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The Balance Sheets of Bat Ltd. and Ball Ltd. as on 31.3.2000 are as follows:
Bat Ltd.
Ball Ltd.
Bat Ltd.
Ball Ltd.
Rs.
Rs.
Rs.
Rs.
Share Capital
(Shares of Rs. 10 each)
1,60,000
2,00,000
Investments
Shares in Ball Ltd.
1,96,000
-
Profit and Loss account
50,000
60,000
Debtors
-
1,20,000
Creditors
-
16,000
Stock
-
80,000
Cash at Bank
-
70,000
_______
_______
Cash in hand
14,000
6,000
2,10,000
2,76,000
2,10,000
2,76,000
Particulars of Bat Ltd.:
(1)This company was formed on 1.4.1999.
(2)It acquired the shares of Ball Ltd. as under:
Date of Acquisition
No. of Shares
Cost
Rs.
1.4.1999
8,000
1,10,000
31.7.1999
6,000
86,000
(3)The shares purchased on 31.7.1999 are ex-dividend and ex-bonus from existing holders.
(4)On 31.7.1999 dividend at 10% was received from Ball Ltd. and was credited to Profit and Loss Account.
(5)On 31.7.1999 it received bonus shares from Ball Ltd. in the ratio of one share on every four shares held.
(6)Bat Ltd. incurred an expenditure of Rs. 500 per month on behalf of Ball Ltd. and this was debited to the Profit and Loss Account of Bat Ltd., but nothing has been done in the books of Ball Ltd.
(7)The balance in the Profit and Loss Account as on 31.3.2000 included Rs. 36,000 being the net profit made during the year.
(8)Dividend proposed for 1999-2000 at 10% was not provided for as yet.
Particulars of Ball Ltd.:
(1)The balance in the Profit and Loss Account as on 31.3.2000 is after the issue of bonus shares made on 31.7.1999.
(2)The net profit made during the year is Rs. 24,000 including Rs. 6,000 received from insurance company in settlement of the claim towards loss of stock by fire on 30.06.1999 (Cost Rs. 10,800 included in opening stock).
(3)Dividend proposed for 1999-2000 at 10% was not provided for in the accounts.
Prepare the Consolidated Balance Sheet of Bat Ltd. as on 31.3.2000.
(16 marks)(November, 2000)
Answer
Consolidated Balance Sheet of Bat Ltd. and its subsidiary Ball Ltd.
as at 31st March, 2000
Liabilities
Amount
Assets
Amount
Rs.
Rs.
Share Capital
(Shares of Rs. 10 each)
Minority Interest
1,60,000
50,800
Stock
Debtors
Cash at Bank
80,000
1,20,000
70,000
Capital Reserve
3,040
Cash in hand
20,000
Profit and Loss Account
44,160
Creditors
16,000
Proposed Dividend
16,000
_______
2,90,000
2,90,000
Working Notes:
(1)
Analysis of profits of Ball Ltd.
Capital Profits
Revenue Profits
Rs.
Rs.
Profit and Loss Account on 1.4.1999
(60,000 – 24,000)
36,000
Profit for the year
24,000
Add back: Loss by fire
4,800
28,800
Less: Expenses not considered
6,000
22,800
Pre-acquisition profits =
7,600
Less: Loss in pre-acquisition period =
4,800
2,800
Post-acquisition profits
______
15,200
_____
38,800
15,200
Bat Ltd.’s share (80%*)
31,040
12,160
Minority’s share (20%)
7,760
3,040
(2)
Minority interest
Rs.
Share capital
40,000
Capital profits
7,760
Revenue profits
3,040
50,800
(3)
Cost of control
Rs.
Face value of investments
1,60,000
Capital profits
31,040
1,91,040
Investment in Ball Ltd.
1,96,000
Less: Pre-acquisition dividend
8,000
(1,88,000)
Capital Reserve
3,040
(4)
Profit and Loss Account – Bat Ltd.
Rs.
Balance
50,000
Less: Pre-acquisition dividend wrongly credited
8,000
42,000
Less: Proposed dividend
16,000
26,000
Add: Expenses of Ball Ltd. written back
6,000
Add: Share in Ball Ltd.
12,160
44,160
Why the dividend paid out of pre-acquistion is not deducted from profit and loss pre-acquistion balance.
Dear Harish, Dividend is deducted from P/L Account if it is a preacquisition dividend and wrongly credited to P/L account. But here in question it is clearly mentioned that shares are ex-dividend hence dividend is post acquistion dividend and treated as revenue income and need not be deducted from P/L account.
On the other hand if it was Pre acquisition it must be treated as capital profit.
Actually im also looking for the answer to that problem.....The sum of Rs.20000 dividend paid out of preacquistion profits should be subtracted from preacquistion profits. And with due respect to Dhirendra Sir...only the shares issued on 31.7 are ex-dividend but what about the earlier shares??
Hence the query remains unresolved....please somebody help out
