,375 6,600
Goodwill Total = 7,975 (1375+6600)
Reserve of A 18,000
(+)Post Share in B (Step-1) 1,050
19050
c) Consolidated P&L:
Consolidated A Ltd. 16,000
(+)Post Share in B LTd.(Step-1) 1,225
17,825
d) Minority Profit
Minority interest in C 23,867
Minority interest in B 28,833
52,700
Step-3)
(A) (i) Share Capital 1,25,000
(ii) Reserve Surplus 36,875
(C) Non-Current Liability
Creditors 10,000
2,24,576
Non Current Asset
(A) Fixed Asset
(i) Tangible Assets 1,20,400
(ii) Intangible Assets 7,975
(B) Investment
(C) Current Assets
Stock 2 27,400
Debtor 67,800
Cash in transit
(8,000 – 7,000) 1,000
1. 59
2,24,575
Notes to A/C
1) Reserve:
Consolidated Reserve 19,050
Consolidated P&L 17,825
36,875
2) Stock:
A 22,000
B 6,000
Less: Unrealized Profit 600
27,400
Page-48(Ques-6):
A Ltd. Holds 75% in B Ltd.
B Ltd. Holds 58.33% in C Ltd.
A Ltd. Holds 16.67% in C Ltd.
DOA = 01.07.11
1.60 DOC = 31.12.11
Step-1:
Analysis of Net Worth of C Ltd.:
Pre Post Share Capital

60,000 - Reserve & Surplus
+6,250 +1,250 P&L
+12500 +12,500 Unrealized Profit
___-__ (2,000)
78,750 11,700
90,500
Holding of A 16.67% Holding by B 58.38%

Minority 25%
15,083 52,791
22,626
Pre Post
13,126 1,958 45,937 6,854
Reserve P&L Reserve P&L

208 1750 729 6,125
(1250×16.67%) (1250×58.33%) (12,500 - 2000)×58.33)
WN1: Analysis of Reserve:
7,500
Total Pre: 5,000+1,210 = 6,250
01.01.11 Current P Post: = 1,250
1,000 2,500 (Bf) 7,500
(Given)
Till 01.07.11 Post

1,250 1,250
WN2: Analysis of P&L:
(25,000+3000) Total Pre:
3,000+12,500-3,000 = 12,500 P
Post: = 12,500
01.01.11 Current 25,000
3,000 25,000
(22,000+3,000) 1. 61
01.01.11 Post
12,500 12,500
WN3:
Cross Check:
Reserve 7,500
P&L 25,000
Unrealized Profit (2,000)
90,500
Step-2: Analysis of Net Worth of B Ltd.
S/C Pre Post

1,00,000
R&S 10,000 729(729+0)
P&L 10,000 20,000+6,125
Unrealised (1,000)
1,20,000
Profit 25,854
1,45,854
Holding by A Minority Interest

75% 25%
1,09,390 36,464
Pre Post
(75% × 1,20,000) (75% × 25,854)
90,000 19,390
Reserve P&C
546 18,843
(75% × 729) (75% × 25,125)
WN4: Analysis of Reserve of B Ltd.
10,000
01.01.11 Current
1.62 10,000 -
WN5: Analysis of P&L: Total Pre(20,000 – 5,000 – 5,000) = 10,000

30,000+5,000 P Post: = 20,000
30,000
01.01.11
(5,000) 40,000
01.07.11 Post
20,000 20,000
WN6:
Cross Check:
Reserve 10,000
P&L 30,000
Post in C 6,854
Unrealized Profit (1,000)
1,45,854
Step-2: Valuation of
Cost of Control 75% 16.67% 58.33%
Held by A to Held by A to C Held by B
B
Cost of acquisition 90,000 15,000 50,000
Pre Acquisition Dividend (3,750) (500) (1,750)
(5,000×75%) (3,000×16.67%) (3,000×58.33%)
Net cost of Acquisition 86,250 14,500 50,250
(-)Pre Acquisition Net (90,000) (13,125) (45,937)
Worth(Step-1)
Goodwill / CR (3,750) 1,375 4313
Therefore, Net Goodwill 1938
Note 1:
Depreciation on Fab. Of machines sold by C is ignored because rates are not given.
Note 2:
CDT not given so we ignore it.
Step-3:
Consolidated Reserve:
(+)Post share in B Ltd. Hold by A Ltd. 547
(+)Post share in C Ltd. Hold by A Ltd. 208
Total 20,754
1. 63
Consolidated P&L:
P&L of A Ltd. (given) 50,000
(-) Pre Acquisition Dividend
(3,750+500+1,750) (6,000)
(+) Post share in C Ltd. By A Ltd. 1,750
(+) Post share in B Ltd. By A Ltd. 18,843
64,593
Minority Interest
Minority interest in C 22,626
Minority interest in B 36,464
59,090
Consolidated Balance Sheet of A Ltd. With its subsidiary as on 31.12.2011

(I) Equity and Liability Note
(A) Share holder Fund
Reserve and Surplus 1 85,348
(B) Minority investment 59,090
(C) Non-Current Liability
(D) Current Liability 60,000
Total 3,54,438
(ii) Assets:
A) Non Current Asset
a) Fixed Asset
(i) Tangible 2 1,77,000
(ii) Intangible 3 46,938
B) Current Asset
Cash in transit (12,000 – 10,000) 2,000
Other Current Asset 1,28,500
3,54,438
Note to A/C:
Reserve and Surplus
Consolidated Reserve 20,765
Consolidated P&C 64,593
85358
Non-Current Asset:
Tangible Fixed Asset A 70,000
Tangible Fixed Asset B 50,000
Tangible Fixed Asset C 60,000 1,80,000
(-)unrealized Non - Profit (3,000)
1.64 1,77,000
Intangible Fixed Asset
Existing A 20,000
Existing B 15,000
Existing C 10,000
Goodwill 1,932
46,932
Q-7)
A Ltd. Holds 83.33% (66.67%+16.67%) in B Ltd.
B Ltd. Holds 75% in C Ltd.
Analysis of Net Worth of C Ltd.

Pre Post
P&L A/C (WN1) 34,000 30,000
2,34,000 30,000
Total = 2,64,000
B Ltd. 75% Minority interest 25%

1,98,000 66,000
Post 22,500
Pre 1,75,500
(P&L)
WN1:
P&C A/C
64,000
Pre Post
34,000 30,000
Analysis of Net Worth of B Ltd.:
Pre Post Pre Post
2,00,000 Share 50,000 Share
Share Capital 3,00,000 - 3,00,000 -
Post acquisition Share in C Ltd - 22,500 - 22,500
P&L A/C (WN2) 36,000 77,000 48,000 65,000
1. 65
336,000 99,500 3,48,000 87,500
Total = 4,35,500
A Ltd. 83.33% Minority Interest 16.67%

3,62,917 72,583
Pre Post
= 2,24,000 + 58,000 = 66,333 + 14,583
= 2,82,000 = 80,917
WN2 P&L A/C

98,000 + 15,000
= 1,13,000
2,00,000 Share 50,000 Share
Pre = 78,000
Pre Post (30,000) Post
36,000 77,000 = 48,000 65,000
Cost of Control
B Ltd. C Ltd.
(20,000) (15,000)
(5,000)
8,000 9,500
TOTAL = 17,500
Consolidated P/L A/C
P&L A/C of A Ltd. [1,20,000 + 20,000 + 25,000] 1,65,000
(+) Post acquisition Share in B Ltd. 80,917
(-) Pre acquisition dividend [(20,000 + 15,000) + 5,000] (40,000)
2,05,917
Balance Sheet of A Ltd. As on 31.12.11
Shareholder’s Fund
Reserve [2,05,917 – 50,000] 1,55,917
1.66
Minority Interest [66,000 + 72,563] 1,38,583
Current Liability
Creditor [20,000 + 5,000 + 17,000] 42,000
Dividend Payable [40,000 + 5,000 + 5,000] 50,000
7,86,500
Assets
Non Current Assets
Fixed Assets
Tangible [2,10,000 + 1,80,000 + 2,61,000] 6,59,000
Intangible 17,500
Current Assets [60,000 + 30,000 + 20,000] 1,10,000
7,86,500
Q-9)
H Ltd. Holds 90% in S Ltd.
S Ltd. Holds 11.11% in H Ltd.
Analysis of Net Worth of S Ltd. (without Share Capital):

Pre Post
Reserves 30,000 -
P&L A/C (WN1) 14,000 6,000
Stock Reserve (33,000 × 0.10/1.10) - (3,000)
Revaluation (WN2) 6,800 -
Depreciation (WN2) - (340)
50,800 2,660
Analysis of Net Worth of H Ltd. (without Share Capital):

Pre Post
Premium on ordinary 36,000 -
share
Reserves 26,000 -
P&LA/C (WN3) 18,625 41,375
80,625 41,375
WN1:
P&L
20,000

8,000 12,000
1. 67
Pre (6/12) 6,000

Post (6/12) 6,000
+ 8,000
= 14,000
WN2:
Revaluation of Plant:
As on 01.01.11 56,000
(-) Depreciation @10% for 6 months (2,800)
Balance as on 30.06.11 53,200
Revalue Value 60,000
Revaluation reserve 6,800
Depreciation @10% for 6 months (340)
WN3: P&L A/C

60,000

(22,750) (82,750)
Pre
Post
= 41,375
41,375
– (22,750)
18625
Solving using simultaneous equation:

