1

CONSOLIDATED FINANCIAL STATEMENTS

Solution 1
Consolidated Balance Sheet of H Ltd. and its Subsidiary S Ltd. as at 31st March, 2021
Particulars Note No. Amount
I. Equity and Liabilities
(1) Shareholder's Funds
(a) Share Capital 1 5,00,000
(b) Reserves and Surplus 2 2,60,000
(2) Minority Interest 3 70,000
(3) Current Liabilities
(a) Trade Payables 4 2,25,000
Total 10,55,000
II. Assets
(1) Non-current assets
(a) Property, Plant & Equipment & Intangible Assets
(i) Property, Plant & Equipment 5 8,00,000
(2) Current assets 6 2,55,000
Total 10,55,000

Notes to Accounts
1 Share Capital
50,000 equity shares of ₹ 10 each 5,00,000
2 Reserves and Surplus
Profit and Loss Account 2,00,000
Add: Share of S Ltd.’s post-acquisition profits (Nil Nil 2,00,000
as acquisition was on last day of year)
Capital Reserve 60,000
2,60,000
3. Minority Interest
Paid-up value of (2,50,000 x 20%) 50,000
Add: 20% share of pre-acquisition profits [(20% of 20,000 70,000
1,00,000)
4 Trade Payables
H Ltd. 1,75,000
S Ltd. 50,000 2,25,000
5 PPE
H Ltd. 5,00,000
S Ltd. 3,00,000 8,00,000
6 Current Assets
H Ltd. 1,55,000
S Ltd. 1,00,000 2,55,000
Working Notes:
% of holding = 2,000 shares/2,500 shares* 100 = 80%
Minority Interest %= 20%

Analysis of reserves and profits of S Ltd. as on 31.03.2021

Pre-acquisition Post-acquisition
Profit and loss account as on 31.3.2021 1,00,000
(All Pre as acquisition on 31.03.2021)
1,00,000
The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing
 2
Cost of Control or Goodwill
Cost of Investment 2,20,000
Less: Paid-up value of 80% shares 2,00,000
80% share of pre-acquisition profits 80,000 (2,80,000)
Capital Reserve 60,000

Solution 2
Consolidated Balance Sheet of H Ltd. and its subsidiary S Ltd. as at 31st March, 2022
Note No Amount (₹)
I Equity and Liabilities
1 Shareholders’ Fund:
(a) Share Capital 1 3,00,000
(b) Reserve and Surplus 2 1,10,500
2 Minority interest 3 84,000
3 Current Liabilities
Trade payables 4 3,20,000
Total 8,14,500
II Assets
1 Non-Current Assets:
Property, plant and equipment 5 4,60,000
Intangible Asset 6 66,500
2 Current Assets 7 2,88,000
Total 8,14,500

Notes to Accounts
Amount (₹)
1 Share capital
30,000 Equity Shares @ ₹10 each 3,00,000
2 Reserve and Surplus
Profit and loss account (₹ 1,00,000 + 70% of 9/12 x 20,000 i.e. ₹ 10,500) 1,10,500
3 Minority Interest (W/N 2) 84,000
4 Trade payables
H Ltd. 2,00,000
S Ltd. 1,20,000
3,20,000
5 Property, plant and equipment
H Ltd. 2,00,000
S Ltd. 2,60,000
4,60,000
6 Intangible Asset:
Goodwill (W/N 3) 66,500
7 Current Assets:
H Ltd. 1,48,000
S Ltd. 1,40,000
2,88,000
Working Notes:
1. Percentage of holding
No. of Shares Percentage
Holding Co. : 14,000 (70%)
Minority shareholders: 6,000 (30%)
Total Shares : 20,000

The copyright of these notes is with C.A. Nitin Goel

No part of these notes may be reproduced in any manner without his prior permission in writing
 3
2. Calculation of Minority Interest
Share capital (30% of ₹ 2,00,000) 60,000
Share in Profit and loss account (₹ 80,000 X 30%)24,000 84,000

3. Calculation of Cost of Control (Goodwill)

Cost of Investment 2,52,000
Less: Paid up value of shares (70% of ₹ 2,00,000) (1,40,000)
Share in pre-acquisition profits 70% of [60,000+3/12 (80,000-60,000)] (45,500)
66,500

Solution 3
Consolidated Balance Sheet of Virat Ltd. and its Subsidiary Anushka Ltd. as at 31st March, 2021
Particulars Note No. Amount
I. Equity and Liabilities
(1) Shareholder's Funds
(a) Share Capital 1 6,00,000
(b) Reserves and Surplus 2 1,80,000
(2) Minority Interest 3 1,00,000
(3) Non Current Liabilities
(a) Long Term Borrowings 4 3,00,000
(4) Current Liabilities
(a) Trade Payables 5 2,00,000
Total 13,80,000
II. Assets
(1) Non-current assets
(a) Property, Plant & Equipment & Intangible Assets
(i) Property, Plant & Equipment 6 7,00,000
(2) Current assets
(a) Inventories 7 3,60,000
(b) Trade Receivables 8 2,20,000
(c) Cash at Bank 9 1,00,000
Total 13,80,000
Notes to Accounts
1 Share Capital
60,000 equity shares of ₹ 10 each 6,00,000
2 Reserves and Surplus
General Reserve 1,00,000
Add: General Reseve of Anushka Ltd (Post)(80%) 80,000 1,80,000
3 Minority Interest
20% share in Anushka Ltd.
Paid-up value of (4,00,000 x 20%) 80,000
Add: 20% share of post-acquisition profits 20,000 1,00,000
[(20% of 1,00,000)
4 Long Term Borrowings
Virat Ltd. 2,00,000
Anushka Ltd. 1,00,000 3,00,000
5 Trade Payables
Virat Ltd. 1,00,000
Anushka Ltd. 1,00,000 2,00,000
6 PPE
Virat Ltd. 4,00,000
The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing
 4
Anushka Ltd. 3,00,000 7,00,000
7 Inventories
Virat Ltd. 1,60,000
Anushka Ltd. 2,00,000 3,60,000
8 Trade Receivables
Virat Ltd. 80,000
Anushka Ltd. 1,40,000 2,20,000
9 Cash & Cash Equivalents
Virat Ltd. 40,000
Anushka Ltd. 60,000 1,00,000
Working Notes:
% of holding = Virat Ltd: = 80% Minority Interest %= 20%

Analysis of General Reserve of Anushka Ltd.

