Calculation of Capital Profit, Revenue Profit, Cost of Control, Minority Interest with the preparation of Consolidated Balance sheet for easy understanding

1. Holding company exercises
Dr. D. Heena Cowsar
Asst. Prof of Commerce
Bon Secours College for Women, Thanjavur
heena.raffi@gmail.com

2. Ex. No. 4
On 1.7. 17 , X Ltd.., Acquired 60% shares of Y
LTD.., (With a total capital of Rs.5,00,000) for
3,80,000 . The balance sheet of Y Ltd.., showed
P&L a/c balance on 1.1.17 Rs. 1,20,000 and
profit for the year 2017 Rs. 1,00,000.
Calculate the value of Goodwill or Capital
Reserve.

3. Soln.
1. Share ratio = 60%:40 % (or) 3:2
2. Time Ratio = Pre Acquisition Period : Post
Acquisition Period
Pre Acquisition Period = 01.01.2017 to 01.07.2017
= 6 Months
Post Acquisition Period = 01.07.2017 to 31.12.2017
= 6 Months
Time Ratio = 6: 6 (or) 1:1

4. Soln.
3. Share of X ltd & Minority holders in Profit items
P&L a/c (1.1.17) – Rs. 120,000
Profit for the year – Rs. 100000
Share Ratio 3:2
X Ltd:
3/5* 120000 = 72000
M Ltd:
2/5* 120000 = 48000
Cap. Profit
1/2* 100000 = 50000 Rev. Profit:
1/2* 100000 = 50000
X Ltd:
3/5* 50000 = 30000
Minority Holders :
2/5*50000 = 20000
X Ltd:
3/5* 50000 = 30000
Minority Holders :
2/5*50000 = 20000

5. Cont…3. Calculation of Capital Profit of X ltd 4. Calculation of Revenue Profit 0f X ltd
Profit as on 1.1.17 72000
Profit for the year 30000
Profit for the year 30000
1020000
5. Calculation of Cost of Control 6. Calculation of Minority Interest
VALUE OF SHARES AQUIRED BY X
CO
380000
Share Acquisition 40/100*500000 200000
CAPITAL LOSS/ GOODWILL NIL
ADD: CAPITAL PROFIT: PROFIT AS ON
1.1.17
48000
380000 PROFIT FOR THE YEAR:CAPITAL PROFIT 20000
LESS: FACE VALUE OF SHARES
ACQUIRED BY X CO IN Y CO
60/100* 500000
300000
REVENUE PROFIT 20000 88000
CAPITAL PROFIT 102000
Minority Interest 288000
DIVIDEND / BONUS NIL 402000
GOODWILL 22000

6. Ex. No. 5
The Balance Sheets of C Ltd. And D Ltd as at 31st December, 1986 are as follows:
• In case of ‘D’ Ltd., profit for the year ended 31st December 1986 is
RS.12,000 and transfer to reserve is Rs.5,000. The holding of C Ltd. In
D Ltd is 90% acquired on 30th June 1986.
• Draft a consolidate Balance Sheet of ‘C’ Ltd. And its subsidiary.
Liabilities C Ltd. D Ltd. Assets
C Ltd
.
D Ltd.
Share Capital (in
shares of Rs.10 each)
2,00,000
1,00,000 Sundry assets 1,32,500 1,38,200
General reserve 18,000 20,000 Goodwill ------- 20,000
Profit & Loss AC 24,500 23,000 Shares in D Ltd.
At cost
1,40,000 -----
Creditors 30,000 15,000
2,72,500 1,58,200 2,72,500 1,58,200

7. Soln.
1. Share ratio = 90%:10 % (or) 9:1
2. Time Ratio = Pre Acquisition Period : Post
Acquisition Period
Pre Acquisition Period = 01.01.1986 to 30.06.1986 = 6
Months
Post Acquisition Period = 01.07.1986 to 31.12.1986 =
6 Months
Time Ratio = 6: 6 (or) 1:1

8. Soln.
3. Calculation of Last Year Profit: (Pre acqu.)
Profit as per Balance Sheet = 23000 ½* 12000 =6000
(-) Profit for the year = 12000 1:1
Last Year Profit = 11000 ½* 12000 =6000
(Post acqu.)
4. Calculation of Capital Profit:
Last year Profit = 11000
(+) General Reserve = 20000
(+) Profit Prior to acqn. = 6000
37000
5. Calculation of Revenue Profit:
Balance of Profit for the year = 6000

9. Soln.
6. Share of X ltd & Minority holders in Profit items
P&L a/c as per B/S + G/R+ Profit prior to acquisition– Rs. 37000
7. Profit for the year – Rs. 12000
Included with above profit calculation
(Refer last slide)
Share Ratio 9:1
X Ltd:
9/10* 37000 = 33300
M Ltd:
1/10* 37000 = 3700
Cap. Profit
1/2* 12000= 6000 Rev. Profit:
1/2* 12000= 6000
X Ltd:
9/10* 6000 = 5400
Minority Holders :
1/10* 6000 = 600

10. Soln.
8. Calculation of Cost of Control
Shares in D Ltd 140000
Goodwill 20000
160000
Less: Face Value of Shares acquired 90/ 100 * 100000 90000
Capital Profit 33300 123300
Goodwill 36700
9. Calculation of Minority Interest
Shares acquired by Minority Holders 10/100*100000 10000
Add: Minority share in capital Profit 3700
Minority share in Revenue Profit 600
Minority Interest 14300

11. Soln.
Consolidated Balance sheet of C Ltd & Its Subsidiary D Ltd as on 31.12.1986
Share Capital: C Ltd 200000 Goodwill 36700
P& L a/c: C Ltd – 24500 S. Assets C Ltd 132500
Add: Revenue Profit of C Ltd 5400 29900 D Ltd 138200 270700
General Reserve of C Ltd 18000
Creditors of C Ltd 30000
D Ltd 15200 45200
Minority Interest 14300
307400 307400