1) Pre acquisition:
Let pre- acquisition net worth of H Ltd. Be x and,
Let pre- acquisition net worth of S Ltd. Be y and,
Therefore, x = 80,625 + 0.90y
y = 50,800 + 0.11x
Therefore, y = 50,800 + 0.11 [80,625 + 0.90y]
y = 50,800 + 8,958 + 0.10y
y = 66,398
66,398
Holding 90% Minority interest 10%

59,758 6,640
2) Post Acquisition:
1.68 Let post - acquisition net worth of H Ltd. Be x and,
Let post - acquisition net worth of S Ltd. Be y and,
Therefore, x = 41,375 + 0.90y
y = 2,660 + 0.11x
y = 2,660 + 0.11 [41,375 + 0.90y]
y = 8,063
8,063

7,257 806
(P&L)
Total Pre Net Worth:

Share Capital (1,00,000 × 0.90) 90,000
(+) Pre-acquisition Share 59,750
1,49,758
Minority Interest:
(+) Pre Acquisition share 6,640
(+) Post Acquisition share 806
(+)Preference Share Capital 80,000
97,446
Cost of Control Investment in

S Ltd. H Ltd.
Cost of Acquisition 1,20,000 24,000
(-)Pre- Acquisition Net Worth (1,49,758) (20,000)
(29,758) 4,000
Capital Reserve = 25,758
Consolidated Reserve:
Reserve of H Ltd. 26,000
(+) Premium on Ordinary Share 36,000
(-) Transfer to S Ltd. (66,398 – 50,800) (15,598)
46,402
Consolidation of P&L
P&L of H Ltd. 60,000
(+) Post Acquisition share in S Ltd. 7257
(-)Transfer to S Ltd. (8,063 – 3,660) (5403)
61,854
1. 69
Consolidated Balance Sheet of A Ltd. As on 31.12.11

Equity &Liabilities
Shareholders Fund
Share Capital [1,80,000 – 20,000 + 1,50,000] 3,10,000
Reserve [25,758 + 46,402 + 61,854] 1,34,014
Current Liability
Creditors [17,000 + 61,000 – 15,000] 63,000
6,04,460
Assets
Non-Current Assets
Fixed Assets – Tangible [95,000 + 50,400 + 6,800 – 340 1,63,460
+ 7,000 + 4,600]
Fixed Assets – Tangible [ 1,12,000 + 40,000] 1,52,000
Current Assets
Stock [-3,000 + 48,000 + 1,14,000] 1,59,000
Debtors [-15,000 + 70,000 + 45,000] 1,00,000
Bank [17,000 + 13,000] 30,000
6,04,460
Q-13
Bee Ltd. Holds 80% in Dee Ltd.
Bee Ltd. Holds 60% in Cee Ltd.
Analysis of Net Worth of Dee Ltd.:
Pre Post
General Reserve - -
P&L (360) 1,110
Preliminary expenses (15) -____
2625 1,110
Total = 3,735
B Ltd. 80% Minority Interest 20%

2,988 747
1.70
Pre Post
2,100 888
(P&L)
Analysis of Net Worth of Cee Ltd.

Pre Post
Share Capital 7500 -
Reserves (3,150 – 2,550) 2,550 600
P&L (WN1) 150 1,050
10,200 1,650
Total
11,850
Bee Ltd. (60%)

Minimum Interest (40%)
7,110
4,740
Pre Post
6,120 990
Reserve P&L
360 630
P&L
WN1:
1,200
Pre Post
900 1,050
(750)
150
Valuation of:
Cost of Control Share in Debenture in
Cee Ltd. Dee Ltd. Dee Ltd.
Cost of Acquisition 6,750 2,160 294
(-) Pre-Acquisition Net Worth (6,120) (2,100) (300)
(-)Pre-Acquisition Dividend (450) -____ -____
1. 71
180 60 (6)
Goodwill = 234
Consolidation Reserves:
Reserves of Bee Ltd. 33,000
(+) Post Acquisition in Cee Ltd. 360
(+) Post Acquisition in Dee Ltd. __-__
33,360
Consolidated P&L:
P&L of Bee Ltd. 9,000
(+)Post Acquisition in Cee Ltd. 630
(+)Post Acquisition in Dee Ltd. 888
(-)Pre Acquisition dividend in Cee Ltd. (450)
(-)Stock Reserve (200×0.25/1.25) (40)
10,028
Consolidate Balance Sheet of Bee Ltd. As on 31.03.12

Equity and Liability
Shareholders Fund
Reserve and Surplus [33,360+10,028] 43388
Minority Interest [747 + 4740] 5487
Debenture [1500 – 300] 1200
Current Liability
Creditors [14100 + 2700 + 930] 17730
Bills payable [150 – 75] 75
Loan [75 – 75] _-__
94885
Assets
Non-Current Assets
Fixed Assets
Tangible [39,000 + 7,500 + 2,100 + 6,000 + 1,500 + 600] 56700
Intangible 234
Current Assets
Stock [ -40+16,500+3,000+1,500] 20,960
Debtors [9,000+1,300+1,280] 11634
Cash and Bank [3201 + 1056 +900] 5157
Bills Receivables [195+60-75] 180
Cash in Transit 15
94,880
Q-15)
1.72
Net Assets:
Fixed Assets 144
Investment 49.5
Current Assets 70
Loan and Advance 15
15% Debenture (90)
Current Liability (50)
Net Assets 138.5
Dividend = 70,00,000 × 20% = 20

70%
Cost of Acquisition 70
(-) Dividend (10 × 0.7) 7
(-) Pre-Acquisition cost (1385 × (96.95)
70%)
Capital Reserve 33.95
WN1: Calculation of Dividend:

Number of Shares = 70 lakhs = 3.5 lakh per Share
20 per share
Therefore, Face Value = 3.5 ×10 = 35 Lakhs
@20% = 35×20% = 7 lakhs
Q-16)Amalgamation Inter Company Holding Control

Step-1:Net Assets:
Total Assets (1 Cr. – 1,75,000) 98,25,000
(-) Current Liability (20,00,000)
78,25,000
Step-2: PC
Yield = (30+40+65) ×40% = 18,00,000
3
PC = Yield = 18,00,000
15% 15%
= 1,20,00,000
Holding 46% (55,20,000)

Payment to Foreign Company : 64,80,000
PC 120,00,000
(-)Cost to FC (5,40,000)
Capital gain 1,14,60,000
(-) Tax @30% (34,38,000)
Net Payment [1,20,00,000 – 34,38,000] 85,62,000
1. 73
(-) immediate amount (42,81,000)
Unsecured Loan 42,81,000
Step-3)
PC 64,80,000
Less: NA 76,25,000
Goodwill 3,45,000
Q-17)In the book of H Ltd(DOA 01.08.2016)

Bank A/C 1,20,000
To dividend reserve A/C 1,20,000
It is assumed that dividend is paid out of current profit.
Q-18)
90% 85% 80% 100%
Pre Post Pre Post Pre Post Pre Post
Share 1,00,000 - 1,00,000 - 50,000 - 50,000 -
Capital
Reserve 5,00,000 20,000 30,000 (10,000) 20,000 - 40,000 15,000
1,50,000 20,000 1,30,000 (10,000) 70,000 - 90,000 15,000
Total 1,70,000 1,20,000 70,000 1,05,000
Holding MI Holding MI Holding MI

1,53,000 17,000 1,02,000 18,000 56,000 14,000
Pre Post Pre Post

1,10,500 (8,500) 36,000 -
Holding MI
1,05,000 -
Pre Post
1,35,000 18,000
Pre Post
90,000 15,000
COC
Cost of Acquisition 1,40,000 1,04,000 56,000 10,000
(-)Pre Acquisition (1,35,000) (1,10,500) (56,000) (90,000)
Goodwill/CR 5,000 (6,500) - 10,000
1.74 P&L A/C

90% 85% 80% 100%
Holding 2,00,000 2,00,000 2,00,000 2,00,000
(+)Post Acquisition 18,000 (8,500) - 15,000
Consolidated Balance 2,18,000 1,91,500 2,00,000 2,15,000
Minority interest 17,000 18,000 14,000 -
It is assumed that Company has not utilised current year profits and shortfall is adjusted
against past profits.
Bank A/C (30,000 × 80%) 24,000
To investment 8,000
To P&L A/C(20,000 × 80%) 16,000
Analysis of Net Worth of Subsidiary Company

2009 2010 2011
Share 1,00,000 - 1,00,000 - 1,00,000 -
Capital
P&C A/C 35,000 27,000 35,000 35,000 35,000 45,000
1,35,000 27,000 1,35,000 35,000 1,35,000 45,000
Total Net 1,62,000 1,70,000 1,80,000
Worth
Holding 80% MI 20% Holding 75% MI 25% Holding 85% MI 15%

129600 32400 127500 42500 153000 27000

10800 21600 101250 26250 114750 38250
0
Step-2: Cost of Control:
2009 2010 2011
Cost of investment (WN 1) 1,28,000 1,20,000 14,100
(-)Pre acquisition dividend (12,000) (11,250) (12,750)
(-)Pre Acquisition Net Worth (1,08,000) (1,01,250) (1,14,750)
8,000 7,500 1,350
P&L A/C (2009) P&L A/C (2010)
62,000 70,000
Pre Pre
50,000 Post 27,000 50,000 Post 35,000
-(15,000) -(15,000) 1. 75
35,000 35,000
P&L A/C (2011)

80,000
Pre
Post 45,000
50,000
-(15,000)
35,000
Step-3:
Calculation of P&L
2009 2010 2011
Balance if holding Company 1,60,000 1,48,000 1,55,000
(-)Pre Acquisition Dividend (12,000) (11,250) (12,750)
(+)Post Acquisition share in Subsidiary 21,600 26,250 38,250
1,69,600 1,63,000 1,80,500
WN calculations of Cost of Investments