Since Virat Ltd. holds shares in Anushka Ltd. since its incorporation, the entire Reserve balance of
1,00,000 will be Revenue (Post acquisition)

Cost of Control or Goodwill

Cost of Investment 3,20,000
Less: Paid-up value of 80% shares 3,20,000
80% share of pre-acquisition profits Nil (3,00,000)
Cost of Control Nil

Solution 4
Minority Interest = Equity attributable to minorities
Equity is the residual interest in the assets of an enterprise after deducting all its liabilities i.e. in this case,
it should be equal to Share Capital + Profit & Loss A/c
A = Share Capital as on 01.01.2019
B = Profit & Loss Account Balance on 01.01.2019
C = Share Capital as on 31.12.2019
D = Profit & Loss Account Balance on 31.12.2019

% Minority % Minority interest as at Minority interest as at

Subs.
Case Shares shares owned date of acquisition date of consolidation
Com.
owned {E} [E]x [A+B] [E]x [C+D]
Case A X 90% 10% 22,500 23,500
Case B Y 75% 25% 50,000 40,000
Case C Z 70% 30% 18,000 18,000
Case D M 95% 5% 4,750 5,750
Case E N 100% Nil Nil Nil

Solution 5
Consolidated Balance Sheet of H Ltd. and its Subsidiary S Ltd. as at 31st March, 2020
Particulars Note No. Amount
I. Equity and Liabilities
(1) Shareholder's Funds
(a) Share Capital 1 12,00,000
(b) Reserves and Surplus 2 8,16,200
(2) Minority Interest 99,300
(3) Current Liabilities
(a) Trade Payables 3 4,10,000
Total 25,25,500
The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing
 5
II. Assets
(1) Non-current assets
(a) Property, Plant & Equipment & Intangible Assets
(i) Property, Plant & Equipment 4 13,10,500
(ii) Intangible assets 5 24,000
(2) Current assets
(a) Inventories 6 3,25,000
(b) Trade Receivables 7 6,70,000
(c) Cash at Bank 8 1,96,000
Total 25,25,500
Notes to Accounts
1 Share Capital
1,20,000 equity shares of ₹ 10 each 12,00,000
2 Reserves and Surplus
General Reserves 4,35,000
Add: 80% share of S Ltd.’s post-acquisition reserves 84,000 5,19,000
Profit and Loss Account 2,80,000
Add: 80% share of S Ltd.’s post-acquisition profits 17,200 2,97,200
8,16,200
3 Trade Payables
H Ltd. 3,22,000
S Ltd. 1,23,000
Less: Mutual transaction (35,000) 4,10,000
4. Property, Plant & Equipment
Machinery
H Ltd. 6,40,000
S Ltd. 2,00,000
Add: Appreciation 1,00,000
3,00,000
Less: Depreciation (20,000+10,000) (30,000) 2,70,000 9,10,000
Furniture
H Ltd. 3,75,000
S Ltd. 40,000
Less: Decrease in value (10,000)
30,000
Less: Depreciation (6,000-1,500) (4,500) 25,500 4,00,500
13,10,500
5. Intangible Assets
Goodwill 24,000
6. Inventories
H Ltd. 2,68,000
S Ltd. 62,000 3,30,000
Less: Inventory reserve (5,000)
3,25,000
7. Trade Receivables
H Ltd. 4,70,000
S Ltd. 2,35,000
Less: Mutual transaction (35,000) 6,70,000
8. Cash and Bank
H Ltd. 1,64,000
S Ltd. 32,000 1,96,000
The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing
 6
Working Notes:
1. Profit or loss on revaluation of assets in the books of S Ltd. and their book values as on 1.4.2019
Machinery
Revaluation as on 1.4.2019 3,00,000
Less: Book value as on 1.4.2019 (2,00,000)
Profit on revaluation 1,00,000
Furniture
Revaluation as on 1.4.2019 30,000
Less: Book value as on 1.4.2019 (40,000)
Loss on revaluation (10,000)

2. Calculation of short/excess depreciation

Machinery Furniture
Upward/ (Downward) Revaluation 1,00,000 (10,000)
Rate of depreciation 10% 15%
Difference [(short)/excess] (10,000) 1,500

3. Analysis of reserves and profits of S Ltd. as on 31.03.2020

Pre-acquisition Post-acquisition
Gen reserve P&L
General reserve as on 31.3.2020 50,000 1,05,000
Profit and loss account as on 31.3.2020 30,000 35,000
Upward Revaluation of machinery as on 1,00,000
1.4.2019
Downward Revaluation of Furniture as on (10,000)
1.4.2019
Short depreciation on machinery (10,000)
Excess depreciation on furniture 1,500
Less: Unrealised Profit (55,000*10/110) (5,000)
1,70,000 1,05,000 21,500

4. Minority Interest
Paid-up value of (2,00,000 x 20%) 40,000
Add: 20% share of pre-acquisition profits [(20% of 1,70,000) 34,000
20% share of post-acquisition reserves 21,000
20% share of post-acquisition profit 4,300
99,300

5. Cost of Control or Goodwill

Cost of Investment 3,20,000
Less: Paid-up value of 80% shares 1,60,000
80% share of pre-acquisition profits 1,36,000 (2,96,000)
Cost of control or Goodwill 24,000

Solution 6
Consolidated Balance Sheet of Beta Ltd. and its Subsidiary Gamma Ltd. as at 31st March, 2021
Particulars Note No. Amount
I. Equity and Liabilities
(1) Shareholder's Funds
(a) Share Capital 1 15,00,000
(b) Reserves and Surplus 2 8,61,500
(2) Minority Interest 1,20,375
The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing
 7
(3) Current Liabilities
(a) Trade Payables 3 5,17,500
Total 29,99,375
II. Assets
(1) Non-current assets
(a) Property, Plant & Equipment & Intangible Assets
(i) Property, Plant & Equipment 4 14,94,375
(ii) Intangible assets 5 30,000
(b) Other Non Current Assets 6 14,75,000
Total 29,99,375

Notes to Accounts
1 Share Capital
15,000 equity shares of ₹ 10 each 15,00,000
2 Reserves and Surplus
Reserves 5,00,000
Add: 80% share of Gamma Ltd.’s post-acquisition 1,00,000 6,00,000
reserves
Profit and Loss Account 2,50,000
Add: 80% share of Gamma Ltd.’s post-acquisition 11,500 2,61,500
profits
8,61,500
3 Trade Payables
Beta Ltd. 3,75,000
Gamma Ltd. 1,42,500 5,17,500
4. Property, Plant & Equipment
Machinery
Beta Ltd. 7,50,000
Gamma Ltd. 2,50,000
Add: Appreciation 1,25,000
3,75,000
Less: Depreciation (25,000+12,500) (37,500) 3,37,500 10,87,500
Furniture
Beta Ltd. 3,75,000
Gamma Ltd. 50,000
Less: Decrease in value (12,500)
37,500
Less: Depreciation (7,500-1,875) (5,625) 31,875 4,06,875
14,94,375
5. Intangible Assets
Goodwill 30,000
6. Other Non Current Assets
Beta Ltd. 11,00,000
Gamma Ltd. 3,75,000 14,75,000

Working Notes:
1. Profit or loss on revaluation of assets in the books of Gamma Ltd. and their book values as on
1.4.2020
Machinery
Revaluation as on 1.4.2020 3,75,000
Less: Book value as on 1.4.2020 (2,50,000)
The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing
 8
Profit on revaluation 1,25,000
Furniture
Revaluation as on 1.4.2020 37,500
Less: Book value as on 1.4.2020 (50,000)
Loss on revaluation (12,500)

2. Calculation of short/excess depreciation

Machinery Furniture
Upward/ (Downward) Revaluation 1,25,000 (12,500)
Rate of depreciation 10% 15%
Difference [(short)/excess] (12,500) 1,875

