Holding Company Accounts, Minority Interest, Goodwill, Consolidated Balance Sheet

1. RAJAKRISHNAN M
ASSISTANT PROFESSOR IN COMMERCE WITH ELECTRONIC COMMERCE
Holding Company Accounts

2. Cost of Control / Goodwill
Calculate Cost of Control / Goodwill from the Balance sheet of S Ltd. as on 31st March
2010 (Liabilities only)
Share capital 40,000 Equity shares of Rs. 10/- each 4,00,000
Reserves and surpluses 2,50,000
Secured loan 2,50,000
Other Liabilities 1,00,000
10,00,000
On the above date H Ltd. acquired 30,000 Equity shares in S Ltd. Rs. 7,50,000, fixed
assets of S Ltd. were appreciated by Rs. 1,50,000 find out cost of control / Goodwill.
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3. Cost of Control / Goodwill
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Calculation of Holding Minority Ratio:
40000 Total no. of shares in S Ltd
30000 Holding company shares
10000 Minority interest =1/4
Holding company’s share = ¾

4. Cost of Control / Goodwill
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Calculation of Cost of control
Cost of investment in S Ltd. 7,50,000
Less : 1) Share in share capital
4,00,000* ¾ (or) (30000*10) 3,00,000
2) Share in Reserves and surpluses
Capital profit 2,50,000* 3/ 4 1,87,500
3) Share in capital profit
(Appreciation in fixed assets)
1,50,000* 3 /4 1,12,500
6,00,000
Goodwill 1,50,000

5. Minority Interest
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The following is the Balance sheet of S Ltd. as on 31st March, 2010.
Liabilities Rs. Assets Rs.
Share capital Fixed Assets 2,90,000
Equity shares of Rs. 10 each 2,70,000 Investment 2,75,000
General Reserve 2,70,000 Current Assets 1,30,000
Profit & Loss A/c 3,60,000 Preliminary Expenses 20,000
Current liabilities 85,000
7,15,000 7,15,000
H Ltd. acquired 25,000 shares in S Ltd. on 31st March, 2010 at a cost of Rs.
2,75,000. fixed assets were revalued at Rs. 3,28,000. find minority interest.

6. Minority Interest
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Calculation of Holding Minority Ratio:
27000 Total no. of shares in S Ltd
25000 Holding company shares
2000 Minority interest =2/27

7. Minority Interest
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Calculation of Minority Interest:
1) Share in share capital 2,70,000 *2/ 27 20,000
2) Share in Reserves and Surpluses
2, 70, 000 * 2/ 27 20,000
3) Share in profits 28,000
Profit on appreciation on fixed Assets
(3,60,000 – 20,000 + 38,000) = 3, 78, 000 * 2/ 27
Minority Interest 68,000

8. Consolidated Balance Sheet
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H ltd acquired all the shares in S ltd on 1St January, 2016 and liabilities
and assets of the two companies on 31st March, 2016 were as follows:
Liabilities H Ltd S Ltd Assets H Ltd S Ltd
Share Capital 50,000 30,000 Sundry assets 65,000 70,000
Reserve on 1.4.2015 20,000 15,000 Shares in S ltd at cost 50,000 -
Surplus A/c 25,000 10,000
Sundry creditors 20,000 15,000
1,15,000 70,000 1,15,000 70,000
The Surplus account of S Ltd. had a credit balance of Rs.3,000 on 1st
April, 2015. Prepare a Consolidated Balance sheet as on 31st March, 2016.

9. Consolidated Balance Sheet
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Opening date Date of acquisition Closing date
1.4.2015 1.1.2016 31.3.2016
Workings
Analysis of Capital profit
Balance of Reserve as on 1.4.2015 15,000
Balance of surplus as on 1.4.2015 3,000
Share of capital profit for 9 months
From (1.4.2015 - 31.12.2015 )
10,000-3000=7000*9/12 5,250
23,250
Analysis of Revenue profit
Profit for 3 months
From (1.1.2016-31.3.2016) 7000*3/12 1,750

10. Consolidated Balance Sheet
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Calculation of Capital reserve / Goodwill
Cost of Investment of H Ltd in S Ltd 50,000
Paid up value of shares 30,000
Holding Co Share of Capital profit 23,250 53,250
Capital Reserve 3,250
Balance of Surplus in H Ltd
Balance 25,000
+ Holding co Share of Revenue profit 1,750
26,750

11. Consolidated Balance Sheet
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Accompanying notes for consolidated B/S
A. Share capital
Issued and subscribed capital
5,000 shares of Rs 10 each 50,000
B. Reserves and surplus
Capital Reserve (3) 3,250
Reserve 20,000
Surplus (4) 26,750
50,000

12. Consolidated Balance Sheet
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Consolidated Balance sheet of H Ltd and Its subsidiary S Ltd as on 31st March 2016
Note No Amount
I Equities and liabilities
1.Share holders fund
a) Share capital
b) Reserves and surplus
Total
2. Current liabilities
Sundry creditors H Ltd
S Ltd
Total Equity and Liabilities (1)+(2)
II Assets
Sundry assets H Ltd
S Ltd
20,000
15,000
65,000
70,000
A
B
50,000
50,000
1,00,000
35,000
1,35,000
1,35,000