Given 1,19,000
(+)sale proceeds(1,28,000 – 1,19,000) 9,000
(-)Cost of investment (1,28,000/800 × 50) (8,000)
1,20,000
(+)Purchase(1,40,000+1,19,000) 21,000
141,000
Q-19) 70% (in Lakhs)

2006 2007 2008 2009 2010 2011
Pre Post Pre Post Pre Post Pre Post Pre Post Pre Post
Share 10 - 10 - 10 - 10 - 10 - 10 -
Capital
Reserve 0.8 (2.5) 0.8 (4.0) 0.8 (5.0) 0.8 (1.2) 0.8 1.0 0.8 1.5
10.8 (2.5) (4.0) (5.0) (1.2) 1.0 1.5
Total 8.30 6.80 5.80 9.60 11.80 1.23
(-) MI (2.49) (2.04) (1.74) (2.88) (3.54) (3.69)
= 10,80,000 × 70% = 7,56,000
Pre Acquisition Net Worth will be same each year.
Cost of control
COI 10,00,000
(-) Pre Acquisition Net Worth (7,56,000)
Goodwill 2,44,000
1.76
This calculation will be same each year.
Q 20)
Statement showing consolidated P&L as on 31.12.11
H Ltd. S Ltd. Total
Revenue
Revenue from operation [WN2] 8,40000 9,50,000 17,90,000
Other incomes - - -
8,40000 9,50,000 17,90,000
Expenses
Interest on Debentures 12,000 12,000 24,000
Cost of RM consumed (WN1) 5,00,000 5,40,000 1,04,000
Wages and Salaries 1,00,000 1,50,000 2,50,000
General Expenses 80,000 60,000 1,40,000
Depreciation 1,10,000 79,000 1,89,000
8,02,000 8,41,000 707,000
PBT 38,000 1,09,000 1,47,000
(-)Tax @30% (19,000) (54,500 (73,500)
)
PAT 19,000 54,500 73,500
(-)P. Dividend - (7,000) (7,000)
(+)P. Dividend 3,500 - 3,500
(-)Stock reserve (2,500) - (2,500)
1,00,000 47,500
(-)minority Interest 13,500 67,500
Profit transfer to Balance sheet 54000 7,14,000
47,500
Holding Minority
38,000 9,500
Pre Post
2,500 28,500
Assumption: It is assumed that tax rates is 15.50%
WN1:
Cost of RM consumed:
Opening Stock
(+) Purchase 5,00,000 6,00,000
(-) closing Stock 1,00,000 50,000
1. 77
4,00,000 5,50,000
(60,000)
5,00,000 5,40,000
Ques 22) A Ltd. Holds 80% in B Ltd.

Analysis of Net Worth of D Ltd.
Pre Post
Reserves 1,00,000 -
P&L[WN1] 46,000 36,000
Revaluation 37,500
Depreciation (1875)
3,83,500 34,125
Total
4,17,625
Holding 80% MI 20%

3,34,100 83,525
Post
Pre
27,300
3,06,800
P&L
P&L
82,000
Other Profits
30,000 72,000
–(20,000)
10,000
Pre
36,000 Post
+10,000 36,000
46,000
Plant and machinery:
OP Balance 1,50,000
(-) 6 month depreciation (7,500)
1,42,500
Revaluation 1,80,000
37,500
1.78
5% Depreciation 1,875
Step-2: COC:
Cost of Investment 3,40,000
Pre Acquisition cost of Acquisition (3,06,800)
1,13,200
97,200
Reserves : A Ltd. 240,000
P&L
A Ltd. 57,200
Post acquisition in B Ltd. 27,300
(-)Dividend (16,000)
68,500
Reserves
A Ltd. 24,000
P&L
A Ltd. 57,200
Post acquisition in B Ltd. 27,300
(-) Dividend (16,000)
68,500
Balance Sheet of A Ltd. As on 31.12.11

Shareholders Fund
Reserve and Surplus [2,40,000+68,500] 3,08,500
Current Liability
BOD 80,000
BP 8,400
CD 56
10,36,525
Assets
Non-Current Assets
Fixed Assets
Tangible [1,50,000 + 1,80,000 + 2,40,000 + 13,50,000] 19,20,000
Intangible 17,200
Current Assets
Stock 1,56,400
Debtors 84,000
Cash 22,500
1. 79
Bills Receivables 1,580
1036
Q-23) DOA/DOC – 01/04/11

Eagle 52.8% Grande
66.67% Preference
60% Debenture
20% 40%
Bird
For Bird Ltd.

Analysis of Net Worth of Bird Ltd.
Pre Post
Equity Share Capital 40 -
General Reserves 5 5
P&L A/C - (21)
45 (16)
Total Net worth

29
Eagle Ltd. 20% Grande Ltd. 40% Minority Interest 40%

5.8 11.6 4.6
Pre Post Pre Post

9 (3.2) 18 (6.4)
General Reserve P&L General Reserve P&L

1 (42) 2 (8.4)
Analysis of Preference Shares of Bird Ltd.

Pre Post
Preference Share Capital 10 -
Dividend [10×7.5%×4] - 3
10 3
Total 13
Holding 0.1 Minority 100

0 10
1.80 Step-1: For Grande Ltd.

Analysis of Net Worth of Grande Ltd.
Pre Post (8.4)
Post Share in Bird Ltd. - 2
Equity share capital 48 -
General Reserves - 15
P&L A/C - (36)
48 (27.1)
Total
20.6
Eagle Ltd. 52.08% Minority interest 47.92%

10.73 9.87
Pre Post
25 (14.27)
P&L General Reserve

(23.12) 8.85
Analysis of Preference Shares of Grande Ltd.

Pre Post
Share Capital 12 -
Dividend [10×7.5%×4] - -
12 -
Total = 12
Holding 0% Minority 100%

0 12
Step-2: Calculation of
Cost of Control Eagle Ltd. In Grandee ltd. Bird Ltd. In
Grande Ltd. Bird Ltd. Bird Ltd. Investment in Eagle
Equity Equity Equity Profit Debenture
Cost of Acquisition 25 8 20 10 14
(-) Pre Acquisition (25) (9) (18) 10 (15)
1. 81
Net Worth
0 (1) 2 - (1)
Calculation of Cumulative general Reserve
General Reserve Eagle Ltd. 25
(+) Post Acquisition share in Bird Ltd. 1
(+)Post share in Grande Ltd. 8.85
34.85
Calculation of Cumulative P&L
P&L of Eagle Ltd. (96)
(+)Post Share in Bird Ltd. (4.2)
(+) Post Share in Grande Ltd. (23.12)
(123.12)
Minority Interest
Equity share in Bird Ltd. 11.6
Equity share of grandee Ltd. 9.87
Preference share of bird Ltd. 10
Preference share of Grandee Ltd. 12
43.47
Balance Sheet of Eagle Ltd. As on 31.12.11

Shareholders Fund
Share Capital [60 + 15 -10] 65
Reserve and Surplus [120 + 34.85 -123.32] 31.53
Minority Interest 43.47
Non-Current Liability 319
[153 + 71 + 52 + 18 + 12 + 3 +25 + 13]
Current Liability 537
[314 + 71 + 52 + 18 + 12 + 9 – 6 – 4]
996
Assets
Fixed Assets [272 + 104 + 42] 418
Current Assets [ 353 + 123 + 112 – 6 – 4] 578
996
NOTE : Preference dividend are in a mean with 8 years in case Eagle Ltd. And 4 years
in case of other companies.
Q-24)
Investment
A Ltd. B Ltd. C Ltd.
1.82 75% 83.33% 80%

Balance Sheet of Investment Ltd. As on 31.12.11 (Before Consolidation)
Liabilities Amount Assets Amount
Share Capital 3,00,000 Investment in
A Ltd. 35,000
B Ltd. 72,000
Reserve* 15,100 C Ltd. 92,000 1,99,000
Debtor 6,000
B Ltd.
Creditors
A Ltd. 3,500 Cash and Bank Balance 1,13,600
3,18,600 3,18,600
*Dividend Received During the Year

Final Dividend
C Ltd. (4,000 × 80%) 3,200
B Ltd. ( - ) -
A Ltd. (2,000 × 75%) 1,500
Interim
A Ltd. @8% (3,200×75%) 2,400
B Ltd. @10% (10,000×80%) 8,000
15,100
Analysis of Net Worth of C Ltd.:

Pre Post
Reserves 7,500 -
P&L [WN1] - 15,000
Revaluation (65,000 – 50,000) 15,000 -
1,22,500 15,000
Total = 1,37,500
Investment 80% Minority Interest 20%

1,10,000 27,500
Pre 98,000 Post 12,000

P&L
15,000
Pre 4,000
Post
Dividend (4,000)
15,000 1. 83
------

Pre Post
Reserves - -
P&L [WN2] (12,000) (6,000)
Depreciation - (3,000)
1,08,000 (9,000)
Total = 99,000
Investment 83.33% Minority Interest 16.67%

82,500 16,500
Pre Post
90,000 7,500
P&L
P&L
WN 2:
18,000
Pre Post
12,000 6,000
Analysis of Net Worth of A Ltd.:

Pre Post
Reserves 3,000 -
P&L A/C - 6,000
Stock Reserve 2,000 -
45,000 6,000
Total = 51,000
Investment 75% Minority Interest 25%

