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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 – 4
Conducted on 24th October 2015
(Solution is at the end with markings for self assessment)
Time Allowed-1½ hours
Q1
Maximum Marks- 30
Draft consolidated balance sheet of Helpful Ltd. as on 31.03.12 is given below:
(Rs. in ‘000s)
Liabilities
Share Capital
Capital Reserve
Profit and Loss Account
Minority Interest
Non-Current Liabilities
Current Liabilities
Amount
(Rs.)
1,200
30
875
450
900
600
4,055
Assets
Amount
(Rs.)
Fixed Assets
Investment in Need Ltd.
Investment in Desire Ltd.
Current Assets
3,000
180
375
500
4,055
Helpful Ltd. acquired 25% stake in Need Ltd. for Rs.1.8 lakh and 40% stake in joint
venture Desire Ltd. for Rs.3.75 lakh on 01.01.2011. Profit and loss account balances
of Need Ltd. and Desire Ltd. on that date were Rs.2 lakh and Rs.3 lakh respectively.
Balance sheets of Need Ltd. and Desire Ltd. as on 31.12.11:
(Rs. in ‘000s)
Liabilities
Need Desire Assets
(Rs.)
(Rs.)
Share Capital
Profit and Loss Account
Non-Current Liabilities
Current Liabilities
500
300
100
100
1,000
Need Desire
(Rs.)
(Rs.)
600 Fixed Assets
600
400 Current Assets
400
150
350
1,500
1,000
800
700
1,500
Earnings of Need Ltd. for the first quarter of 2012 was Rs.32,000. There were no
changes in long term assets and liabilities. Current assets and liabilities increased
during the period by Rs.27,000 and Rs.18,000 respectively.
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In the first quarter of 2012, Desire Ltd. redeemed debentures of Rs.1 lakh at par
(standing in the books as non-current liability) and earned Rs.40,000. Current assets
and liabilities increased during the period by Rs.38,000 and Rs.25,000 respectively.
Prepare balance sheets of Need Ltd. and Desire Ltd. as on 31.03.12 (as part of
workings) and thereafter prepare consolidated balance sheet of Helpful Ltd. as on
31.03.12.
(16 Marks)
Q2
(a)
Bright Ltd. acquired 30% of East India Ltd. shares for Rs.1,00,000 on 1st April 2013.
By such an acquisition Bright can exercise significant influence over East India. The
total issued capital of East India Ltd. was Rs.1,50,000 divided into 15,000 equity
shares of Rs.10 each. On the date of acquisition of shares, reserves and surplus of
East India Ltd. was Rs.90,000.
For the financial year ending 31st March 2013, East India declared a dividend of
Rs.50,000 on 12th August 2013.
East India reported earnings of Rs.3,00,000 for the financial year ending on 31st
March 2014.
Determine goodwill / capital reserve on acquisition of shares on 1st April 2013.
Calculate carrying amount of investment in East India Ltd. as on 31st March 2014 if –
a. Bright Ltd. does not have subsidiary
b. Bright Ltd. has subsidiary
(8 Marks)
(b)
A Ltd. owns 90% shares of B Ltd. purchased for Rs.90 lakhs. On 5th May 2012 it
sells 80% for Rs.120 lakhs such that holding of A Ltd. is reduced to just 10 % in B
Ltd. Capital Reserve on consolidation is Rs.9 lakhs. The net assets of B Ltd. on 5th
May 2012 is Rs.80 lakhs. Determine gain / loss on disposal of subsidiary.
(6 Marks)
(Assessed answer papers shall be returned latest by 17th November 2015)
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Solution of Test of CFS – 4
Conducted on 24th October 2015
Q1
Working Notes:
(1) Calculation of Change in Cash and Bank Balance from 01.01.12 to 31.03.12:
(Rs. in ‘000s)
Need Desire
(Rs.)
(Rs.)
Profit earned from 01.01.12 to 31.03.12
* Increase in current assets
* Increase in current liabilities
* Redemption of debentures
32
(27)
18
---23
40
(38)
25
(100)
(73)
(2) Calculation of Profits earned from 01.01.11 to 31.03.12:
Need Desire
(Rs.)
(Rs.)
P & L A/c as on 31.03.12
Less: P & L A/c on 01.01.11
332
200
132
440
300
140
(1 Mark)
(3) Analysis of Profits:
(a) Need Ltd.:
Capital Revenue
Profits
Profits
P & L A/c on 01.01.11
Profits from 01.01.11 to 31.03.12
200
---200
50
Helpful Ltd. (25%)
---132
132
33
(b) Desire Ltd.:
Capital Revenue
Profits
Profits
(Rs.)