3. Analysis of reserves and profits of S Ltd. as on 31.03.2020

Pre-acquisition Post-acquisition
Reserve P&L
Reserve as on 31.3.2021 62,500 1,25,000
Profit and loss account as on 31.3.2021 37,500 25,000
Upward Revaluation of machinery as on 1,25,000
1.4.2020
Downward Revaluation of Furniture as on (12,500)
1.4.2020
Short depreciation on machinery (12,500)
Excess depreciation on furniture 1,875
2,12,500 1,25,000 14,375

4. Minority Interest
Paid-up value of (2,50,000 x 20%) 50,000
Add: 20% share of pre-acquisition profits [(20% of 2,12,500) 42,500
20% share of post-acquisition reserves 25,000
20% share of post-acquisition profit 2,875
1,20,375

5. Cost of Control or Goodwill

Cost of Investment 4,00,000
Less: Paid-up value of 80% shares 2,00,000
80% share of pre-acquisition profits 1,70,000 (3,70,000)
Cost of control or Goodwill 30,000

Solution 7
Consolidated Balance Sheet of H Ltd. and its Subsidiary S Ltd. as at 31st March, 2020
Particulars Note No. Amount
I. Equity and Liabilities
(1) Shareholder's Funds
(a) Share Capital 1 13,40,000
(b) Reserves and Surplus 2 8,27,040
(2) Minority Interest 1,15,560
(3) Non Current Liabilities
(a) Long Term Borrowings (12% Debentures) 1,00,000
(3) Current Liabilities
(a) Trade Payables 3 3,84,800
(b) Short Term Borrowings (Bank Overdraft) 1,00,000
Total 28,67,400
The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing
 9
II. Assets
(1) Non-current assets
(a) Property, Plant & Equipment & Intangible Assets
(i) Property, Plant & Equipment 4 14,34,600
(ii) Intangible assets 5 28,800
(2) Current assets
(a) Inventories 8,00,000
(b) Trade Receivables 6 5,08,000
(c) Cash at Bank 96,000
Total 28,67,400

Notes to Accounts
1 Share Capital
1,34,000 equity shares of ₹ 10 each 13,40,000
2 Reserves and Surplus
Reserves 4,80,000
Add: 80% share of S Ltd.’s post-acquisition reserves 96,000 5,76,000
Profit and Loss Account 2,40,000
Add: 80% share of S Ltd.’s post-acquisition profits 11,040 2,51,040
8,27,040
3 Trade Payables
H Ltd. 2,00,000
S Ltd. 1,22,000 3,22,000
Bill Payables
H Ltd. 60,000
S Ltd. 14,800
Less: Mutual transaction (12,000) 62,800 3,84,800
4. Property, Plant & Equipment
Machinery
H Ltd. 7,20,000
S Ltd. 2,40,000
Add: Appreciation 1,20,000
3,60,000
Less: Depreciation (24,000+12,000) (36,000) 3,24,000 10,44,000
Furniture
H Ltd. 3,60,000
S Ltd. 48,000
Less: Decrease in value (12,000)
36,000
Less: Depreciation (7,200-1,800) (5,400) 30,600 3,90,600
14,34,600
5. Intangible Assets
Goodwill 28,800
6. Trade Receivables
H Ltd. 3,00,000
S Ltd. 3,90,000 3,90,000
Bills Receivables
H Ltd. 1,00,000
S Ltd. 30,000
Less: Mutual transaction (12,000) 1,18,000 5,08,000

The copyright of these notes is with C.A. Nitin Goel

No part of these notes may be reproduced in any manner without his prior permission in writing
 10
Working Notes:
1. Profit or loss on revaluation of assets in the books of S Ltd. and their book values as on 1.4.2019
Machinery
Revaluation as on 1.4.2019 3,60,000
Less: Book value as on 1.4.2019 (2,40,000)
Profit on revaluation 1,20,000
Furniture
Revaluation as on 1.4.2019 36,000
Less: Book value as on 1.4.2019 (48,000)
Loss on revaluation (12,000)
2. Calculation of short/excess depreciation
Machinery Furniture
Upward/ (Downward) Revaluation 1,20,000 (12,000)
Rate of depreciation 10% 15%
Difference [(short)/excess] (12,000) 1,800
3. Analysis of reserves and profits of S Ltd. as on 31.03.2020
Pre-acquisition Post-acquisition
Gen reserve P&L
General reserve as on 31.3.2020 60,000 1,20,000
Profit and loss account as on 31.3.2020 36,000 24,000
Upward Revaluation of machinery as on 1.4.2019 1,20,000
Downward Revaluation of Furniture as on 1.4.2019 (12,000)
Short depreciation on machinery (12,000)
Excess depreciation on furniture 1,800
2,04,000 1,20,000 13,800

4. Minority Interest
Paid-up value of (2,40,000 x 20%) 48,000
Add: 20% share of pre-acquisition profits [(20% of 2,04,000) 40,800
20% share of post-acquisition reserves 24,000
20% share of post-acquisition profit 2,760
1,15,560

5. Cost of Control or Goodwill

Cost of Investment 3,84,000
Less: Paid-up value of 80% shares (2,40,000*80%) 1,92,000
80% share of pre-acquisition profits (2,04,000*80%) 1,63,200 (3,55,200)
Cost of control or Goodwill 28,800

Solution 8
Consolidated Balance Sheet of White Ltd. and its Subsidiary Black Ltd.
as at 31st March, 2021
Particulars Note No. (₹)
I. Equity and Liabilities
(1) Shareholder's Funds
(a) Share Capital 1 6,50,000
(b) Reserves and Surplus 2 2,55,000
(2) Minority Interest 3 1,05,000
(3) Current Liabilities
(a) Trade Payables 4 1,90,000
Total 12,00,000

The copyright of these notes is with C.A. Nitin Goel

No part of these notes may be reproduced in any manner without his prior permission in writing
 11
II. Assets
(1) Non-current assets
(a) Property, Plant and Equipment 5 9,31,000
(2) Current assets
(i) Inventory 6 1,70,000
(ii) Cash & cash equivalent 7 99,000
Total 12,00,000

Notes to Accounts
₹
1. Share capital
6,500 equity shares of ₹ 100 each, fully paid up 6,50,000
Total 6,50,000
2. Reserves and Surplus
General Reserves 60,000
Profit and Loss Account 1,50,000
Add: 75% share of Black Ltd.’s post-acquisition profits (W.N.1) 37,500 1,87,500
Capital reserve (W.N. 5) 7,500
Total 2,55,000
3. Minority interest in Black Ltd. (WN 4) 1,05,000
4. Trade payables
White Ltd. 1,15,000
Black Ltd. 75,000 1,90,000
5. Property, plant and equipment
White Ltd. 5,80,000
Black Ltd. 3,51,000 9,31,000
6 Inventory
White Ltd. 50,000
Black Ltd. 1,20,000 1,70,000
7 Cash & cash equivalent
White Ltd. 39,000
Black Ltd. 54,000
Cash in transit 6,000 99,000