38,250 12,750
1.84
Pre Post
33,750 4,500
P&L
WN3: P&L 6,000
Pre 2,000 Post

Dividend (2,000) 6,000
--------
Step-2:
Cost of Control
A Ltd. B Ltd. C Ltd.
Cost of Acquisition 35,000 72,000 92,000
(-) Pre Acquisition Dividend (1,500) - (3,200)
(-) Pre Acquisition Net Worth (33,750) (90,000) (98,000
)
(250) (18,000) (9,200)
Capital reserve = 27,450
Consolidated P&L:
P&L of Investment Ltd. 15,100
(+)Post Share in A Ltd. 4,500
(+)Post Share in B Ltd. (7,500)
(+)Post Share in C Ltd. 12,000
(-) Pre-Acquisition dividend in A Ltd. (1,500)
(-) Pre-Acquisition dividend in C Ltd. (3,200)
19,400
Minority Interest:
Share in A Ltd. 12,750
Share in B Ltd. 16,500
Share in C Ltd. 27,500
56,750
Balance Sheet of investment Ltd. A Ltd. As on 31.12.11
Share Fund
Reserve and Surplus 46,850
1. 85
Current Liability
Creditors [5,000 + 11,000 + 4,000 + 3,500 - 3,500 - 6,000 11,000
- 2,000 - 1,000]
4,14,600
Assets
Non-Current Assets
Fixed Assets
Tangible [18,000 + 41,000 + 50,000 + 16,000 + 30,000 + 1,79,000
12,000 + 15,000 – 3,000]
Intangible [ 4,000 + 15,000 ] 19,000
Current Assets
Stock [2,000 + 11,000 + 321,000 + 21,000] 66,000
Debtors [4,000 + 8,000 + 17,000 + 6,000 – 6,000 – 3,500 22,500
– 2,000 – 1,000]
Cash at Bank [1,000 + 2,000 + 11,500 + 1,13,600] 1,28,100
4,14,600
Q-25)
DOA = 01/04/11
DOC = 30/06/12
Cost of Investment = 6,000/4 × 5 × 25 = 1,87,500
Step-1:Calculation of Net Worth of Baker Ltd.

Pre Post
P&L (WN1) 8,000 12,000
68,000 12,000
Total
80,000

60,000 20,000
Pre 51,000 Post 9,000
P&L
WN1: P&L A/C
20,000
Pre: 12,000
(4,000) Dividend Post
8,000 12,000
1.86
Step-2:
Calculation of Cost of control:
Cost of Acquisition (1,87,500×75%) 1,40,625
(-) Pre Acquisition Dividend (4,000 × 0.70) (3,000)
(-)Pre Acquisition Net Worth (51,000)
Goodwill 86,625
Calculation of Cumulative general Reserve
General Reserve Able Ltd. 55,000
(+) Post Acquisition share in Baker Ltd. -
55,000
Calculation of Cumulative P&L
P&L of Able Ltd. 62,000
(+)Post Acquisition in Baker Ltd. 9,000
71,000
68,000
Balance Sheet of investment Ltd. A Ltd. As on 30.06.12

Shareholders Fund
Reserve and Surplus 2,07,375
Current Liability
Creditors [27,000 + 7,000] 34,000
Provision for Tax [33,000 + 6,000] 39,000
5,06,625
Non-Current Assets
Fixed Assets
Tangible [2,00,000 + 38,000 + 32,000 + 9,000] 2,79,000
Intangible 86,625
Non Current Investment 7,000
Current Assets
Stock [32,000 + 21,000] 53,000
Debtors [41,000 + 17,000] 58,000
Bank 23,000
5,06,625
Note: Proposed Dividend is part of Reserves and is to be ignored as per Amended AS 4.
New Shares to be issued:

1,87,500 × 75% = 5,625
25
Share Capital [(15,000 + 5,625) × 10] 20,625
Reserve and Surplus 1. 87
General Reserve 55,000
P&L 68,000
Security Premium (5,625×15) 84,375
20,734
Q-26)
1) 48,000×100 = 75%
64,000
(Before Bonus Issue)
Step-1)
Analysis of Net Worth of W Ltd.
Pre Post
P&L (WN1) 9,500 14,500
89,500 14,500
Total = 1,04,000
H Ltd. Minimum
75% Interest 25%
78,000 26,000
Pre Post
67,125 10,875
P&L
Step-2:
(-)Pre Acquisition Dividend (9,500×0.75) (7,125)
Goodwill 750
WN1: P&L
24,000
Pre = 30,000+30,000×2/12(2month) Post

= 35,000 14,500
1.88
(9,500) [8,000+(9,000×2/12)]
25,500
(16,000) Bonus
9,500
2) 40,000×100 = 62.50%
64,000
Pre Post
P&L (WN2) 27,000 3,000
1,07,000 3,000
Total = 1,04,000
H Ltd. Minimum Interest

62.5% 37.5%
65,000 39,000
Pre Post
66,875 1,875
WN2: P&L A/C

24,000
Pre: 43,000 Post

(16,000) (3,000)
27,000
P&L
Step-2:
Capital reserve (6,875)
1. 89
3) 60,000 × 100 = 75%
80,000
Acquired (after issue of bonus)

Pre Post
P&L (WN3) 26,000 (2,000)
1,06,000 (2,000)
Total = 1,04,000
H Ltd. Minority Interest

75% 25%
78,000 26,000
Pre Post
79,500 (1,500)
P&L
WN3:
P&L A/C
24,000

28,000 (4,000)
Post (6/12)
Pre (6/12) (2,000)
(2,000)
28,000
26,000
Step-2:
Goodwill (500)
1.90
Q-27)
A Ltd. Holds 75% in B Ltd.
B Ltd. Holds 80% in C Ltd.
A Ltd. Holds 10% in C Ltd.

Pre Post Pre Post
(B) 1 September 2011
st
(A) 1 December 2011
st
Balance Forward 1,920 - 1,920 -

P&L (320) (160) (440) (40)
(8:4/11:1)
1,600 (160) 1,480 (40)
1,440 1,440
1,440
A Ltd. B Ltd. Minority Interest

Pre 10% 80% 10%
148 144 1,152 144
Pre Post
Post (4) 1,280 (128)

Pre Post
Balance Forward [7:5] (466.67) (333.33)
P&L - 1,800
Post Acquisition Share in C Ltd. - (128)
(466.67) 1,338.67
Total = 872
A Ltd. 75% Minority 25%

654 218
1. 91
Pre Post
(350) 1,004
Consolidated P&L
P&L of A Ltd. 2,300
(+) Post Acquisition share in C Ltd. (4)
4300
Minority Interest
Shares in B Ltd. 218
Shares in C Ltd. 144
362
Ques 26:
Rock Ltd holds 80% in King Ltd.
King Ltd. Holds 85% in Chair Ltd.
Step-1:Analysis of Net Worth of Chair Ltd.

Pre Post
Capital Reserve 15,000 8,000
Revenue Reserve 30,500 14,560
1,25,500 22,560
Total = 1,48,060
Holding (King Ltd.) Minority Interest

85% 15%
1,25,851 22,209
Pre Post
1,06,675 19,176
Capital Revenue
6,800 12,376
Analysis of Net Worth of King Ltd.:
Pre Post
Post Acquisition in Chair Ltd.
Capital Reserve - 68,000
1.92 Revenue Reserve - 12,376
1,90,000 28,546
Total = 2,18,546
Holding (Rock Ltd.) Minority Interest

80% 20%
1,74,837 43,709
Pre Post
1,52,000 22,837
Capital Revenue
5,440 1,739
Step-2:
Cost of Control
Rock Ltd. King Ltd.
Cost of Acquisition [6,800×22] 1,60,000 1,49,600
Goodwill 8,000 42,925
Total = 50,925
Balance Sheet of Rock Ltd. As on 30.06.12

Shareholder Fund
Reserve and Surplus [55,440 + 1,16,937] 1,72,377
Minority Interest [22,209 + 43,709] 65,918
Current Liability
Creditors [1,12,060 + 73,130 + 78,190] 2,63,380
Taxation [30,000 + 22,000] 52,000
Proposed Dividend [1,00,000 + 60,000 + 40,000 – 48,000 – 34,000] 1,18,000
8,71,675
Assets
Non-Current Assets
Fixed Assets
Tangible [1,35,000 + 60,000 + 7,000] 2,65,000
Intangible 50,925
Non Tradable Investment 10,400
1. 93
Current Assets
Stock [55,240 + 36,840 + 61,760] 1,53,840
Debtors [ - 48,000 – 34,000 + 1,10,070 + 69,120 + 93,880] 1,91,070
Bank [1,31,290 + 16,540 + 52,610 2,00,440
8,71,675
Cumulated Capital reserve

Capital Reserve of Rock Ltd. 50,000
(+) Share of post Acquisition Net Worth in King Ltd. 5,440
55,440
Cumulative Revenue Reserve
Revenue reserve of Rock Ltd. 99,540
(+)Share of Post Acquisition Net Worth in King Ltd. 17,397
1,16,937
Q-29)
80% 75% 85%
2010 2011 2012
Share 10,00,000 - 10,00,000 - 10,00,000 -
Capital
P&L A/C 3,50,000 2,70,000 3,50,000 3,50,000 3,50,000 4,50,000
(WN1)
13,50,000 2,70,000 3,50,000 13,50,000 13,50,000 4,50,000
16,20,000 17,00,000 18,00,000
MI 20% Holding 75% MI 25%