(Rs.)
P & L A/c on 01.01.11
Profits from 01.01.11 to 31.03.12
Helpful Ltd. (40%)
300
---300
120
---140
140
56
(3 Marks)
(4) Calculation of Goodwill:
Need Desire
(Rs.)
(Rs.)
Cost of Shares
Less: Paid up value of shares
Share in capital profits
180
125
50
5
375
240
120
15
(3 Marks)
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(5) Determination of Carrying Amount of Investment in Need Ltd:
Amount
(Rs.)
Cost of Shares
Add: Share in revenue profits
180
33
213
(1 Mark)
(6) Consolidated Profit and Loss A/c:
Amount
(Rs.)
P & L A/c on 31.03.12 of Helpful Ltd. group
Add: Share in revenue profits (33 + 56)
875
89
964
(1 Mark)
(7) Balance sheet of Need Ltd. and Desire Ltd. as on 31st March 2012:
(Rs. in ‘000s)
Liabilities
Need Desire Assets
(Rs.)
(Rs.)
Share Capital
Profit and Loss Account
Non-Current Liabilities
Current Liabilities
500
332
100
118
1,050
Need Desire
(Rs.)
(Rs.)
600 Fixed Assets
600
440 Current Assets
50
400 + 27 + 23
450
375
700 + 38 – 73
---1,465
1,050
800
---665
1,465
(2 Marks)
Consolidated Balance Sheet of Helpful Ltd. as on 31st March 2012
(Rs. in ‘000s)
Note No. Amount
Amount
I.
1.
(a)
(b)
Equity and Liabilities:
Shareholders’ Funds
Share Capital
Reserves and Surplus
2.
Minority Interest
450
3.
Non Current Liabilities
920
4.
Current Liabilities
2,194
1
1,200
994
750
4,314
Total
II.
1.
2.
Assets:
Non Current Assets
Fixed Assets
- Tangible
- Intangible (Goodwill)
Non Current Investment in Need Ltd.
(Goodwill: 5)
Current Assets
Total
See accompanying notes.
Solution prepared by
3,548
3,320
15
213
766
4,314
(5 Marks)
CA. Ashish Lalaji
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Note 1 Reserves and Surplus
Capital Reserve
Consolidated Profit and Loss Account
Q2
(a)
994
30
964
Analysis of Profits of East India Ltd.:
Reserves and Surplus on 01.04.13
Profits in 2013 – 14 (given)
Dividend for 2012 – 13
Bright Ltd. (30%)
Capital Revenue
Profits
Profits
90,000
------- 3,00,000
90,000 3,00,000
(50,000)
----40,000 3,00,000
12,000
90,000
(2 Marks)
Identification of Goodwill / Capital Reserve on acquisition of shares of East
India Ltd.:
Cost of shares
Less: Pre-acquisition dividend (50,000 X 30%)
Correct Cost
Less: Paid up value (1,50,000 X 30%)
Share in capital profits
Goodwill
Amount
(Rs.)
1,00,000
15,000
85,000
45,000
12,000
28,000
(2 Marks)
Determination of Carrying Amount of Investment in East India Ltd.:
(i) Bright Ltd. does not have subsidiary:
AS 23 is not applicable. Investment shall be reported as per AS 13 at its correct cost
of Rs.85,000.
(2 Marks)
(ii) Bright Ltd. has subsidiary:
Correct Cost
Add: Share in revenue profits and reserves
Amount
(Rs.)
85,000
90,000
1,75,000
(2 Marks)
Solution prepared by
CA. Ashish Lalaji
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(b)
Computation of Gain / Loss on Disposal of Subsidiary:
Sale proceeds on sale of shares on 5th May 2012 (A)
Net assets of B Ltd. on 5th May 2012
Less: Share of Minority (80 X 10%)
Share of Parent in net assets of B Ltd. on 5th May 2012
Less: Capital Reserve
Carrying Amount of total investment in B Ltd. to parent (B)
Carrying Amount of Investment Sold (63 X 80%/90%) (C)
Gain on Disposal of Subsidiary (A – C)
(Rs. in lakhs)
Amount
Amount
120
80
8
72
9
63
56
64
(4 Marks for Carrying Amount / Fair value and
2 Marks for final gain)
Solution prepared by
CA. Ashish Lalaji
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