Working Notes:
1. Post-acquisition profits of Black Ltd. ₹
Profits earned during the year = ₹ 90,000 + ₹10,000 1,00,000
Pre-acquisition profits (1.4.20 to 30.9.20) 50,000
Post-acquisition profits (1.10.20 to 31.3.21) 50,000
White Ltd.’s share 75% of 50,000 37,500
Minority Interest 25% of 50,000 12,500
2. Pre-acquisition profits and reserves of Black Ltd.
Reserves as on 1.4.2020 30,000
Profit and Loss Account 40,000
[10,000 (loss as on 1.4.20) +50,000 (6 month Adjusted pre-acquisition profits)]
70,000
White Ltd.’s = (75%) × 70,000 52,500
Minority Interest= (25%) × 70,000 17,500
3. Post-acquisition reserves of Black Ltd.
Post-acquisition reserves
(Total reserves less pre-acquisition reserves = ₹ 30,000 – 30,000) Nil

The copyright of these notes is with C.A. Nitin Goel

No part of these notes may be reproduced in any manner without his prior permission in writing
 12
4. Minority Interest
Paid-up value of (3,000 – 2,250) = 750 shares
held by outsiders i.e. 750 × ₹ 100 75,000
Add: 25% share of pre-acquisition reserves & Profit 17,500
25% share of post-acquisition profit 12,500
1,05,000
5. Capital Reserve
Price paid by White Ltd. for 2,250 shares (A) 2,70,000
Intrinsic value of the shares-
Paid-up value of 2,250 shares held by White Ltd. i.e. 2,250 × ₹ 100 = 2,25,000
Add 75% share of pre-acquisition reserves & profit (70,000 x 75%) = 52,500 (B) 2,77,500
Capital reserve (A – B) 7,500

Solution 9
Consolidated Balance Sheet of H Ltd. and its Subsidiary S Ltd.
as at 31st March, 2023
Particulars Note No. (₹)
I. Equity and Liabilities
(1) Shareholder's Funds
(a) Share Capital 1 9,00,000
(b) Reserves and Surplus 2 2,73,500
(2) Minority Interest 3 1,26,000
(3) Current Liabilities
(a) Trade Payables 4 1,29,000
Total 14,28,500
II. Assets
(1) Non-current assets
(a) Property, Plant and Equipment 5 10,20,000
(2) Current assets
(a) Inventory 6 1,49,500
(b) Trade Receivables 7 1,29,000
(c) Cash & cash equivalent 8 1,30,000
Total 14,28,500
Notes to Accounts
₹
1. Share capital
Authorised, issued, subscribed and paid up capital
90,000 equity shares of ₹ 10 each, fully paid up 9,00,000
2. Reserves and Surplus
General Reserves 1,60,000
Profit and Loss Account (W.N.5) 88,500
Capital Reserve (W.N. 4) 25,000 2,73,500
3. Minority interest in S Ltd. (WN 3) 1,26,000
4. Trade payables
Bills Payable
H Ltd. 40,000
S Ltd. 20,000
Less: Mutual payables (7,000) 53,000
Trade Creditors
H Ltd. 50,000
The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing
 13
S Ltd. 30,000
Less: Mutual owing (4,000) 76,000 1,29,000
5. Property, plant and equipment
Machinery: H Ltd. 7,00,000
S Ltd. 1,50,000 8,50,000
Furniture: H Ltd. 1,00,000
S Ltd. 70,000 1,70,000 10,20,000
6. Inventory
H Ltd. 1,00,000
S Ltd. 50,000
Less: Unrealized profit (2,000x 25%) (500) 1,49,500
7. Trade receivables 1,29,000
Bills receivable:
H Ltd. 25,000
S Ltd. 20,000
Less: Mutual payables (7,000) 38,000
Debtors:
H Ltd. 60,000
S Ltd. 35,000
Less: Mutual owing (4,000) 91,000 1,29,000
8. Cash & cash equivalent
Cash at Bank H Ltd. 90,000
S Ltd. 40,000 1,30,000
Working Notes:
1. Percentage of holding No. of Shares Percentage
Holding Co. : 15,000 (60%)
Minority shareholders : 10,000 (40%)
Total Shares : 25,000

2. Analysis of Profits
Pre-acquisition profits and Post-acquisition
reserves of S Ltd. (₹) profits of S Ltd. (₹)
General Reserve 40,000 ---
Opening balance of Profit and Loss 5,000 ---
Current Year’s profit (in 1:3) 5,000 15,000
50,000 15,000
H Ltd.’s share (60%) 30,000 9,000
Minority Interest (40%) 20,000 6,000
3. Minority Interest
Paid up value of 10,000 shares @ ₹ 10 each ₹ 1,00,000
Add: Share in pre-acquisition profits and reserve (40%) ₹ 20,000
Add: Share in post-acquisition profits (40%) ₹ 6,000
₹ 1,26,000
4. Capital Reserve for H Ltd.
(A) Cost of acquiring 15,000 shares of S Ltd. ₹ 1,55,000
(B) Paid up value of 15,000 shares of S Ltd. @ ₹ 10 each ₹ 1,50,000
Add: Share in pre-acquisition profit and reserves of S Ltd. ₹ 30,000
₹ 1,80,000
Capital Reserve (B-A) ₹ 25,000

The copyright of these notes is with C.A. Nitin Goel

No part of these notes may be reproduced in any manner without his prior permission in writing
 14
5. Consolidated Balance of Profits of H Ltd.
Balance as per Statement of Profit and Loss ₹ 80,000
Add: Share in post-acquisition profits of S Ltd. ₹ 9,000
Less: Unrealised Profit in unsold stock of S Ltd. ₹ (500)
₹ 88,500

Solution 10
Consolidated Balance Sheet of H Ltd. with its subsidiary S Ltd. as at 31st March, 2022
Particulars Note No. (₹ in 000’s)
I. Equity and Liabilities
(1) Shareholder's Funds
(a) Share Capital 1 4,000
(b) Reserves and Surplus 2 3,063
(2) Minority Interest (W.N.6) 1,560
(3) Current Liabilities
(a) Trade payables 3 1,118
(b) Short term provisions 4 482
Total 10,223
II. Assets
(1) Non-current assets
(a) PPE 5 5,904
(2) Current assets
(a) Inventories 6 1,759
(b) Trade receivables 7 1,598
(c) Cash and cash equivalents 8 512
(d) Short term loans and advances 9 450
Total 10,223

Notes to Accounts
(₹ in 000’s) (₹ in 000’s)
1. Share Capital
Authorised share capital
5 lakhs equity shares of ₹ 10 each 5,000
Issued, Subscribed and Paid up
4 lakhs equity shares of ₹ 10 each fully paid 4,000
2. Reserves and surplus
Capital Reserve (Note 5) 679.8
General Reserve 928
Profit and Loss Account:
H Ltd. ₹ 1,305.00
Add: Share in S Ltd ₹ 340.20
₹ 1,645.20
Less: Dividend wrongly credited ₹ (180)
₹ 1,465.20
Less: Unrealised profit (50 X 1/5) ₹ (10) 1,455.20 3,063
3. Trade payables
H Ltd. 611
S Ltd. 507 1,118
4. Short –term provisions
Provision for Taxation H Ltd. ₹ 220