Holding 80%
12,75,000 4,25,000
12,96,000 3,24,000
Holding 85% MI 15%

15,30,000 2,70,00
Pre Post 0
Pre Post
10,80,00 2,16,000
10,12,500 2,62,500
0
Pre Post
11,47,500 3,82,500
According to Cost of Acquisition
12,80,000 11,90,000 12,00,000
(+) Selling Price [12,80,000 – 11,90,000] - 90,000 -
(-) Cost [12,80,000 × 500] - (80,000)
8,000
(+) Cost of Purchase [14,00,000 – 12,90,000] 2,10,000
1.94
12,80,000 12,00,000 14,10,000
Cost of Control
Cost of Acquisition 12,80,000 12,00,000 14,10,000
(-) Post Acquisition Dividend (1,20,000) (1,12,500) (1,27,500)
(-) Post Acquisition Net Worth (10,80,000) (10,12,500) (11,47,500)
Goodwill 80,000 75,000 1,35,000
Revenue Profit post Acquisition 2,16,000 2,62,500 3,82,500

(-)Pre Acquisition Dividend (1,20,000) (1,12,500) (1,27,500)
96,000 1,50,000 2,55,000
WN1:
P&L A/C (2010)
6,20,000
Pre 5,00,000 Post

(1,50,000) 15% Dividend 2,70,000
3,50,000
Pre Acquisition = 1,50,000 × 80%

= 1,20,000
P&L A/C (2011)

7,00,000
Pre 5,00,000 Post

(1,50,000) 15% Dividend 3,50,000
3,50,000

= 1,12,500
P&L A/C (2012)
8,00,000
Pre 5,00,000 Post

(1,50,000) 15% Dividend 4,50,000 1. 95
3,50,000

= 1,27,500
When Z Ltd. Is treated as Subsidiary

Consolidated P&L of Z and its subsidiary as on 31.03.12
XY Z Total
Income
Revenue from operation 2,000 1,000 3,000
Other income [100+100] 200 - 200
2,200 1,000 3,200
Expenses 900 500 1,400
PBT 1,300 500 1,800
(-) Tax (600) (200) (800)
PAT 700 300 1,000
(-) Dividend Paid (300) (200) (500)
400 100 500
(-) Minority interest @50% - (50) (50)
400 50 450
(+)Retained Earning 3,150
Profit transfer to consolidated B/S 3,600
As per the given information in the question we can answer given into as follows:
Particulars Subsidiary Associates Investment Joint Venture
Applicable AS 21 23 13 27
Treatment for Share Full Revised investment At Cost Proportional
(i.e. Equity Consolidation
Method)
According Treatment
Analysis of Net Worth of Z Ltd.

Pre Post
Reserve (WN1) 1,900 100
2,900 100
Total = 3,000
Minority Interest
Holding 50%
50%
1,500
1,500
1.96
Pre Post
1,450 500
P&L
WN1:
Reserves 2,000
P&L Others
1,200 800
Pre 1,110 Post 100
Total Pre =1,100 + 800

= 1,900
Total Post = 100
Cost of Control
Goodwill (550)
Consolidated Reserve
Reserve of X Ltd. 3,600
Balance Sheet of X Ltd. As on 31.03.12

Shareholders Fund
Share Capital 2,000
Non-Current Liability
Debenture [1,500 + 2,000] 3,500
Current Liability [4,550 + 2,500] 7,050
17650
Assets
Non-Current Assets
Fixed Assets
Tangible [6,500 + 4,000] 10,500
Intangible 550
1. 97
Current Assets [3,500 + 3,000 + 100(Dividend)] 600
17,650
Q-32) DOA-01/04/11
DOC-31/03/12
H Ltd. (60%)  S Ltd.
Holding after bonus issue = (180 + 180×3/5)
= 288
Percentage = 288×100 = 60%
480
Step-1:
Pre Post
General Reserve (WN1) 1,200 180
P&L (WN2) 600 1,020
6,600 1,200
Total = 7,800
Holding Minority Interest

60% 40%
4,680 3,120
Pre Post
3,960 720
General Reserve P&L

108 612
WN1:
General Reserve P&L
1,380 1,620
Pre 3,000 Post

1.98 (1800) Post 1,020
1,200 180
Pre 1,200
(600) Dividend @20% on 3,000
600
Cost of Control
(-) Post Acquisition Dividend (360)
(-) Post Acquisition Net Worth (3,960)
Capital Reserve (1,320)
Cumulative General Reserve:

General Reserve of H Ltd. 2,784
(+)Post Acquisition Share in S Ltd. 108
2,892
Cumulative P&L:
P&L of Ltd. 2,715
(+) Post Acquisition Share in S Ltd. 612
(--) Pre Acquisition Dividend (360)
2,967
Balance Sheet of H Ltd. As on 31.03.12

Share Fund
Reserve and Surplus [2,892 + 2,967 + 13,607] – 20 7,159
Current Liability 4,981
27,260
Assets
Non-Current Assets
Fixed Assets
Tangible [2,718 + 4,905 + 4,905 + 1,845 + 586] 14,954
Intangible -
Current Assets 12,306
27,260
Notes to Accounts
Current Liabilities
Bills Payable
H Ltd. 372
1. 99
S Ltd. 160
(-) Inter Company Holding (160) 372
Sundry Creditor
H Ltd. 1,461
S Ltd. 854
(-) Inter Company Holding (155) 2,160
Provision for Tax
H Ltd. 855
S Ltd. 394 1,249
Proposed Dividend 1,200
4,981
Current Assets
Stock
H Ltd. 3,949
S Ltd. 1,956
(-) Stock Reserve (100×0.25/1.25) (20) 5,885
Debtors
H Ltd. 2,600
S Ltd. 1,363 3,963
Cash and Bank Balance
H Ltd. 1,490
S Ltd. 204 1,694
Bills receivable
H Ltd. 360
S Ltd. 199
(-) Inter company Holding (160)
(-) Against Cr (360 – 160 – 45) (155) 244
Sundry Advance 520
12,306
Q-33) PD Ltd. (80%) SD Ltd.
Analysis of Net Worth of SD Ltd.
Pre Post
Capital Reserve (WN1) 1,80,000 1,30,000
1.100
(WN2)
P&L A/C (WN3) 1,52,500 1,27,500
Revaluation (WN4)
Land and Building 4,40,000 -
Furniture (30,000)
Depreciation
Land and Building - (11,000)
Furniture - 3,000
27,80,000 2,87,000
Total
30,67,000
Holding 80% Minority interest 20%

24,53,600 6,13,400
Pre Post
22,24,000 2,29,600
Capital Reserve Revenue Reserve P&L

1,04,000 30,000 95,600
WN1: Capital Reserve

3,10,000
On 01.04.11 During the Year

50,000 2,60,000
Pre (6/12) (6/12) Post

1,30,000 13,000
+50,000
1,80,000
WN2: Revenue Reserve
75,000
During the Year

On 01.04.11
75,000
-
1. 101
Pre Post
37,500 3,750
WN3: P&L
2,80,000

2,75,000 2,55,000
(2,50,000) Dividend@12.5%
25,000
Pre (6/12)
(6/12) Post
1,27,500
1,27,500
+25,000
1,52,500
Dividend = (18,10,000 – 16,10,000) × ___1___ × 100

0.80 20,00,000
WN4: Revaluation of Fixed Assets:

Depreciation Rate:
Land and building = 16,00,000 – 15,20,000 × 100 = 5%
16,00,000
Furniture = 2,00,000 – 1,60,000 × 100 = 20%
2,00,000
Value of Fixed Asset as on 01.10.11
Land and buildings Furniture
As on 01.04.11 16,00,000 2,00,000
(-) Depreciation for Six months (40,000) (20,000)
Value as on 01.10.11 15,60,000 1,80,000
Revolved Value 20,00,000 1,50,000
Revaluation Reserve (pre) 4,40,000 (30,000)
Depreciation for six months (11,000) 3,000
(Post)
Cost of Control (Step-2)
Capital Reserve 6,14,000
Calculation of cumulative Capital Reserve
1.102
Capital Reserve of PD Ltd. 50,000
(+) Post A/C Share in SD Ltd. 1,04,000
6,04,000
Calculation of Cumulative Revenue reserve
Revenue Reserve of PD Ltd. 8,50,000
(+) Post Acquisition share in SD Ltd. 30,000
8,80,000
Calculation of Cumulative P&L:
P&L of PD Ltd. 4,00,000
(+) Post Acquisition Share in SD Ltd. 95,600
(-) Stock Reserve on hire (1,600 + 4,000) (5,600)
4,90,000
Consolidated Balance Sheet of PD Ltd. And its Subsidiary SD Ltd. as on

31.03.12
Shareholder Fund
Reserve and Surplus [6,04,000+8,80,000+21,90,000+6,10,000] 25,88,000
Current Liability
Sundry Creditors [2,50,000 + 2,25,000 + 28,000] 4,47,000
Bills Payable [1,00,000 + 10,000] 1,10,000
87,58,000
Assets
Non-Current Assets
Fixed Assets
Tangible [-5600 + 4,40,000 – 30,000 – 11,000 + 3,000 + 20,00,000 73,76,400
+ 13,20,000 + 20,00,000 + 8,00,000 + 5,00,000 + 1,60,000]
Current Assets
Stock [3,40,000 + 1,00,000] 4,40,000
Debtors [ - 28,000 + 3,60,000 + 2,00,000] 5,32,000
Bills Receivable [50,000 + 40,000] 90,000
Bank [2,40,000 + 8,000] 3,20,000
87,58,400
Q-35) DOA – 01.07.09
DOC – 31.03.12
X 80% Y
30% 60%
Z
1. 103
Step-1:
Pre Post
Share Capital 100 -
Reserves (WN1) 10 20
P&L (WN2) 16 24
Profit on Sale of Equity (24 × 1/3) (8) -
118 44
Total = 162
X Ltd. 30% Y Ltd. 60% Minority Interest 10%

