CONSOLIDATED FINANCIAL STATEMENTS

PRACTICAL QUESTIONS
Question 1
To be written in class

Question 2
To be written in class

Question 3
To be written in class

Question 4
The following data is provided to you :
Case Subsidiary % Cost Date of acquisition Consolidation Date
Company Shares 1.1.2018 31.12.2018
Owned Share Profit & Share Profit &
Capital Loss A/c Capital Loss A/c
Case 1 A 90% 1,40,000 1,00,000 50,000 1,00,000 70,000
Case 2 B 85% 1,04,000 1,00,000 30,000 1,00,000 20,000
Case 3 C 80% 56,000 50,000 20,000 50,000 20,000
Case 4 D 100% 1,00,000 50,000 40,000 50,000 55,000
Determine in each case :
(1) Minority interest at the date of acquisition and at the date of consolidation.
(2) Goodwill or Capital Reserve.

Question 5
A Ltd. acquired 1,600 ordinary shares of ₹100 each of B Ltd. on 1st July, 2016. On 31st
December, 2016 the summarized balance sheets of the two companies were as given below:
Liabilities A Ltd. B Ltd. Assets A Ltd. B Ltd.
Capital (Shares of ₹ 5,00,000 2,00,000 Land & Buildings 1,50,000 1,80,000
100 each fully paid)
Reserves 2,40,000 1,00,000 Plant & Machinery 2,40,000 1,35,000
Profit & Loss A/c 57,200 82,000 Investment in B 3,40,000 —
Ltd. at cost
Bank Overdraft 80,000 - Inventory 1,20,000 36,400
Trade Payable 47,100 17,400 Trade Receivable 59,800 40,000
Cash 14,500 8,000
9,24,300 3,99,400 9,24,300 3,99,400

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The Profit & Loss Account of B Ltd. showed a credit balance of ₹30,000 on 1st January, 2016
out of which a dividend of 10% was paid on 1st August, 2016; A Ltd. credited the dividend
received to its Profit & Loss Account. The Plant & Machinery which stood at ₹ 1,50,000 on 1st
January, 2016 was considered as worth ₹ 1,80,000 on 1st July, 2016; this figure is to be
considered while consolidating the Balance Sheets. The rate of depreciation on plant & machinery is
10% (computed on the basis of useful lives).
Prepare consolidated Balance Sheet as on 31st December, 2016.

Question 6
On 31st March, 2017 the summarized Balance Sheets of H Ltd. and its subsidiary S Ltd. stood as
follows:
Liabilities H Ltd. S Ltd.
₹ In Lakhs ₹ In Lakhs
Share Capital :
Authorized 15,000 6,000
Issued and Subscribed:
Equity Shares of ₹ 10 each, fully paid up 12,000 4,800
General Reserve 2,784 1,380
Profit and Loss Account 2,715 1,620
Bills Payable 372 160
Trade Payables 1,461 854
Provision for Taxation 855 394
Dividend payable 1,200 -
21,387 9,208
Assets
Land and Buildings 2,718 -
Plant and Machinery 4,905 4,900
Furniture and Fittings 1,845 586
Investments in shares in S Ltd. 3,000 -
Stock 3,949 1,956
Trade Receivables 2,600 1,363
Cash and Bank Balances 1,490 204
Bills Receivable 360 199
Sundry Advances 520 -
21,387 9,208
The following information is also provided to you:
(a) H Ltd. purchased 180 lakh shares in S Ltd. on 1st April, 2016 when the balances of General
Reserve and Profit and Loss Account of S Ltd. stood at ₹ 3,000 lakh and ₹ 1,200 lakh
respectively.

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(b) On 31st March, 2016, S Ltd. declared a dividend @ 20% for the year ended 31st March,
2016. H Ltd. credited the dividend received by it to its Profit and Loss Account.
(c) On 1st January, 2017, S Ltd. issued 3 fully paid-up bonus shares for every 5 shares held out
of balances of its general reserve as on 31st March, 2016.
(d) On 31st March, 2017, all the bills payable in S Ltd.’s balance sheet were acceptances in
favour of H Ltd. But on that date, H Ltd. held only ₹ 45 lakh of these acceptances in hand, the
rest having been endorsed in favour of its trade payables.
(e) On 31st March, 2017, S Ltd.’s inventory included goods which it had purchased for ₹ 100
lakh from H Ltd. which made a profit @ 25% on cost.
Prepare a Consolidated Balance Sheet of H Ltd. and its subsidiary S Ltd. as at 31st March, 2017.

Question 7
A Ltd. acquired 70% of equity shares of B Ltd. on 1.4.2010 at cost of ₹ 10,00,000 when B
Ltd. had an equity share capital of ₹ 10,00,000 and reserves and surplus of ₹ 80,000. In the
four consecutive years, B Ltd. fared badly and suffered losses of ₹ 2,50,000, ₹ 4,00,000, ₹
5,00,000 and ₹ 1,20,000 respectively. Thereafter in 2014-15, B Ltd. experienced turnaround
and registered an annual profit of ₹ 50,000. In the next two years i.e. 2015-16 and 2016-17, B
Ltd. recorded annual profits of ₹ 1,00,000 and ₹ 1,50,000 respectively.
Show the minority interests and cost of control at the end of each year for the purpose of
consolidation.

Question 8
Given below are the Profit & Loss Accounts of Hello Ltd. and its subsidiary Sello Ltd. for the
year ended 31st March, 2017 :
Hello Ltd. Sello Ltd.
(₹ In Lacs) (₹ In Lacs)
Incomes:
Sales and other income 10,000 2,000
Increase in Inventory 2,000 400
12,000 2,400
Expenses:
Raw material consumed 1,600 400
Wages and Salaries 1,600 300
Production expenses 400 200
Administrative Expenses 400 200
Selling and Distribution Expenses 400 100
Interest 200 100
Depreciation 200 100
4,800 1,400
Profit before tax 7,200 1,000

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 Provision for tax 2,400 400
Profit after tax 4,800 600
Dividend paid 2,400 300
Balance of Profit 2,400 300
Other Information:
Hello Ltd. sold goods to Sello Ltd. of ₹ 240 lacs at cost plus 20%. Inventory of Sello Ltd.
includes such goods valuing ₹ 48 lacs. Administrative expenses of Sello Ltd. include ₹ 10 lacs paid
to Hello Ltd. as consultancy fees. Selling and distribution expenses of Hello Ltd. include ₹ 20 lacs
paid to Sello Ltd. as commission.
Hello Ltd. holds 80% of equity share capital of ₹ 2,000 lacs in Sello Ltd. prior to 2015-2016.
Hello Ltd. took credit to its Profit and Loss Account, the proportionate amount of dividend
declared and paid by Sello Ltd. for the year 2015-2016.
You are required to prepare a consolidated profit and loss account of Hello Ltd. and its subsidiary
Sello Ltd. for the year ended 31st March, 2017.

CA Rahul Garg Gold Medalist All India Rankholder in CA, CS, CMA (incl. Rank 1)
Copyright of these notes is with RSA. Buy Regular & Fast Track Lectures @ www.carahulgarg.com