The copyright of these notes is with C.A. Nitin Goel

No part of these notes may be reproduced in any manner without his prior permission in writing
 15
S Ltd. ₹ 180 400
Other Provisions H Ltd ₹ 65
S Ltd. ₹ 17 82 482
5. PPE
Plant and Machinery
H Ltd. ₹ 2,541
S Ltd. ₹ 2,450 4,991
Furniture and fittings
H Ltd. ₹ 615
S Ltd. ₹ 298 913 5,904
6. Inventories
Inventory H Ltd. ₹ 983
S Ltd. ₹ 786 1,769
Less: Unrealised profit (₹ 50 x 1/5) (10) 1,759
7. Trade receivables
H Ltd. 820
S Ltd. 778 1,598
8. Cash and cash equivalents
Cash and Bank Balances H Ltd 410
S Ltd. 102 512
9. Short term loans and advances
Sundry Advances H Ltd. 260
S Ltd. 190 450
Working Notes: Share holding pattern
Particulars Number of Shares % of holding
a. S Ltd.
(i) Purchased on 01.04.2021 90,000
(ii) Bonus Issue (90,000/5 x 3) 54,000
Total 1,44,000 60%
(1,44,000 /2,40,000*x 100)
b. Minority Interest 96,000 40%
*2,40,000 is after issue of bonus shares as per balance sheet as at 31.3.2022
1. S Ltd. General Reserve
(₹ in 000) (₹ in 000)
To Bonus to equity shareholders 900 By Balance b/d 1,500
[(2400*3)/8]
To Balance c/d 690 By Profit & Loss A/c (Bal. fig.) 90
1,590 1,590
2. S Ltd.’s Profit and Loss Account
(₹ in 000) (₹ in 000)
General Reserve 90 Balance b/d 633
Dividend paid on 14.7.2021 300 Net Profit for the year (Balancing
[(1500*20)/100] figure) 567*
Balance c/d 810
1,200 1,200
* Out of ₹ 5,67,000 profit for the year, ₹ 90,000 has been transferred to reserves by S Ltd.
3. Distribution of Revenue Profits
₹ in ’000
Revenue Profit as above 567.00
Share of H Ltd. (60%) 340.20
Share of Minority shareholders (567– 340.20) 226.80
The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing
 16
4. Computation of Capital Profits
₹ in 000 ₹ in 000
General Reserve on the date of acquisition 1,500
Less: Bonus issue of shares (900)
600
Profit and Loss Account balance on the date of acquisition 633
Less: Dividends paid (300) 333
933
Share of H Ltd. (60%) 559.80
Share of Minority shareholders 373.20

5. Computation of Capital Reserve

₹ in ’000
60% of share capital of S Ltd. 1,440
Add: Share of H Ltd. in the capital profits as in working note (4) 559.80
1,999.80
Less: Investments in S Ltd. 1,500
Less: Dividends received out of pre- acquisition profits [(₹300*60)/100] (180) (1,320)
679.80

6. Calculation of Minority Interest

₹ in ’000
40% of share capital of S Ltd. 960.00
Add: Share of Revenue Profits (Note 3) 226.80
Share of Capital Profits (Note 4) 373.20
1,560.00

Solution 11
Total dividend paid is ₹ 22,500 (out of post-acquisition profits), hence dividend received by Hemant will
be credited to P & L account. Hemant Ltd.’s share of dividend = ₹ 22,500 X 80% = ₹ 18,000
Amount Amount
Goodwill on consolidation (at the date of acquisition):
Cost of shares 2,10,000
Less: Face value of capital i.e. 80% of capital 1,20,000
Add: Share of capital profits [90,000 X 80 %] 72,000 (1,92,000)
Goodwill 18,000
Minority interest on:
- 1st January, 2020:
20% of ₹ 2,40,000 [1,50,000 + 90,000] 48,000
- 31st December, 2020:
20% of ₹2,47,500 [1,50,000 + 90,000 + 30,000 – 22,500] 49,500

Solution 12
Revalued net assets of Queen Ltd. as on 31st March, 2020
In Lakhs
Property, Plant & Equipment (240*20%) 288
Investments (110*90%) 99
Current Assets 140
Loans & Advances 30
15% Debentures (180)
The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing
 17
Current Liabilities (100)
Equity/Net Worth 277
King Ltd.’s share of net assets (70% of 277) 193.9
King Ltd.’s cost of acquisition of shares of Queen Ltd (140)
Capital Reserve 53.90

Solution 13
Since dividend is declared by B Ltd. on the date of acquisition itself, it would be out of the divisible
profits of B Ltd. existing on the date of acquisition i.e., pre-acquisition profits from the perspective of A
Ltd. Accordingly, as per AS 13, such pre-acquisition dividend would be reduced from the cost of
investment, as seen below in the determination of Goodwill on the date of acquisition.

Property, Plant & Equipment 70,00,000

Less: Value Written off (70 Lakhs * 10%) (7,00,000)
63,00,000
Investments 60,00,000
Current Assets 68,00,000
Loans & Advances 22,00,000 2,13,00,000
Less: 10% Debentures 10,00,000
Trade Payables 55,00,000 (65,00,000)
Net Assets of B Ltd. 1,48,00,000
Share of A Ltd. in Net Assets of B Ltd.: 60% 88,80,000
Less: Cost of Investment in B Ltd. (60% stake):
10,00,000 Equity Shares x 60% x ` 20 per shar 1,20,00,000
Less: Pre-acquisition dividend: 6,00,000 shares x ` 2 (12,00,000) (1,08,00,000)
Goodwill on Date of Acquisition 19,20,000

Solution 14
Revalued net assets of B Ltd. as on 31st March, 2020
In Lakhs
Property, Plant & Equipment 360
Investments 90
Current Assets 140
Loans & Advances 30
15% Debentures (180)
Current Liabilities (100)
Equity/Net Worth 340
Share of Minority Interest in Net Assets (340*30%) 102
A Ltd.’s share of net assets (70% of 340) 238
A Ltd.’s cost of acquisition of shares of B Ltd (140)
Capital Reserve 98

Solution 15
The losses applicable to the minority in a consolidated subsidiary may exceed the minority interest in the
equity of the subsidiary. The excess, and any further losses applicable to the minority, are adjusted
against the majority interest except to the extent that the minority has a binding obligation to, and is able
to, make good the losses. If the subsidiary subsequently reports profits, all such profits are allocated to the
majority interest until minority's share of losses previously absorbed by the majority has been recovered.