48.60 97.2 16.2
Pre Post Pre Post

35.4 13.2 70.8 26.4

6 7.2 12 14.4
WN1:
Reserves
30
Pre Post
10 20
WN2: P&L
40
Pre Post
16 24
Analysis of Net Worth of Y Ltd.
Pre Post
Share Capital 200 -
Reserves 20 20
P&L 30 20
1.104 Stock Reserve (5×0.25/1.25) - (1)
Post Acquisition Share in Z Ltd.
Reserves - 12
P&L - 14.40
250 65.40
Total
315.40

252.32 63.08
Pre Post
200 52.32
Reserve P&L
25.6 26.72
Cost of Control
X Ltd.
(-) Pre Acquisition Net Worth (200) (35.40) (70.80)
(200) 4.6 9.2
Total Capital Reserve = 6.2
Cumulative Reserves
Reserve of X Ltd. 50
(+) Post Acquisition share in Y Ltd. 25.60
(+) Post Acquisition share in Z Ltd. 6
81.60
Cumulative P&L
P&L of X Ltd. 60
(+) Post Acquisition share in Y Ltd. 26.72
(+) Post Acquisition share in Z Ltd. 7.2
93.32
Minority Interest
In Y Ltd. 63.08
In Z Ltd. 16.20
79.28
1. 105
Balance Sheet of X Ltd. As on 31.03.12
Shareholders Fund
Share Capital 300
Reserve and Surplus [81.60 + 93.92 + 6.2] 181.72
Minority Interest 79.28
Current Liability
Bills Payable [10 + 5 - 5] 10
Creditor [30 + 10 + 10 – 5] 45
Y’s Balance [15 – 10] 5
Z’s Balance [50 - 0] 50
660
Assets
Non-Current Assets
Fixed Assets
Tangible [-8 + 130 + 150 + 100] 372
Intangible -
Current Assets
Stock [-1 + 50 + 20 + 20] 89
Drr [70 + 10 + 20 -5] 95
BR [10 + 20 -5] 25
Cash at Bank [30 + 20 + 10] 60
Inter company [10 + 30 – 10] 30
660
Q-36:
M Ltd. 75% D Ltd.
50%
50% 25%
25%
A Ltd. 8.33% K Ltd.
M Ltd. D Ltd. = 30,000×100 = 75%

40,000
M Ltd. A Ltd. = 10,000×100 = 50%
20,000
D Ltd. A Ltd. = 5,000×100 = 25%
20,000
M Ltd. K Ltd. = 3,60,000×100 = 75%
120×60,000
1.106 D Ltd. K Ltd. = 18,00,000×100 = 75%
120×60,000
A Ltd. K Ltd. = 6,00,000×100 = 75%
120×60,000
Analysis of Net Worth of kanpur Ltd.

Pre Post
P&L A/C 60,000 2,60,000
66,60,000 6,60,000
Total = 162
Minority Interest 16.67%
12,20,244
M Ltd. 50%
36,60,000 D Ltd. 25%
18,30,000 A Ltd. 8.33%
6,09,756

33,30,000 3,30,000 16,65,000 1,65,000 5,54,778 54,978
0
Reserve P&L Reserve P&L Reserve P&L

2,00,000 1,30,000 1,00,000 65,000 33,320 21,658
0
Analysis of Net Worth of A Ltd.

Pre Post
P&L A/C 50,000 2,00,000
Post Acquisition Share in K Ltd.
General Reserve - 33,320
P&L - 21,658
21,50,000 4,04,978
Total = 25,24,978
M Ltd. 50% D Ltd. 25% Minority Interest 25%

12,77,489 6,38,745 6,38,744 1. 107
Pre Post Pre Post

10,75,000 2,02,489 5,37,500 1,01,245

91,660 1,10,829 45,830 55,415
Analysis of Net Worth of Delhi Ltd.

Pre Post
General Reserves 2,00,000 2,00,000
P&L 2,00,000 2,00,000
Post Acquisition Share in A Ltd.
General Reserves - 45,830
P&L - 55,415
General Reserves - 1,00,000
P&L - 65,000
44,00,000 6,66,245
Total
50,66,245
M Ltd. 75% Minority Interest 25%

37,99,684 12,66,561
Pre Post
33,00,000 4,99,684
Reserve & Surplus P&L

2,59,373 2,40,311
Calculation of Cost:
Cost of Acquisition (-) Pre Acquisition Net
Worth
Total goodwill 6,37,722
Calculation of Cumulative General Reserve
General Reserve of M Ltd. 20,00,000
1.108
(+) Post Acquisition Shares in
Delhi Ltd. 2,59,373
Amritsar Ltd. 91,660
Kanpur Ltd. 2,00,000
25,51,033
Calculation of Cumulative P&L:
P&L of M Ltd. 10,00,000
(+) Post Acquisition Share in
Delhi Ltd. 2,40,311
Amritsar Ltd. 1,10,829
Kanpur Ltd. 1,30,000
14,81,140
Cost of Control:
Mumbai in Delhi in Amritsar
Delhi Amritsar Kanpur Amritsar Kanpur Kanpur
35,00,000 11,00,000 36,00,000 5,00,000 18,00,000 6,00,000
(33,00,000) (10,75,000) (33,30,000) (5,37,500) (16,65,000) (5,54,778)
2,00,000 25,000 2,70,000 (37,500) 1,35,000 45,222
Balance Sheet of Mumbai Ltd. as on 31.12.2011

Shareholder Fund
Reserve and Surplus [25,51,033 + 14,81,140] 40,32,173
Minority Interest [12,66,561 + 6,38,744 + 12,20,244] 31,25,549
Current Liability
Sundry Creditors [3,00,000 + 1,00,000 + 50,000 + 80,000] 5,30,000
12,68,772
Assets
Non-Current Assets
Fixed Assets
Tangible 10,50,000
Intangible 6,37,723
Current Assets [1,00,000 + 6,00,000 + 4,50,000 + 4,00,000] 15,50,000
12,68,772
Q-37)
A Ltd. 80% Y Ltd.
30% 60%
C Ltd.
Step-1: 1. 109
Pre Post
General Reserves (WN1) 8,250 750
P&L (WN2) 6,000 3,000
74,250 3,750
Total = 78,000
A Ltd. 16.67% B Ltd. 66.67% Minority Interest 16.66%

13,000 52,000 13,000
Pre Post Pre Post

12,375 625 49,500 2,500

125 500 500 2,000
WN1: General Reserve

9,000

7,500 1,500
Pre(6/12) (6/12) Post

750 750
+7500
8250
WN2: P&L
9,000

3,000 6,000
1.110
Pre(6/12) (6/12)
3,000 Post
+3,000 3,000
6,000

Pre Post
General Reserve (WN3) 9,000 1,000
P&L A/C (WN4) 8,000 4,000
General Reserve - 500
P&L - 2,000
Stock Reserve - (400)
1,17,000 7,100
Total
1,24,100
A Ltd. Minority
80% 20%
99,280 24,820
Pre Post
93,600 5,680
General Reserve P&L

1,200 4,480
10,000

8,000 2,000
1. 111
Pre(6/12) (6/12) Post

1,000 1,000
+8,000
9,000
WN4:
P&L
12,000

4,000 8,000
Pre(6/12) (6/12) Post

4,000 4,000
+4,000
8,000
Step-2:
Cost of Control
A Ltd. in B Ltd. In
B Ltd. C Ltd. C Ltd.
(-) Pre Acquisition Net Worth (93,600) (12,375) (49,500)
Goodwill 1,400 625 3,500
Total = 5,525
Calculation for Cumulative Reserves

General Reserve of A Ltd. 48,000
(+) Post Acquisition share in C Ltd. 125
49,325
Calculation for Cumulative P&L
P&L of A Ltd. 16,000
20,980
1.112
Balance Sheet of A Ltd. as on 31.12.11

Shareholder Fund
Reserve and Surplus [49,325 + 20,980] 70,305
Minority Interest [24,820 + 13,000] 37,820
Current Liability
Creditors [7,000 + 5,000] 12,000
2,20,125
Assets
Non-Current Assets
Fixed Assets
Tangible [ 20,000 + 60,000 + 43,000 ] 1,23,000
Intangible 5,525
Current Assets
Stock in Trade[12,000 + 400] 11,600
Sundry Debtors [ 26,000 + 21,000 + 32,000] 79,000
Cash in Transit 1,000
2,20,125
Q-38:
A Ltd. 75% B Ltd.
16.67% 38.33%
C Ltd.
Step-1:
Pre Post
Reserves (WN1) 25,000 3,000
P&L (WN2) 44,000 56,000
Profit on sales of Equipment - (8,000)
3,09,000 53,000
Total = 3,62,000
A Ltd. 16.67% B Ltd. 58.33% Minority Interest 25%

60,345 2,11,155 90,500
1. 113
Pre Post Pre Post

51,510 8,835 1,80,240 30,915

834 8,001 2,917 27,998

3,000

20,000 10,000
Pre(6/12) (6/12) Post

5000 5,000
+20,000
25,000
WN2:
P&L
1,00,000
01.01.11 During the Year

12,000
1,12,000
- (24,000) Dividend)
(12,000)
Pre(6/12) (6/12) Post

56,000 56,000
-(12,000)
44,000
Pre Post
General Reserve (WN3) 40,000 -
P&L A/C (WN4) 30,000 90,000
1.114 Post Acquisition Share in C Ltd.
General Reserve - 2,917
P&L - 27,998
Profit on sale of Equipment - (4,000)
4,70,000 1,16,915
Total
5,86,915
A Ltd. 75% Minority 25%

