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Pinnacle Academy
Solutions of Tests of
April 2015 Batch
201-202, Florence Classic, Besides Unnati Vidhyalay,
Jain Derasar Road, Ashapuri Society, Akota, Vadodara-20. ph: 98258 561 55
Test of
CFS – 3
Conducted on 26th September 2015
(Solution is at the end with markings for self assessment)
Time Allowed-1 hour
Q1
On 1st July, 2010, A Ltd. acquired 7,000 shares of Rs.10 each of B Ltd. at Rs.90,000.
The respective balance sheets as on 31st December, 2012 are given below:
Liabilities
Share Capital
( Rs.10)
Reserves
Profit & Loss
A/c
Creditors
Total
i.
ii.
iii.
iv.
v.
vi.
Maximum Marks- 20
A Ltd.
B Ltd.
1,00,000
40,000
1,00,000
26,000
36,000
71,000
2,47,000
35,000
48,000
2,09,000
Assets
Fixed Assets
Investment
A Ltd.
60,000
1,00,000
B Ltd.
1,10,000
15,000
Debtors
Stock
Cash at bank
Total
25,000
30,000
32,000
2,47,000
20,000
40,000
24,000
2,09,000
Additional Information:
On 01.01.10 B Ltd. had Rs.43,000 in Reserve and Rs.15,000 in Profit and Loss
Account. Profits earned in 2010 is Rs.16,000
B Ltd. paid 10% dividends in 2010, 12% in 2011, 15% in 2012 for 2009, 2010 and
2011 respectively. All dividends received have been credited to the Profit and Loss
Account of A Ltd.
Proposed dividend of both the companies for 2012 is 10%.
One bonus share for four fully paid shares held has been declared by B Ltd. out of
pre-acquisition reserve on 31st December, 2012. Effect has been given to that in the
above accounts.
An item of fixed asset of B Ltd., which stood in books at Rs.50,000 on 01.01.10, was
revalued at Rs.60,000 on the same date but no adjustment has been made in the
books. Depreciation has been charged @ 10% p.a. on reducing balancing method.
In 2012, A Ltd. purchased from B Ltd. goods for Rs.10,000 on which B Ltd. made a
profit of 20% on sales, 25% of such goods are lying unsold on 31st December, 2012.
Prepare consolidated balance sheet as at 31st December, 2012.
(20 Marks)
(Assessed answer papers shall be returned latest by 3rd October 2015)
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Solution of Test of CFS – 3
Conducted on 26th September 2015
Q1
Working Notes:
(1) Extent of Holding:
Pre bonus shares:
Bonus shares:
Post bonus shares:
4
1
5
Pre-bonus shares = 10,000 X 4 / 5 i.e. 8,000
% of holding = (7,000 + Bonus 7,000 X 1 / 4) i.e. 8,750 / 10,000 = 87.5%
Pre-bonus share capital: Rs.80,000
Post-bonus share capital: Rs.1,00,000
Bonus issue size: Rs.20,000
(2) Profits earned by B Ltd. from 01.10.10 to 31.12.12:
P & L A/c as on 31.12.12
Add: Transfer to general reserve
[26,000 – (43,000 – Bonus 20,000)]
Dividend for 2009 (80,000 X 10%)
Dividend for 2010 (80,000 X 12%)
Dividend for 2011 (80,000 X 15%)
Less: P & L A/c as on 01.01.10
Profits earned in 2010, 2011 and 2012
Less: Profits earned in 2010
Profits earned in 2011 and 2012
Amount
(Rs.)
1,20,000
3,000
8,000
9,600
12,000
67,600
15,000
52,600
16,000
36,600
(2 Marks)
(3) Revaluation of an item of Fixed Asset of B Ltd.:
Book value on 01.01.10
Less: Revalued on 01.01.10 at
Revaluation Gain on 01.01.10
Depreciation for 01.01.10 to 31.12.12 on Revalued Amount:
2010: 60,000 X 10%: 6,000
2011: 54,000 X 10%: 5,400
2012: 48,600 X 10%: 4,860
Book value (already provided):
2010: 50,000 X 10%: 5,000
2011: 45,000 X 10%: 4,500
2012: 40,500 X 10%: 4,050
Additional depreciation to be provided
Less: Additional depreciation for 2010 (6,000 – 5,000)
Additional depreciation for 2011 and 2012
Amount
(Rs.)