The copyright of these notes is with C.A. Nitin Goel

No part of these notes may be reproduced in any manner without his prior permission in writing
 18
Year Profit / (Loss) Minority Consolidated Minority's Share of Cost of
Interest P & L (Dr.) losses borne by H Ltd. Control
(30%) or Cr. Amount Balance
On
1.1.2013 1,62,000
2013 (1,25,000) (37,500) (87,500) 1,22,000
Balance 1,24,500
2014 (2,00,000) (60,000) (1,40,000) 1,22,000
Balance 64,500
2015 (2,50,000) (75,000) (1,75,000) 1,22,000
(10,500)
Loss of minority 10,500 (10,500) 10,500 10,500
borne by Holding Co
Balance Nil (1,85,500)
2016 (60,000) (18,000) (42,000) 1,22,000
Loss of minority 18,000 (18,000) 18,000 28,500
borne by Holding Co
Balance Nil (60,000)
2017 25,000 7,500 17,500 1,22,000
Profit share of (7,500) 7,500 (7,500) 21,000
minority adjusted
against losses of
minority absorbed by
Holding
Balance Nil 25,000
2018 50,000 15,000 35,000 1,22,000
Profit share of (15,000) 15,000 (15,000) 6,000
minority adjusted
against losses of
minority absorbed by
Holding
Balance Nil 50,000
2019 75,000 22,500 52,500 1,22,000
Profit share of (6,000) 6,000 (6,000) Nil
minority adjusted
against losses of
minority absorbed by
Holding
Balance 16,500 58,500

Working Note: Calculation of Minority interest and Cost of control on 1.1.2013

Share of Holding Co. Minority Interest
100% 70% 30%
Share Capital 5,00,000 3,50,000 1,50,000
Reserve 40,000 28,000 12,000
Less: Cost of investment (5,00,000)
Goodwill 1,22,000

The copyright of these notes is with C.A. Nitin Goel

No part of these notes may be reproduced in any manner without his prior permission in writing
 19
Solution 16

Year Profit / (Loss) Minority Additional Minority's Share of Cost of

Interest Consolidated losses borne by GB Control
(20%) P & L (Dr.) Cr. Ltd.
₹ Balance
At the time -
of 10,92,800
acquisition (W.N.)
in 2016
2016-17 (14,50,000) (2,90,000) (11,60,000) 14,28,800
(W.N.)
Balance 8,02,800
2017-18 (23,20,000) (4,64,000) (18,56,000) 14,28,800
Balance 3,38,800
2018-19 (29,00,000) (5,80,000) (23,20,000) 14,28,800
(2,41,200)
Loss of minority borne 2,41,200 (2,41,200) 2,41,200 2,41,200
by Holding Co.
Balance Nil (25,61,200)
2019-20 (6,96,000) (1,39,200) (5,56,800) 14,28,800
Loss of minority borne 1,39,200 (1,39,200) 1,39,200 3,80,400
by Holding Co.
Balance Nil (6,96,000)
2020-21 1,90,000 38,000 1,52,000 14,28,800
Profit share adjusted (38,000) 38,000 (38,000) 3,42,400
against losses of
minority absorbed by
Holding Co.
Balance Nil 1,90,000
2021-22 6,80,000 1,36,000 5,44,000
Profit share adjusted
against losses of (1,36,000) 1,36,000 (1,36,000) 2,06,400 14,28,800
minority absorbed by
Holding Co.
Balance Nil 6,80,000
2022-23 12,70,000 2,54,000 10,16,000 (2,06,400) Nil 14,28,800
(2,06,400) 2,06,400
Balance 47,600 12,22,400

Working Note:
Calculation of Minority interest and Cost of control on 1.4.2016
Share of Holding Co. Minority Interest
100% (₹) 80% (₹) 20% (₹)
Share Capital 50,00,000 40,00,000 10,00,000
Reserve 4,64,000 3,71,200 92,800
43,71,200 10,92,800
Less: Cost of investment (58,00,000)
Goodwill 14,28,800

The copyright of these notes is with C.A. Nitin Goel

No part of these notes may be reproduced in any manner without his prior permission in writing
 20
Solution 17
Restated Balance Sheet of MNT Ltd. as at 31st March, 2020
Particulars Note No. Amount
I. Equity and Liabilities
(1) Shareholder's Funds
(a) Share Capital 7,50,000
(b) Reserves and Surplus 1 7,18,500
(2) Current Liabilities
(a) Short term borrowings 2 1,70,000
(b) Trade Payables 2,46,000
(c) Short-term provision 3 4,30,000
Total 23,14,500
II. Assets
(1) Non-current assets
(a) Property, Plant & Equipment & Intangible Assets
i) Property, Plant & Equipment 4 6,37,500
(b) Non-current Investment 5,30,000
(2) Current assets
(a) Inventories (6,90,000 +12,000) 5 7,02,000
(b) Trade Receivables (343000/98X100) 3,50,000
(c) Cash & Cash Equivalents 42,500
(d) Other current assets 6 52,500
Total 23,14,500
Notes to Accounts
Particulars Amount
1 Reserves and Surplus
Revenue Reserve (refer W.N.) 5,11,500
Securities Premium 2,07,000 7,18,500
2 Short term borrowings
Bank overdraft 1,70,000
3 Short-term provision
Provision for taxation 4,30,000
4 Property, Plant and Equipment
Cost 9,20,000
Less: Depreciation to date (2,82,500) 6,37,500
5 Inventories 6,90,000
Increase in value as per FIFO 12,000 7,02,000
6 Other current assets
Prepaid expenses (After adjusting sales 52,500
promotion expenses to be written off each year)
(65,000 -12,500)

Working Note: Adjusted revenue reserves of MNT Ltd.:

Particulars Amount Amount
Revenue reserves as given 5,05,000
Add: Provision for doubtful debts [3,43,000 X 2/98) 7,000
Add: Increase in value of inventory 12,000 19,000
5,24,000
Less: Sales Promotion expenditure to be written off (12,500)
Adjusted revenue reserve 5,11,500

The copyright of these notes is with C.A. Nitin Goel

No part of these notes may be reproduced in any manner without his prior permission in writing
 21
Solution 18
Consolidated Profit & Loss Account of A Ltd. & its subsidiary B Ltd. the year ended on 31st March, 20
Particulars Note No. ₹ in Lacs
I. Revenue from operations 1 8,797
Total Income 8,797
II. Expenses
Cost of Material purchased/Consumed 3 1,770
Changes of Inventories of finished goods 2 (1,794)
Employee benefit expense 4 1,425
Finance cost 6 225
Depreciation and amortization expense 7 225
Other expenses 5 802
Total expenses 2,653
Profit before Tax (II-III) 6,144
III. Tax Expenses 8 2,100
Profit After Tax 4,044

Notes to Accounts
₹ in Lacs ₹ in Lacs
1. Revenue from Operations
Sales and other income
A Ltd. 7,500
B Ltd. 1,500
9,000
Less: Inter-company Sales (180)
Consultancy fees received by A Ltd. from B Ltd. (8)
Commission received by B Ltd. from A Ltd. (15) 8,797
2. Increase in Inventory
A Ltd. 1,500
B Ltd. 300
1,800
Less: Unrealised profits ₹ 180×1/6 x 25/125 (6) 1,794
3. Cost of Material purchased/consumed
A Ltd. 1,200
B Ltd. 300
1,500
Less: Purchases by B Ltd. from A Ltd. (180) 1,320
Direct Expenses
A Ltd. 300
B Ltd. 150 450
1,770
4. Employee benefits and expenses
Wages and Salaries:
A Ltd. 1,200
B Ltd. 225 1,425
5. Other Expenses
Administrative Expenses
A Ltd. 300
B Ltd. 150
450
Less: Consultancy fees received by A Ltd. from BLtd. (8) 442
Selling and Distribution Expenses:
The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing
 22
A Ltd. 300
B Ltd. 75
375
Less: Commission received from B Ltd. from A Ltd. (15) 360
802
6. Finance Cost
Interest:
A Ltd. 150
B Ltd. 75 225
7. Depreciation and Amortisation
Depreciation:
A Ltd. 150
B Ltd. 75 225
8. Provision for tax
A Ltd. 1800
B Ltd. 300 2100
Note:
It is assumed that dividend adjustment has not been done in sales & other income of A Ltd i.e. dividend
received from B Ltd is not included in other income of A Ltd. Alternative answer is possible considering
otherwise.