4,40,186 1,46,729
Pre Post
3,52,500 87,686
General Reserve P&L

2,188 85,498
WN3:
Reserves
40,000

40,000 0
WN4: P&L
1,20,000
01.01.11 During the Year

20,000 1,80,000
+ 40,000 (Dividend) 1. 115
60,000
Pre(6/12) (6/12) Post
90,000 90,000
-(60,000)
30,000
Step-2:
Cost of Control
A Ltd. in B Ltd. In
B Ltd. C Ltd. C Ltd.
Cost of Acquisition 3,60,000 60,000 2,08,000
(-) Pre Acquisition Dividend (30,000) (4,000) (14,000)
(-) Pre Acquisition Net Worth (3,52,500) (5,1510) (1,80,240)
(22,500) 4,490 13,760
Net Capital Reserve = 4,250

General Reserve of A Ltd. 80,000
83,022

P&L of A Ltd. 2,00,000
(+) Post Acquisition share in C Ltd. 8,001
(-) Pre Acquisition dividend in B Ltd. (30,000)
(-) Pre Acquisition dividend in C Ltd. (4,000)
(-) Pre Acquisition Dividend Reserved by B Ltd. (14,000)
2,45,499
Consolidated Balance Sheet of A Ltd. And its subsidiary as on 31.12.2011

Shareholder Fund
Reserve and Surplus [83,022 + 2,59,499 + 4,250] 33,277
Minority Interest [1,46,729 + 90,500] 2,37,229
Current Liabilities
Sundry Creditors [80,000 + 1,00,000 + 60,000] 2,40,000
Arun Ltd. [40,000 + 32,000 – 40,000 – 32,000] -
14,10,000
1.116 Assets
Non-Current Assets
Fixed Assets
Tangible [12,000 + 2,80,000 + 2,00,000 + 2,40,000] 7,08,000
Intangible [80,000 + 60,000 + 40,000] 1,80,000
Current Assets [1,00,000 + 2,32,000 + 1,82,000] 5,14,000
Brown Ltd. [48,000 – 40,000] 8,000
Crown Ltd. [32,000 – 32,000] -
14,10,000
Note: It is assumed that interim dividend is given full out of Pre Acquisition Profit.
Q-39: X Ltd. (83.33)  Y Ltd. (75%)  Z Ltd.

Step-1:
Pre Post
P&L (WN1) 68,000 60,000
4,68,000 60,000
Total
5,28,000
Y Ltd. 75% Minority Interest 25%

3,96,000 1,32,000
Pre Post
3,51,000 45,000 P&L
WN1: P&L
1,28,000
Pre Post
1,16,000 60,000
-(48,000)
68,000
Analysis of Net Worth of Y Ltd.
Pre Post
P&L A/C (WN2) 78,000 1,48,000
Post Acquisition Share in Z Ltd. - 45,000
6,78,000 1,93,000
1. 117
Total
8,71,000
X Ltd. 83.3% Minority Interest 16.67%

7,25,833 1,45,167
Pre Post
5,65,000 1,60,833 P&L
WN2:
P&L
1,90,000 + 36,000 = 2,26,000
Pre Post
78,000 1,48,000
Step-2:
Cost of Control
X Ltd. In Y Ltd. In
Y Ltd. Z Ltd.
(-) Pre Acquisition Dividend (60,000) (36,000)
Goodwill 5,000 13,000
Total Goodwill = 18,000
Calculation for Cumulative P&L A/C

Pre Acquisition dividend in Y Ltd. (60,000)
P&L A/C of X Ltd. 2,10,000
(+)Dividend Reserved [60,000 + 60,000] 1,20,000
(+) Post Acquisition share in Y Ltd. 1,60,633
(-) Pre Acquisition dividend (36,000)
3,94,833
Consolidated Balance Sheet of X Ltd. And its group as on 31.12.2011
Shareholder Fund
Reserve and Surplus 3,94,833
1.118 Minority Interest [1,32,000 + 1,45,167] 2,77,167
Current Liabilities [40,000 + 10,000 + 34,000] 84,000
15,56,000
Assets
Non-Current Assets
Fixed Assets
Tangible [4,20,000 + 3,76,000 + 5,22,000] 13,18,000
Intangible 18,000
Current Assets [1,20,000 + 60,000 + 40,000] 2,20,000
15,56,000
Q-40:
Morning Ltd (80%)  Evening Ltd.
75%
Night Ltd.
Step-1:
Analysis of Net Worth of Night Ltd.
Pre Post(In 1,000)
Reserves 750 150
P&L A/C 800 1800
Stock Reserve - (300)
11,550 1,650
Total
13,200

9,900 3,300
Pre Post
8,663 1,237
Reserve P&L
112 1,125
Analysis of Net Worth of Evening Ltd.
Pre Post
Reserves 800 200
P&L A/C 2,000 3,800
Interest on Loan [ 5,000 × 8%] - (400) 1. 119
22,800 3,600
Total
26,400

21,120 5,280
Pre Post
18,240 2,880
Reserve P&L
160 2,720
Step-2:
Cost of Control
Evening Ltd. Night Ltd.
(-) Pre Acquisition Net Worth (18,240) (8,663)
Capital Reserve (240) (663)
Total = 903
Analysis of Cumulative Reserves

Reserve of Morning Ltd. 1,800
(+) Post Acquisition share in Evening Ltd. 160
(+) Post Acquisition share in Night Ltd. 112
2,072
Analysis of Cumulative P&L

P&L of Morning Ltd. [7,000 + 1,500] 8,500
(+) Post Acquisition share in Evening Ltd. 2,720
(+) Post Acquisition share in Night Ltd. 1,125
(+) Interest on loan to Evening Ltd. 400
12,745
Minority Interest
Share in Evening Ltd. 5,280
Share in Night Ltd. 3,300
8,580
1.120 Consolidated Balance Sheet of Morning Ltd. as on 31.03.12

Shareholder Fund
Reserve and Surplus [903 + 12,745 + 2,072]
Current Liabilities
Creditor [2,500 + 1,000 + 1,400] 4,900
Loan from Morning Ltd. [5,000 – 5,000] -
69,200
Non-Current Assets
Fixed Assets
Tangible -
Intangible -
Current Assets
Loan to Evening Ltd. [5,000 – 5,000] -
Sundry Assets [-300 + 21,800 + 32,800 + 14,900] 69,200
69,200
Q-42:
Analysis of Net Worth of Tom Ltd.
Shyam Ltd. On Ram Ltd. On 01.04.11
01.04.09
Pre Post Pre Post
Share Capital 1,600 - 1,600 -
Reserves - - - -
P&L [WN1] (160) (480) (480) (160)
1,440 (480) 1,120 (160)
960 960
Total = 960
Ram Ltd. 25% Shyam Ltd. 75% Minority Interest 0%

240 720 -
Pre Post Pre Post

360 (120) 840 (120)
WN1: P&L (01.04.09)
(640)
Pre Post
(160) (480) 1. 121
WN2:
P&L (01.04.11)
(640)
Pre Post
(480) (160)
Analysis of Net Worth of Shyam Ltd.

Pre Post
General Reserves 800 -
P&L [960 – 520] 520 440
Post Acquisition share in Tom Ltd. (P&L) - (120)
4,800 320
Total
5,120
Ram Ltd. 80% Minority Interest 20%

4,096 1,024
Pre Post
3,840 256 P&L
Step-2:
Cost of Control
Ram Ltd. in Shyam Ltd. In
Shyam Tom Tom Ltd.
Ltd. Ltd.
Cost of Acquisition 4,800 200 720
(-) Pre Acquisition Net (3,840) (360) (840)
Worth
960 (160) (120)
Net Goodwill = 680
Calculation for Cumulative General Reserves
General Reserve of Ram Ltd. 1,600

P&L of Ram Ltd. 1,360
1.122
(+) Post Acquisition share in Shyam Ltd. 256
(+) Post Acquisition share in Tom Ltd. (120)
(-) Stock Reserve (480×0.2/1.2) (80)
1,416
Balance Sheet of Ram Ltd. as on 31.03.12

Shareholder Fund
Share Capital 8000
Reserve and Surplus (1600+1416) 3016
Current Liabilities(-800-400+1280+3000+1120) 4200
16,240
Assets
Non-Current Assets
Fixed Assets
Tangible -
Intangible 680
Current Assets(-80-800+7240+7520+2080-400) 15,560
16,240
Q43:
W Ltd (80%) H
(Subsidiary)
40%
O Ltd. (Associate)
Step-1:
Analysis of Net Worth of O Ltd.