50,000
60,000
10,000
16,260
13,550
2,710
1,000
1,710
(2 Marks)
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(4) Analysis of Profits of B Ltd.
Capital Revenue Revenue
Profits
Profits Reserve
43,000
----------------15,000
----------------8,000
8,000
----------------36,600
--------66,000
44,600
----------------(2,500)
2,500
Reserves on 01.01.10
P & L A/c on 01.01.10
Profits in 2010 (1 : 1)
Profits in 2011 and 2012
Transfer to general reserve
(3,000 X 2.5 / 3 years)
Dividend for 2009
(8,000)
2010 (1 : 1)
(4,800)
2011
--------Bonus issue
(20,000)
Revaluation gain on 01.01.10
10,000
Additional depreciation for 2010 (1 : 1)
(500)
2011 and 2012
--------Unrealised profit (10,000 X 25% X 20%)
--------42,700
Minority (12.5%)
5,338
A Ltd. (87.5%)
37,362
--------(4,800)
(12,000)
-----------------
-----------------------------------------
(500)
(1,710)
(500)
22,590
2,824
19,766
------------------------2,500
313
2,187
(5 Marks)
(5) Cost of Control:
Cost of shares
Less: Pre-acquisition dividend:
2009: 7,000 X 10 X 10%
2010: 7,000 X 10 X 12% X 6 / 12
Correct cost of shares
Less: Paid up value including bonus
Share in capital profits
Capital Reserve
Amount
90,000
7,000
4,200
78,800
87,500
37,362
46,062
(2 Marks)
(6) Minority Interest:
Paid up value of shares including bonus
Add: Share in profits and reserves
Amount
12,500
8,475
20,975
(1 Mark)
(7) Consolidated P & L A/c:
P & L A/c as on 31.12.12 of A Ltd.
Add: Share in revenue profits
Pre-acquisition dividend wrongly credited
Proposed dividend (own)
Amount
36,000
19,766
(11,200)
(10,000)
34,566
(1 Mark)
Solution prepared by
CA. Ashish Lalaji
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(8) Consolidated Reserves:
Amount
40,000
2,187
42,187
Reserve as on 31.12.12 of A Ltd.
Add: Share from B
(1 Mark)
Consolidated Balance Sheet of A Ltd. as on 31st December 2012
I.
1.
(a)
(b)
Equity and Liabilities:
Shareholders’ Funds
Share Capital
Reserves and Surplus
2.
Minority Interest
3.
Current Liabilities
Trade Payables
Short Term Provisions
(Proposed Dividend)
II.
1.
2.
Note No.
Amount
1
1,00,000
1,22,815
Total
Assets:
Non Current Assets
Fixed Assets
- Tangible
Non Current Investments
Current Assets
Inventories
Trade Receivables
Cash and Cash Equivalents
Total
Amount
2,22,815
20,975
1,29,000
1,19,000
10,000
3,72,790
2,02,290
2
1,77,290
25,000
3
69,500
45,000
56,000
1,70,500
3,72,790
See accompanying notes to Consolidated Balance Sheet.
(6 Marks)
Note No.
1
2
Amount
Reserves and Surplus
Capital Reserve on consolidation
Consolidated Reserves
Consolidated Profit and Loss Account
Tangible Fixed Assets
Add: Revaluation gain
Less: Additional depreciation
3
Inventories
Less: Unrealised profit
Solution prepared by
Amount
46,062
42,187
34,566
1,22,815
1,70,000
10,000
1,80,000
2,710 1,77,290
70,000
500
69,500
CA. Ashish Lalaji
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Points worth noting:
(i)
Revaluation of fixed asset is as on 01.01.10, while shares are acquired on
01.07.10. Thus, this is a question where revaluation is carried out even
before parent – subsidiary relationship comes into effect.
The revaluation gain shall exist on 01.01.10 i.e. before 01.07.10 and
hence is capital profit. However, depreciation in the year 2010 shall affect
capital profits for 1st six months and revenue profits for last six months of
2010.
(ii)
Only that transfer should be taken to general reserve which is out of
profits earned after 01.07.10.
Solution prepared by
CA. Ashish Lalaji
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