Accounts of Holding Companies PartVI BY BHOOMIKA GARG
Accounts of Holding Companies Part-VI BY: BHOOMIKA GARG
Treatment of Miscellaneous Expenditures: Preliminary Expenses, Discount on issue of Shares and Debentures, Underwriting Commission
Problem XIII Cheque-in-Transit & Preliminary Expenses
Contd.
Solution Working Notes 1) The ratio of equity acquired by H Ltd. and Minority Interest Equity Share Capital of S Ltd. = Rs. 3, 000 Investment by H Ltd = 80% @ Rs. 3, 000 Ratio (Neha Ltd. : MI) = 4: 1 2) H Ltd. Share in capital profits (pre acquisition) and reserves Pre Acquisition reserve of S Ltd . = 80, 000 Add: Opening Surplus = 50, 000 Less: Dividend for the year 2015 -16 = (36, 000) (3, 000*12/100) ____ 94, 000 H’s Share= 94, 000*4/5= 75, 200 _____ MI Share = 94, 000*1/5= 18, 800
Contd. 3) Revaluation of Fixed Assets Opening Value of Machinery (2, 70, 000*100/90) Less: Revalued Figure of Machinery = 3, 000 = (2, 50, 000) _____ Loss on Revaluation Or Capital Loss H’s Share= 40, 000, 4) MI= 10, 000 Reduction in Depreciation 50, 000*10/100= Rs. 5, 000 50, 000 _____
Contd. 5) Post Acquisition Surplus of S Ltd. Balance of Surplus on 31. 3. 17 = 90, 000 Less: Opening Surplus (50, 000 -36, 000) = (14, 000) Add: Reduction in Depreciation = Less: Preference Dividend = (10, 000) 5, 000 _____ H’s Share= 56, 800, MI=14, 200 71, 000 ______ 6) Post Acquisition Reserves Balance of General Reserve on 31. 3. 17 = 1, 50, 000 Less: Opening Balance = (80, 000) _____ 70, 000 _____ H’s Share= 56, 000, MI= 14, 000
Contd. 7) Cost of Control Investment in the shares of S Ltd. = 3, 000 Less: Paid up value of shares = (2, 40, 000) Add: H’s share in Loss on Revaluation = 40, 000 Add: H’s share in Preliminary Expenses = 8, 000 Less: H’s share in pre acquisition profits & Reserves = (75, 200) Less: Dividend received from pre acquisition profits = (28, 800) ____ 4, 000 _____ Note: If Subsidiary Co. B/S contain some accumulated losses or unamortized expenses, then holding co. ’s share in such should be adjusted while calculating Goodwill or Cost of Control.
Contd. 8) Minority Interest Paid up value of shares held = 60, 000 Add: Share in Preference share capital = 1, 000 Add: Share in pre acquisition profits and reserves = 18, 800 Add: Share in post acquisition profits = 14, 200 Add: Share in post acquisition reserves = 14, 000 Add: Dividend on preference shares = 10, 000 Less: Loss on revaluation of machinery = (10, 000) Less: Share in preliminary expenses = (2, 000) _____ 2, 05, 000 ______
Consolidated Balance Sheet of H and S Ltd. As at 31 st March 2017 Particulars I. Note No. EQUITY AND LIABILITIES (1) Shareholder’s Fund (a) Share Capital (b) Reserves & Surplus (2) Minority Interest (3) Non Current Liability (a) Long term borrowings (4) Current Liability (a) Trade Payables (b) Other Current Liabilities 1 2 Total Amt. 8, 000 6, 84, 000 _____ 14, 84, 000 2, 05, 000 1, 10, 000 3 Total II. ASSETS (1)Non Current Assets Fixed Assets (a) Tangible Assets (b) Intangible(Goodwill) (2) Current Assets Amt. 5 2, 46, 000 4, 000 _____ 20, 49, 000 _____ 9, 85, 000 4, 000 10, 60, 000 _____ 20, 49, 000 _____
Notes to Accounts Particulars Amount 1. Share Capital Amount 8, 000 2. Reserves & Surpluses General Reserve H Ltd. S Ltd. 4, 000 56, 000 _____ Surplus H Ltd. 2, 000 S Ltd. 56, 800 Less: Dividend wrongly credit (28, 800) _____ 3. Trade Payables: H Ltd S Ltd. 4. Other Current Liabilities Bills Payable 4, 56, 000 2, 28, 000 ______ 1, 70, 000 76, 000 ______ 6, 84, 000 2, 46, 000 4, 000
Notes to Accounts Particulars Amount 5. Tangible Assets Machinery H Ltd. 6, 25, 000 S Ltd 2, 70, 000 Less: Loss on Revaluation (50, 000) Add: Reduction in Dep. 5, 000 ______ Furniture 5. H Ltd. S Ltd. 85, 000 50, 000 ______ Other Current Assets Inventories(4, 000+1, 90, 000) Debtors(1, 50, 000+ 80, 000) Cash (1, 20, 000+1, 10, 000+10, 000) 8, 50, 000 1, 35, 000 ______ 9, 85, 000 5, 90, 000 2, 30, 000 2, 40, 000 ______ 10, 60, 000
Interim Dividend Paid by the Subsidiary Company
Treatment of Proposed Dividend may be given in the Question below the Balance Sheet as an additional information. As per Revised AS-4, it is a contingent liability since it will be payable upon being declared (approved) by the shareholders in the Annual General Meeting to be held after the end of the financial year. i. e. in the next financial year. Hence, no effect is to be given to Proposed Dividend while preparing the Consolidated Balance Sheet.