Solution 19
Consolidated statement of profit and loss of G Ltd. and its subsidiary K Ltd.
for the year ended on 31st March, 2023
Particulars Note No. ₹ in Crores
I. Revenue from operations 1 3,525
II. Total Income 3,525
III. Expenses
Cost of material purchased/consumed 2 650
Changes of inventories of finished goods 3 (842)
Employee benefit expense 4 675
Finance cost 5 105
Depreciation and amortization expense 6 105
Other expenses 7 225
Total expenses 918
IV. Profit before tax (II-III) 2,607

Notes to Accounts

The copyright of these notes is with C.A. Nitin Goel

No part of these notes may be reproduced in any manner without his prior permission in writing
 23
₹ in ₹ in
Crores Crores
1. Revenue from operations
Sales and other income
G Ltd. 3,000
K Ltd. 750
3,750
Less: Inter-company sales (200)
Consultancy fees received by G Ltd. from K Ltd. (5)
Commission received by K Ltd. from G Ltd. (20) 3,525
2. Cost of material purchased/consumed
G Ltd. 600
K Ltd. 100
700
Less: Purchases by K Ltd. from G Ltd. (200) 500
Direct expenses (Production)
G Ltd. 100
K Ltd. 50 150
650
3. Changes of inventories of finished goods
G Ltd. 750
K Ltd. 100
850
Less: Unrealized profits ₹ 40 crores × 25/125 (8) 842
4. Employee benefits and expenses
Wages and salaries:
G Ltd. 600
K Ltd. 75 675
5. Finance cost
Interest:
G Ltd. 75
K Ltd. 30 105
6. Depreciation
G Ltd. 75
K Ltd. 30 105
7. Other expenses
Administrative expenses
G Ltd. 75
K Ltd. 50
125
Less: Consultancy fees received by G Ltd. from K Ltd. (5) 120
Selling and distribution Expenses:
G Ltd. 100
K Ltd. 25
125
Less: Commission received by K Ltd. from G Ltd. (20) 105
225

The copyright of these notes is with C.A. Nitin Goel

No part of these notes may be reproduced in any manner without his prior permission in writing
 24
Note: The information (i) given in the question states that G Ltd. sold goods of ₹ 200 crores to K Ltd.
at cost plus 25%. In the above solution it has been considered that the amount of ₹ 200 crores is
sale value. Alternatively, ₹ 200 crores may be assumed as the cost of the goods sold. In that case,
the solution will differ and will be as follows:

Alternative solution:
Consolidated statement of profit and loss of G Ltd. and its subsidiary K Ltd.
for the year ended on 31st March, 2023
Particulars Note No. ₹ in Crores
II. Revenue from operations 1 3,475
II. Total Income 3,475
III. Expenses
Cost of material purchased/consumed 2 600
Changes of inventories of finished goods 3 (840)
Employee benefit expense 4 675
Finance cost 5 105
Depreciation and amortization expense 6 105
Other expenses 7 225
Total expenses 870
IV. Profit before tax (II-III) 2,605

Notes to Accounts
₹ in ₹ in
Crores Crores
1. Revenue from operations
Sales and other income
G Ltd. 3,000
K Ltd. 750
3,750
Less: Inter-company sales (250)
Consultancy fees received by G Ltd. from K Ltd. (5)
Commission received by K Ltd. from G Ltd. (20) 3,475
2. Cost of material purchased/consumed
G Ltd. 600
K Ltd. 100
700
Less: Purchases by K Ltd. from G Ltd. (250) 450
Direct expenses (Production)
G Ltd. 100
K Ltd. 50 150
600
3. Changes of inventories of finished goods
G Ltd. 750
K Ltd. 100
850
Less: Unrealized profits ₹ 40 crores × 25/100 (10) 840
4. Employee benefits and expenses
Wages and salaries:
G Ltd. 600
K Ltd. 75 675
The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing
 25
5. Finance cost
Interest:
G Ltd. 75
K Ltd. 30 105
6. Depreciation
G Ltd. 75
K Ltd. 30 105
7. Other expenses
Administrative expenses
G Ltd. 75
K Ltd. 50
125
Less: Consultancy fees received by G Ltd. from K Ltd. (5) 120
Selling and distribution Expenses:
G Ltd. 100
K Ltd. 25
125
Less: Commission received by K Ltd. from G Ltd. (20) 105
225

