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Question 5 On 1st February, 2024, Best Ltd. acquired 80% Equity shares of Cool Ltd. for ` 14,80,000. On 31st March, 2024, Best Ltd. also acquired 25% Equity shares of Good Ltd. for ` 3,80,000. The following are the balances extracted from the books of Best Ltd., Cool Ltd., and Good Ltd. as on 31st March, 2024 : Particulars Best Ltd. Amount in ` Cool Ltd. Amount in ` Good Ltd. Amount in ` Equity Shares of ` 100 each fully paid 30,00,000 20,00,000 10,00,000 Securities Premium - 2,20,000 - 9% Debentures 6,30,000 - 2,40,000 General Reserve 2,69,000 84,000 1,20,000 Profit & Loss Account (Credit Balance) 3,26,000 2,70,000 50,000 Investments 17,50,000 6,10,000 - Property, Plant, and Equipment 18,90,000 18,14,000 12,10,000 Current Assets 9,65,000 5,60,000 2,25,000 Trade Payable (Including Bills Payable) 3,80,000 4,10,000 25,000 Sales and other income 56,00,000 38,00,000 27,00,000 Raw material consumed 36,50,000 31,20,000 22,30,000 Wages and Salaries 5,07,000 4,01,000 2,69,000 Production expenses 1,35,000 1,06,000 98,000 Additional information : • The Profit and Loss account of Cool Ltd. showed a credit balance of ` 30,000 on 1st April, 2023. • The General Reserve balance is brought forward from the previous year. • On 31st March, 2024, all the bills payable in Cool Ltd.'s balance sheet were acceptances in favour of Best Ltd. However, on the date, Best Ltd. held only ` 3,00,000 of these acceptances in hand, the rest having been endorsed in favour of its creditor. • Best Ltd. purchased goods costing ` 5,00,000 from Cool Ltd. on 1st June, 2023 at a price of ` 6,50,000. The entire goods remain unsold with Best Ltd. at the end of the financial year. • Best Ltd. is preparing Consolidated Financial Statements for the year ending 31.03.2024. You are required to calculate : (1) Trade Payable (Consolidated) (2) Current Assets (Consolidated) (3) Minority Interest (4) Goodwill/Capital Reserve on the acquisition of Cool Ltd.'s shares (5) Goodwill/Capital Reserve on the acquisition of Good Ltd.'s shares (6) Profit & Loss Account (Consolidated) (7) General Reserve (Consolidated) (8) Revenue from Operations (Consolidated) (9) Cost of material purchased/consumed (Consolidated) (14 Marks)

Options

A
B
C
D
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Correct Answer

✅ Option descriptive — Correct Option

All Options:

  • A
  • B
  • C
  • D

Detailed Solution & Explanation

1. Trade payable (Consolidated) Best limited 3,80,000 Add: Cool Ltd 4,10,000 Less: Elimination (3,00,000) Total 4,90,000 2. Current assets (Consolidated) Best limited 9,65,000 Add: Cool Ltd 5,60,000 Less: Elimination of inter company owing (3,00,000) Total 12,25,000 ADVANCED ACCOUNTING 3. Minority interest Cool Ltd Share Capital (20,00,000 x 20%) 4,00,000 Add: Securities premium (2,20,000 x 20%) 44,000 Add: General Reserve (84,000 x 20%) 16,800 Add: Profit and loss balance (20% of 2,70,000) 54,000 Total 5,14,800 4. Goodwill/Capital Reserve on Acquisition of Cool Ltd.: Purchase Consideration 14,80,000 Less: Share Capital (20,00,000 x 80%) 16,00,000 Less: Securities premium (2,20,000 x 80%) 1,76,000 Less: General Reserve (84,000 x 80%) 67,200 Less: Profit and loss balance opening (30,000 x 80%) 24,000 Less: Pre acquisition profits (2,70,000-30,000) x 10/12 x 80% 1,60,000 Capital Reserves 5,47,200 5. Goodwill/Capital Reserve on Acquisition of Good Ltd. Purchase Consideration 3,80,000 Less: Share Capital (10,00,000 x 25%) 2,50,000 Less: General Reserve (1,20,000 x 25%) 30,000 Less: Profit and loss balance (50,000 x 25%) 12,500 Goodwill 87,500 6. Profit and Loss Account (Consolidated) Best limited 3,26,000 Add: Post acquisition profit of Cool Ltd {(2,70,000-30,000) x 2/12}80% 32,000 Total 3,58000 7. General Reserve (Consolidated) Best limited 2,69,000 8. Revenue (Consolidated) as per para no 15 and 22 of AS 21 Revenue of Best Ltd 56,00,000 Add: Revenue of Cool Ltd. (38,00,000 × 2/ 12) 6,33,333 62,33,333 9. Cost of materials purchased/consumed (Consolidated) as per para no 15 and 22 of AS 21 Raw material of Best Ltd 36,50,000 Add: Raw material of Cool Ltd (31,20,000x 2/12) 5,20,000 41,70,000

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