Problem IV Payment of Interim Dividend by the Subsidiary Company
Solution Working Notes 1) The ratio of equity acquired by H Ltd. and Minority Interest Total no. of shares of S Ltd = 15, 000 shares of Rs. 10 each Investment by H Ltd = 12, 000 shares, MI= 3, 000 Ratio (H Ltd. : MI) = 4: 1 2) H Ltd. Share in capital profits (pre acquisition) and reserves Pre Acquisition reserve of S Ltd. = Add: Opening Surplus = 4, 500 76, 000 ____ 80, 500 H’s Share = 80, 500*4/5= 64, 400 _____ MI Share = 80, 500*1/5= 16, 100
Contd. 3) Post Acquisition Surplus of S Ltd. Balance of Surplus on 31. 3. 17 = 1, 08, 000 Less: Opening Surplus = (76, 000) Add: Interim Dividend Paid = (15, 000) (1, 50, 000*10/100) _____ 47, 000 H’s Share= 37, 600, MI=9, 400 ______ 4) Post Acquisition Reserves Balance of General Reserve on 31. 3. 17 = 6, 000 Less: Opening Balance = (4, 500) _____ 1, 500 _____ H’s Share= 1, 200, MI= 300
Contd. 5) Cost of Control Investment in the shares of S Ltd. Less: Paid up value of shares = 1, 80, 000 = (1, 20, 000) Less: H’s share in pre acquisition profits & Reserves = (64, 400) ____ Capital Reserve 4, 400 _____ 6) Minority Interest Paid up value of shares held = 30, 000 Add: Share in pre acquisition profits and reserves = 16, 100 Add: Share in post acquisition profits = 9, 400 Add: Share in post acquisition reserves = 300 Less: Interim Dividend Paid = (3, 000) _____ 52, 800 _____ (15, 000*1/4)
Consolidated Balance Sheet of H and S Ltd. As at 31 st March 2017 Particulars I. Note No. EQUITY AND LIABILITIES (1) Shareholder’s Fund (a) Share Capital (b) Reserves & Surplus (2) Minority Interest (4) Current Liability (a) Trade Payables Total 1 2 3 II. ASSETS (1)Non Current Assets Fixed Assets (a) Tangible Assets (2) Current Assets Total Amt. 3, 000 3, 79, 700 _____ Amt. 6, 79, 700 52, 800 60, 300 _____ 7, 92, 800 _____ 4, 87, 300 4 3, 05, 500 _____ 7, 92, 800 _____
Notes to Accounts Particulars Amount 1. Share Capital 30, 000 shares of Rs. 10 Each 2. Reserves & Surpluses Surplus H Ltd. 1, 60, 000 S Ltd. 37, 600 Less: Interim Dividend (12, 000) (15, 000*3/4) Less: Unrealized Profit (1, 500) _______ H Ltd. 1, 90, 000 S Ltd. 1, 200 _____ Capital Reserve on Consolidation Amount 3, 000 1, 84, 100 General Reserve 3. Trade Payables: H Ltd S Ltd. Less: Inter company debts 1, 91, 200 4, 400 _____ 3, 79, 700 30, 000 48, 300 (18, 000) _____ 60, 300
Notes to Accounts Particulars 5. Other Current Assets Inventories(68, 000+ 60, 600 - 1, 500) Debtors(56, 000+47, 400 -18, 000) Cash (60, 000+33, 000) Amount 1, 27, 100 85, 400 93, 000 _____ Amount 3, 05, 500
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