Holding company exercises to describe the share of Capital & Revenue Profit of subsidiary company among Holding Company and Minority Holders

1. Exercises with Solutions in
Holding Company Accounts
Dr. D. Heena Cowsar
Assistant Professor in Commerce
Bon Secours College for Women,
Thanjavur
heena.raffi@gmail.com

2. Ex. No. 3
Calculate minority interest from the Balance sheet of
Mumbai ltd.
Balance sheet of Mumbai Ltd. as on 31.12. 2017
Madras Ltd. acquired 80% of shares at Rs. 650,000
LIABILITIES RS ASSETS RS
Share Capital: 7,00,000
Shares of RS 2 each
14,00,000 Investment
(80% of shares)
6,50,000
General Reserve as 1.1.17 600000 Plant & Machinery 7,00,000
Creditors 300000 Other Assets 1,50,000
P&L as on 31.12 17 200000 Sundry assets 10,00,000
25,00,000 25,00,000

3. Solution to Q. No. 3
1. Share ratio = 80%:20 % (or) 4:1
2. Time Ratio = No date mentioned
3. Calculation of Capital Profit
General Reserve (1.1.17) – Rs. 600,000
4. Calculation of Revenue Profit
P& L as on 31.12.17 – Rs. 200000
5. Calculation of Minority Interest
Face Value of Shares acquired
my Minority Share holders
1/5* 14,00,000
2,80,000
(+) Share of Capital Profit 120,000
(+) Share of Revenue Profit 40000
Minority Interest 440, 000
Madras Ltd:
4/5* 600000 = 480000
Minority Holders :
1/5*600000 = 120000
Madras Ltd:
4/5* 200000 = 160000
Minority Holders :
1/5*200000 = 40000

4. Ex. No. 4
On 1.7. 17 , X Ltd.., Acquired 60% shares of
Y LTD.., (With a total capital of Rs.5,00,000)
for 3,80,000 . The balance sheet of Y Ltd..,
showed P&L a/c balance on 1.1.17 Rs.
1,20,000 and profit for the year 2017 Rs.
1,00,000.
Calculate the value of Goodwill or Capital
Reserve.

5. Solution to Q. No. 4
1. Share ratio = 60%:40 % (or) 3:2
2. Time Ratio = Pre Acquisition Period : Post Acquisition Period
Pre Acquisition Period = 01.01.2017 to 01.07.2017 = 6 Months
Post Acquisition Period = 01.07.2017 to 31.12.2017 = 6 Months
3. Share of X ltd & Minority holders in Profit items
P&L a/c (1.1.17) – Rs. 120,000
Profit for the year – Rs. 100000
X Ltd:
3/5* 120000 = 72000
Minority Holders :
2/5*120000 = 28000
Cap. Profit
1/2* 100000 = 50000
Rev. Profit:
1/2* 100000 = 50000
X Ltd:
3/5* 50000 = 30000 Minority Holders :
2/5*50000 = 20000
Minority Holders :
2/5*50000 = 20000
X Ltd:
3/5* 50000 = 30000
Time Ratio = 6: 6 (or)
1:1

6. Solution to Q. No. 4.
5. Calculation of Cost of Control Calculation of Minority Interest
Actual value of the shares
acquired
3,80,000
Face Value of Shares acquired
my Minority Share holders
20/100* 5,00,000
300000
(Less) Face Value of the
shares acquired
500000*60/100
300000
(+) Share of Capital Profit
(28000 + 20000)
48000
(+) Share of Capital profit 102000 402000 (+) Share of Revenue Profit 20000
Capital Reserve 22, 000 Minority Interest 368,000
3. Calculation of Capital Profit 4. Calculation of Revenue Profit
P& L (01.01.17) 72000
Profit for the year 30000Profit for the year 30000
Capital Profit 102000