Solution 20
Consolidated statement of profit and loss of Moon Ltd. and its subsidiary Star Ltd. for the year
ended on 31st March, 2021
Particulars Note No. ₹
Revenue from operations 1 5,00,32,500
Other Income 2 18,10,000
Total Income (I) 5,18,42,500
Expenses:
Cost of material purchased/consumed 3 2,14,55,000
Changes (Increase) in inventories of finished goods 4 (49,87,500)
Employee benefit expense 5 1,57,50,000
Finance cost 6 2,27,500
Depreciation and amortization expense 7 4,55,000
Other expenses 8 84,32,500
Total expenses (II) 4,13,32,500
Profit before tax (II-III) 1,05,10,000
Notes to Accounts:
₹ ₹
1. Revenue from operations
Sales and other operating revenues*
Moon Ltd. 3,32,50,000
Star Ltd. 1,90,75,000
523,25,000
Less: Inter-company sales (17,50,000)
Consultancy fees received by Star Ltd. from (2,80,000)
Moon Ltd.
Royalty received by Moon Ltd. from Star Ltd. (50,000)
Brokage received by Moon Ltd. from Star Ltd. (2,12,500) 5,00,32,500
The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing
 26
2. Other Income
Dividend income:
Moon Ltd. 16,80,000
Star Ltd. 4,37,500
Less: Dividend realised from Star Ltd. (5,00,000) 16,17,500
Loss on sale of investments Star Ltd. (2,62,500)
Other Non-operating Income
Moon Ltd. 3,50,000
Star Ltd. 1,05,000 4,55,000 18,10,000
3. Cost of material purchased/consumed
Moon Ltd. 1,39,30,000
Star Ltd. 47,25,000
Less: Purchases by Star Ltd. From Moon Ltd. 1,86,55,000
(17,50,000) 1,69,05,000
Direct expenses (Production)
Moon Ltd. 31,50,000
Star Ltd. 14,00,000 45,50,000 2,14,55,000
4. Changes (Increase) in inventories of finished
goods
Moon Ltd. 43,75,000
Star Ltd. 7,52,500
51,27,500
Less: Unrealized profits 7,00,000 × 20/100 (1,40,000) 49,87,500
5. Employee benefits and expenses
Wages and salaries:
Moon Ltd. 1,33,00,000
Star Ltd. 24,50,000 1,57,50,000
6 Finance cost
Interest:
Moon Ltd. 1,75,000
Star Ltd. 52,500 2,27,500
7. Depreciation
Moon Ltd. 3,15,000
Star Ltd. 1,40,000 4,55,000
8. Other expenses
General & Administrative expenses:
Moon Ltd. 28,00,000
Star Ltd. 12,25,000
40,25,000
Less: Consultancy fees received by Star Ltd. (280,000) 37,45,000
from Moon Ltd.
Royalty:
Star Ltd. 50,000
Less: Received by Moon Ltd. Selling and (50,000) Nil
distribution Expenses:
Moon Ltd. 33,25,000
Star Ltd. 15,75,000
49,00,000
Less: Brokerage received by Moon Ltd. from 46,87,500
(2,12,500) 84,32,500
Star Ltd.
*Consultancy fees, Royalty & brokerage received are considered as operating revenues in above answer
The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing
 27
Solution 21
Consolidated Profit and Loss Account of X Ltd. and Y Ltd.
for the year ended 31st March, 2021
Particulars Note No. ₹
Revenue from operations 1 35,80,000
Total Income 35,80,000
Expenses
Cost of Material purchased/Consumed 2 20,80,000
Changes of Inventories of finished goods -
Employee benefit expense 3 5,00,000
Finance cost 4 48,000
Depreciation and amortization expense 5 4,57,000
Other expenses 6 2,80,000
Total expenses 33,65,000
Profit before Tax 2,15,000
Profit transferred to Consolidated Balance Sheet
Profit After Tax 2,15,000
Preference dividend 7,000
Preference dividend payable 7,000 (14,000)
2,01,000
Share in pre-acquisition loss (WN 3) 1,800
Share of Minority interest in losses (WN 1) 1,800
Less: Investment Account- dividend for 3 months (3,500)
(prior to acquisition)
Inventory reserve (WN 2) (6,000)
Profit to be transferred to consolidated balance sheet 1,95,100
Notes to Accounts
₹ ₹
1 Revenue from Operations
X Ltd. 18,00,000
Y Ltd. 19,00,000
Total 37,00,000
Less: Intra-group sales (X sold to Y) (1,20,000) 35,80,000
2 Cost of Materials Purchased/Consumed
X Ltd. 10,00,000
Y Ltd. 12,00,000
Total 22,00,000
Less: Intra-group sales (X sold to Y) (1,20,000) 20,80,000
3 Employee benefit and expenses
Wages and salaries
H Ltd. 2,00,000
S Ltd. 3,00,000 5,00,000
4 Finance cost
Interest
H Ltd. 24,000
S Ltd. 24,000 48,000
5 Depreciation
H Ltd. 2,20,000
S Ltd. 2,37,000 4,57,000
6 Other expenses
H Ltd. 1,60,000
S Ltd. 1,20,000 2,80,000
The copyright of these notes is with C.A. Nitin Goel
No part of these notes may be reproduced in any manner without his prior permission in writing
 28
Working Note
1. Profit of Subsidiary
Revenue from Operations 19,00,000
Less: Expenses
Cost of Material purchased/Consumed 12,00,000
Changes of Inventories of finished goods -
Employee benefit expense 3,00,000
Finance cost 24,000
Depreciation and amortization expense 2,37,000
Other expenses 1,20,000
Total expenses (18,81,000)
Profit Before Tax 19,000
Less: Preference Dividend 14,000
Less: Preference Dividend Payable 14,000 (28,000)
Profit available for shareholders (9,000)
Minority Share (20% of loss ₹ 9,000) (1,800)

2. Inventory reserve = 120000/4 * 25/125 = ₹ 6,000

3. Pre-acquisition loss = 80% of 3 month’s profit up to 30th June,2020 i.e. 80 % of ¼ of loss ₹
9,000. Hence, pre-acquisition loss = ₹ 1,800
4. Investment account includes Preference dividend for 3 months prior to acquisition i.e.
₹ 4,00,000 X 50% X 7% X1/4 = ₹ 3,500

Solution 22
As per AS 21 Intragroup balances and intragroup transactions and resulting unrealised profits should be
eliminated in full.
Intragroup balances and intragroup transactions and resulting unrealised profits should be eliminated in
full. Unrealised losses resulting from intragroup transactions should also be eliminated unless cost cannot
be recovered.
Intragroup balances and intragroup transactions, including sales, expenses and dividends, are eliminated
in full. Unrealised profits resulting from intragroup transactions that are included in the carrying amount
of assets, such as inventory and fixed assets, are eliminated in full. Unrealised losses resulting from
intragroup transactions that are deducted in arriving at the carrying amount of assets are also eliminated
unless cost cannot be recovered.
One also needs to see whether the intragroup transaction is “upstream” or “downstream”. Upstream
transaction is a transaction in which the subsidiary company sells goods to holding company. While in
the downstream transaction, holding company is the seller and subsidiary company is the buyer.
sIn the case of upstream transaction, since the goods are sold by the subsidiary to holding company;
profit is made by the subsidiary company, which is ultimately shared by the holding company and the
minority shareholders. In such a transaction, if some goods remain unsold at the balance sheet date, the
unrealized profit on such goods should be eliminated from minority interest as well as from consolidated
profit on the basis of their share-holding besides deducting the same from unsold inventory.
But in the case of downstream transaction, the whole profit is earned by the holding company, therefore,
whole unrealized profit should be adjusted from unsold inventory and consolidated profit and loss
account only irrespective of the percentage of the shares held by the parent.

a. This would be the case of downstream transaction. In the consolidated profit and loss account for the
year ended 31 March 2019, entire transaction of sale and purchase of ₹ 200 lacs each, would be
eliminated by reducing both sales and purchases (cost of sales). Further, the unrealized profits of ₹ 20
lacs (i.e. ₹ 200 lacs – ₹ 180 lacs), would be eliminated from the consolidated financial statements for
financial year ended 31 March 2019, by reducing the consolidated profits/ increasing the
consolidated losses, and reducing the value of closing inventories as of 31 March 2019.

The copyright of these notes is with C.A. Nitin Goel

No part of these notes may be reproduced in any manner without his prior permission in writing
 29
b. This would be the case of upstream transaction. In the consolidated profit and loss account for the
year ended 31 March 2019, entire transaction of sale and purchase of ₹ 200 lacs each, would be
eliminated by reducing both sales and purchases (cost of sales). Further, the unrealized profits of ₹ 50
lacs (i.e. ₹ 200 lacs – ₹ 150 lacs), would be eliminated in the consolidated financial statements for
financial year ended 31 March 2019, by reducing the value of closing inventories by ₹ 50 lacs as of 31
March 2019. In the consolidated balance sheet as of 31 March 2019, A Ltd’s share of profit from B
Ltd will be reduced by ₹ 37.50 lacs (being 75% of ₹ 50 lacs) and the minority’s share of the profits of
B Ltd would be reduced by ₹ 12.50 lacs (being 25% of ₹ 50 lacs)

The copyright of these notes is with C.A. Nitin Goel

No part of these notes may be reproduced in any manner without his prior permission in writing