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Hep me out if u can

kshitij (CA Final) (121 Points)

10 January 2008

HI FRIENDS...

HELP ME OUT...

IF IN HOLDING & SUBSIDIARY COMPANIES....IF H SOLD ASSET ON HIRE PURCHASE BASIS...AND AT THE END OF THE YEAR ...

INSTALMENTS DUE RS.500,INSTALMENTS NOT DUE RS.2000 AND HP STOCK RESERVE RS.400 APPEARS IN HLTD.

WHAT TREATMENT WILL BE DONE IN CONSOLIDATED B/S ..PLZ REPLY ME CONCEPTUALLY.... ALONG WITH REASONS...

THANX

KSHITIJ GOYAL

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2 Replies

Sathish Karunakaran (ACA) (614 Points)
Replied 10 January 2008

In the books of H Ltd. (Holding Co.)= Profit % = Stk. Reserve/Inst. not due*100 = 400/2000*100 = 20% Instalment Due is inclusive of profit element already credited into P&L A/c. Hence profit entry need to be reversed at above % Dr. P&L A/c. 100 (500*20%) Cr. Instl. Due A/c. 100 Instalment not due is also profit inclusive but netting of stk. reserve will bring down the stk. value to its cost. Now both instl. due & not due have been valued at their original cost, which must be set off against HP liability shown in the books of S Ltd. In the books of S Ltd. (Subsidiary Co.)= HP asset will be recognised at cash price and its equivalent is credited to HP liability A/c. This cash price margin component should be removed simultaneously from Asset A/c. and HP liability a/c. The rest in HP liability will be setoff by Inst. due & not due as aforesaid. The Asset account is shown at original cost. Example : Inst.due - 3000,Inst. Not due - 9000,Stk. Res-2250, original cost - 9000, cash price - 10500. Book of H- Profit element on inst. due is 750 (25%on3K) Now cost of both Inst. due & not due is [3000-750+9000-2250]=9000 which is original cost of the asset. Books of S- Remove cash price from both asset & HP liability Asset = [10500-1500] HP Liability = [10500-1500] HP liability & Cost of Inst. due & not due are netted off. Asset of Rs.9K shown in consolidated B/s. which is the original cost to H Ltd.