Advanced financial accounting - Lecture 41. The main topics covered in this chapter include: balance sheet; minority interest; cost of investment; less dividend pre-acquisition; less goodwill impairment loss; less pre-acquisition dividend;... Please refer to the lecture for details!
Advanced Financial Accounting Lecture41 Question Balance Sheet As on 31st December 2008 P (Rs) S (Rs) Fixed assets 3,500 1,450 Investment in S 2,180 Current assets 2,700 1,250 Total assets 8,830 2,700 Share capital 5,000 1,000 Reserves 3,380 1,700 Total 8,830 2,700 Question The parent Co. (P) acquired 800 of the 1,000 Rs. 1 ordinary shares of subsidiary Co. (S) on 1st Jan. 2008 for Rs. 2,500. S Co. balance sheet at 31st December 2007 showed a dividend payable of Rs. 400 and reserves Rs. 400 and reserves of Rs. 1,200. Goodwill impairment loss Rs. 105 Required: Prepare consolidated Balance sheet as on 31 Dec. 2008. Working1 Holding % = 800/100 x100 = 80% Minority % = 100% 80% = 20% Working2 Preacquisition Postacquisition Share capital 1,000 Reserves 1,200 500 Total 2,200 500 Working3 Group Reserve All reserves of P Co. Add Post acquisition of S Co Less Impairment loss 3,380 400 3,780 105 3,675 Working4 Minority Interest Total owner’s equity of Subsidiary Co. x Minority interest 2,700 x 20% = 540 Working5 Goodwill Cost of investment Less Dividend preacquisition Less Preacquisition reserve of owner’s equity to the extent of holding % (2,280 x 80%) Goodwill Less Goodwill impairment loss 2,500 320 2,180 1,760 420 105 315 Working Cost of investment Less Preacquisition dividend (400 x 80%) 2,500 320 2,180 Working Investment A/c Opening balance 2,500 2,500 Dividend 320 Balance 2,180 2,500 Working1 Holding % = 80% Minority % = 20% Working2 Preacquisition Postacquisition Share capital 3,000 Reserves 1,200 600 200 Total 4,800 200 Holding (80%) 3,840 160 Minority (20%) 960 40 Profit for the year Minority interest = 960 + 40 = 1,000 Working2 Minority interest Total owner’s equity of Subsidiary Co. x Minority interest 5,000 x 20% = 1,000 Working3 Goodwill Cost of investment Less Preacquisition equity Goodwill 4,000 3,840 160 Working34 Group Reserves All reserves of P Co. Add Pos acquisition reserves of S Co. 2,500 160 2,660 Solution Consolidated Balancesheet As at 31st Dec. 2008 Fixed assets (5,500 + 4,500) Goodwill Current assets (2,500 + 1,500) Total assets Share capital Reserves Minority interest Total liabilities & equities 10,000 160 4,000 14,160 8,000 2,260 1,000 14,160 Solution Consolidated Balancesheet As at 31st Dec. 2008 Fixed assets (5,500 + 4,500) Goodwill Current assets (2,500 + 1,500) Total assets Share capital Reserves Minority interest Total liabilities & equities 10,000 160 4,000 14,160 8,000 2,260 1,000 14,160 Question Balance Sheet As on 31st December 2008 P (Rs) Fixed assets S (Rs) 1,000 600 Investment in S 400 Current assets 300 200 Total assets 1,700 800 Share capital 1,200 500 Reserves 400 200 Current liabilities 100 100 1,700 800 Total liabilities & equities Question The parent Co. (P) acquired 80% shares of the subsidiary Co. (S) on 1 Jan. 2000 8when the reserves of the company were worth Rs. 120 Required: Prepare consolidated Balance sheet as on 31 Dec. 2008 Working1 Holding % = 80% Minority % = 20% Working2 Preacquisition Postacquisition Share capital 500 Reserves 120 80 Total 620 80 Working3 Goodwill Cost of investment Less Preacquisition (620x80%) Negative goodwill 400 496 96 Working4 Group Reserve All reserves of P Co. Add Post acquisition of S Co. upto Extent of holding % (80x80%) Add Negative goodwill 400 64 464 96 560 Working5 Minority Interest Total owner’s equity of Subsidiary Co. x Minority interest 700 x 20% = 140 Solution Consolidated Balancesheet As at 31st Dec. 2008 Fixed assets (1,000 + 600) Current assets (300 + 200) Total assets Share capital Reserves Minority interest Current liabilities Total liabilities & equities 1,600 500 2,100 1,200 560 140 200 2,100