Pre Post
Share Capital 200 -
Reserves (WN1) 242 221
442 221
Total
663
W Ltd. 40% Balance 60%

265.2 397.8
1. 123
Pre Post
176.8 Reserve
88.4
WN1:
Reserve
478
Pre
242 Post
236
-(15) (Dividend)
221
Step-1:
Analysis of Net Worth of H Ltd.
Pre Post
Share Capital (200 + 200) 400 -
Reserves (500 – 200) 300 3,200
700 3200
Total
1,020

816 204
Pre Post
Reserve
560 256
WN2: Reserve
850
Pre Post
500 350
1.124 -(30) (Dividend)
- 320
Step-2:
Cost of Control
H Ltd. O Ltd.
Cost of Acquisition 562 184
(-) Pre Acquisition Net Worth (560) (176.8)
2 7.2
(-) Amortised (2) -
- 7.2
Cumulative Reserves
(+)Dividend from H Ltd. (30 × 0.8) 24
Reserve of W Ltd. 1,050
(+) Post Acquisition share in H Ltd. 256
(+) Post Acquisition share in O Ltd. 88.4
(-) Dividend (65)
(-) Stock Reserve (20 × 0.25/1.25) (4)
(-) Goodwill write off (2)
1347.4
Investment in O Ltd.
Cost of Investment 184
(+) Post Acquisition Share in O Ltd. 88.4
272.40
Balance Sheet of W Ltd. as on 31.03.12

Shareholder Fund
Share Capital 600
Non-Current Liabilities
Debentures [400 + 150] 550
Current Liabilities
Trade Payable [375 + 253] 628
Dividend Payable [65 + 30 - 24] 71
3,400
Assets
Non-Current Assets
Fixed Assets
Tangible [697 + 678] 134
Intangible -
Non Trade Investment 272
1. 125
Current Assets
Cash at Bank [101 – 95] 196
Trade Receivable [396 – 321] 707
Inventory [-4 + 495 + 389] 880
34,000
Q-44:
Sun Ltd. 80% Moon Ltd.
30% 60%
Light Ltd.
Step-1:
Analysis of Net Worth of Light Ltd.
Pre Post
Reserves 15,000 15,000
P&L A/C 25,000 15,000
Profit on Sale of Equipment (8,000) -
(24,000×1/3)
92,000 30,000
Total = 1,22,000
Sun Ltd. 30% Moon Ltd. 60% Minority Interest 10%

36,600 73,200 12,200
Pre Post Pre Post

27,600 9,000 55,200 18,000

4,500 4,500 9,000 9,000
Analysis of Net Worth of Moon Ltd.
Pre Post
General Reserves 25,000 15,000
P&L 20,000 30,000
1.126 Stock Reserve - (1,000)
1,45,000 44,000
Post Acquisition in Light Ltd.

Reserve - 9,000
P&L - 9,000
1,45,000 62,000
Total
2,07,000

1,65,600 41,400
Pre Post
1,16,000 49,600
Reserve P&L
19,200 30,400
Step-2:
Cost of Control
Sun Ltd. Moon Ltd.
Moon Light Light Ltd.
Ltd. Ltd.
(-) Pre Acquisition Net Worth (1,16,000) (27,600) (55,200)
(26,000) 12,400 (5,200)
Total = 18,800

Reserve of Sun Ltd. 50,000
(+) Post Acquisition share in Moon Ltd. 19,200
(+) Post Acquisition share in light Ltd. 4,500
73,700
P&L of Sun Ltd. 60,000
(+) Post Acquisition share in Moon Ltd. 30,400
(+) Post Acquisition share in Light Ltd. 4,500
94,900
1. 127
Minority Interest
In Moon Ltd. 41,400
In Light Ltd. 12,200
53,600
Consolidated Balance Sheet of Sun Ltd. as on 31.03.12

Shareholder Fund
Reserve and Surplus [73,700 + 94,900 + 18,800] 1,87,400
Current Liabilities
Creditor [30,000 + 35,000 + 25,000] 90,000
Loan[10,000 + 8,000 – 10,000 – 8,000] -
481,000
Assets
Non-Current Assets
Fixed Assets
Tangible [-8,000 + 70,000 + 1,20,000 + 1,03,000] 2,85,000
Intangible -
Current Assets
Stock [-1,000 + 40,000 + 30,000 + 20,000] 89,000
Debtors [20,000 + 25,000 + 30,000] 75,000
Cash in Hand [10,000 + 10,000 + 10,000] 30,000
Loan [ 12,000 + 8,000 – 10,000 – 8,000] 2,000
4,81,000
Q-3:SM Q-12 (5.35):
Bright Ltd. 80% Dark Ltd.
(70+10)
Step-1: Analysis of Net Worth of Dark Ltd.

4,060 580
1.128
Pre Post Pre Post
Share Capital 5,80,000 - 5,80,000 -
General Reserve (WN1) 60,000 40,000 85,000 35,000
P&L A/C 25,000 1,22,000 1,02,000 45,000
6,85,000 1,62,000 7,67,000 80,000
8,47,000 8,47,000
Total
8,47,000

6,77,600 1,69,400
Pre Post
(6,85,000×70% (61,62,000×70%
+ (76,700×10%) + (80,000×10%)
= 4,79,500 + 76,700 = 1,13,400 + 8,000
=5,56,200 =1,21,400
General Reserve P&L

=28,000 + 3,500 =85,400 + 4,500
=31,500 =89,900
WN1:
General Reserve
1,20,000
4,060 580
Share Share
Pre Post Pre Post

80,000 40,000 85,000 3,500
WN2: 2,05,000 – 58,000 = 1,47,000
P&L A/C
2,05,000
4,060 580 1. 129

Share Share
Pre Post Pre Post

25,000 1,22,000 1,02,000 45,000
Step-2:
Cost of Control
Goodwill 25,800
Consolidated General Reserve

General Reserve of Bright Ltd. 2,00,000
(-) Post Acquisition share in Dark Ltd. 31,500
2,31,500
Consolidated P&L
(-) Stock Reserve [1,45,000 × 0.25/1.25] (29,000)
P&L A/C of Bright Ltd. 3,12,500
(+) Post Acquisition share in Dark Ltd. 89,900
(-) Dividend Declared @10% (2,50,000)
1,23,400
Balance Sheet of Bright Ltd. as on 31.03.17

ss
Shareholder Fund
Reserve and Surplus [1,23,400 + 2,31,500] 3,54,900
Current Liabilities
Trade Payable [4,55,000 + 2,32,500] 6,90,500
Bills Payable [2,50,000 + 58,000] 96,000
Dividend Payable [2,50,000 + 58,000] 3,08,000
41,18,800
Assets
Non-Current Assets
Fixed Assets
Tangible [21,70,000 + 6,25,000] 27,95,000
Intangible 25,800
1.130 Current Assets
Inventories [4,08,000 + 3,19,200 – 25,000] 6,98,200
Trade Receivable [1,80,000 + 1,64,000] 3,44,000
Bills Receivable [-15,000 + 68,000 + 1,00,000] 1,53,000
Cash and Equity [3,87,500 + 15,300] 1,62,800
41,18,800
NOTE:
1) Carrying amount of Investment in Rohtas Ltd.
Separate Financial Stat as on 31.03.17.

Cost of Investment 4,50,000
(+) Pre Acquisition Dividend (2,48,000×0.40) (99,200)
(+) Past Profit (26,26,000×325/365) ×40% 9,35,288
53,36,088
Consolidated Financial Stat

Cost 4,50,000
(+)Post Acquisition Share in Profit 44,00,800
(+)Profit 5,844
49,58,260

Consolidated Financial Statements (CFS) Explained

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Consolidated Financial Statements (CFS) Explained

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Consolidated Financial Statements (CFS)

1. CFS is Governed by AS 21, 23, 27

2. How to Become H Ltd.????

3. Holding Percentage and its Treatment

6. How to solve the problems?

Let’s discuss these steps one by one:

 Step-1: Analysis of Net Worth of S Ltd.

Analysis of Net Worth of S Ltd. – Example 80%

Pre (80%) Post (80%)

Reserves (80%) P&L (80%)

 Step-2: Valuation of Cost of Control (Goodwill/Capital Reserve, Consolidated

Goodwill/Capital Reserve XX/(XX)

Valuation of Cost of Control (Consolidated Reserves)

Valuation of Cost of Control (Consolidated P&L Account)

Minority Interest (Step-2)

 Step-3: Consolidated Balance Sheet of H Ltd. & its Group Companies

I EQUITY AND LIABILITIES

B MINORITY INTEREST W.N.

C NON CURRENT LIABILITIES

A NON CURRENT ASSETS

(b) Non-Current Investments H+S

Holding 80% Minority Interest 20%

Pre 80% Post 80%

Reserve (80% of 50,000) P&L

Analysis of Net Worth of Q Ltd. (DOC)

Net Worth = 38,55,000

Holding 70% Minority Interest 30%

Reserve (70%) P&L 70%

Net Worth = 38,55,000

Holding 70% Minority Interest 30%

Pre 70% Post 70%

Over all following cases of Dividend are possible:

 How to solve a problem:

Note: Common Adjustment/Inter Company Transaction: If subsidiary and holding

Q-2) DOA: 31/03/2011

Holding 60% Minority Interest 40%

Pre 60% Post 60%

Reserve (60%×90) P&L (60%×514)

Pre 600 90 (690 – 600)

WN3: Analysis of Profit and Loss

Consolidated Balance Sheet (Amount in ‘000)

(D) Current Liability

Subsequent holding/ holding on different dates:

How to Solve Problem?

1.18 S Ltd. S Ltd.

332 332 332

20% holding 20% holding Minority

Post Pre Post Pre Post

Reserve P&L Reserve P&L Reserve P&L

Current Year 1/04/11

1/07/11 1/10/11 1/11/11

Pre Post Pre Post Pre Post

120 120 120

Current Year 1/04/11

1/07/11 1/10/11 1/11/11

Pre Post Pre Post Pre Post

 How to solve the problem:

Debentures are also given:

Different Accounting Policy:

Assumption: We assume that A will Not Deduct

Pre Acquisition A/C Dr. 30,000

Consolidated Balance Sheet of A Ltd. with B Ltd. as on 31/12/11

(A) Share Funds