Soln 1-

Date of Balance Sheet= 31/03/12

Date of Acquisition = 1/01/12

ANALYSIS OF PROFITS
Pre-Acquisition Profits TOTAL H Ltd.
Opening Balances
Reserves 15,000
Surplus A/c 3,000
Profit for the year during Pre-Acquisition Phase
=9/12[10,000-3,000] 5,250
23,250 23.250

Post-Acquisition Profits
=3/12[10,000-3,000] 1,750 1,750

COST OF CAPITAL
Investments done in S Ltd. = 50,000
Less:
Shares in S Ltd. = (30,000)
Share in Pre-Acquisition Profits = (23,250)

CAPITAL RESERVE = 3,250

CONSOLIDATED BALANCE SHEET OF H Ltd & ITS SUBSIDIARY S Ltd

As on 31/03/12
1
 PARTICULARS AMOUNT
Equity & Liabilities
Shareholders Fund
Share Capital 50,000
Reserves & Surplus 50,000
Current Liabilities
Sundry Creditors 35,000
Total 1,35,000
Assets
Current Assets 1,35,000
Total 1,35,000

Soln 3
In the Books of Downhill Ltd.
Particulars Dr. Cr.
Equity Share Capital A/C 20,00,000
Dr. 1,00,000
To Equity Share Capital a/c 19,00,000
To Capital Reduction a/c
(Being Equity Shares reduced by rs 95.)

Equity Share Capital a/c 1,00,000

Dr. 1,00,000
To Equity Share Capital a/c
(Being 1000 shares of rs 100 each
consolidated into 10000 shares of rs 10
each)

12% Debentures a/c Dr. 5,00,000

O/S Debenture Interest a/c 1,20,000
Dr. 5,00,000
To 14% Debentures a/c 1,20,000
To Capital Reduction a/c
(Being 12% Debentures converted into 14%
Debentures & Interest Amount being
sacrificed.)

Creditors a/c 1,00,000

Dr. 50,000
2
 To Bank a/c 50,000
To Capital Reduction a/c
(Being claims of rs 1 lakh creditors to be
reduced by half & balance to be paid in
cash.)

Creditors a/c 2,00,000

Dr. 2,00,000
To Equity Share Capital a/c
(Being rs 2 lakh creditors opted for equity
share capital.)

Bank a/c 5,00,000

Dr. 5,00,000
To Equity Share Capital a/c
(Being 50,000 shares of rs 10 each issued for
paying creditors & working capital needs.)

Land & Building a/c 50,000

Dr. 50,000
To Capital Reduction a/c
(Being value of land appreciated by 50,000.)

Balance Sheet of Downhill Ltd after Reconstruction as on 1/04/1995

PARTICULARS Note AMOUNT
no.
Equity & Liabilities

Shareholders’ Funds
Share Capital 1 8,00,000

3
 Non- Current Liabilities
Long Term Borrowings 2 5,00,000

Total 13,00,000

Assets

Non -Current Assets

Land & Building 2,00,000
Plant & Machinery 2,10,000
Furniture 80,000

Current Assets
Stock 2,70,000
Debtors 60,000
Less: Provision for Doubtful debts (5,000) 55,000
Cash at bank 4,85,000

Total 13,00,000

Notes to Accounts
1. Share Capital
10,000 equity shares of rs 10 each = 1, 00, 000
20,000 equity shares of rs 10 each = 2, 00, 000
50,000 equity shares of rs 10 each = 5, 00.000

=8, 00, 000

2. Long Term Borrowings

14% debentures = 5, 00, 000

Soln 4-
1. Profit & Loss a/c Dr. 16,000
To Investment in B Ltd 16,000

4
 2. Book value on the Date of Acquisition = 1,50,000 – (1,50,000*10/100 *6/12)
= 1, 42, 500
Appreciation in value = 37,500
A Ltd. = 30,000
Minority = 7,500

Depreciation for Pre-Acquisition Phase = 7, 500

Depreciation on 1, 80, 000 for 6 months = 9,000
= 16,500

Additional depreciation to be charged = 16, 500 – 15, 000 = 1,500

ANALYSIS OF PROFITS
PRE ACQUISITION PROFITS TOTAL A Ltd B Ltd.

Opening balance
P&L a/c 8000 6, 400 1, 600
Reserves 1,00,000 80,000 20,000

Profit for the year

6/12(55,000) 27,500 22,000 5,500

1,08,400 27, 100

POST-ACQUISITION PROFITS

6/12(55000)-3000 26000 20,800 5,200

Consolidated P & L A/C

A Ltd. = 57200
Less: A’s share in dividend = (16,000)

5
Add: Post Acquisition Profits = 20,800
= 62, 000
A Ltd. Share in share capital = (16000/20000) *100 = 80%
Minority Shareholders = (4000/20000)*100=20%

COST OF CAPITAL

Investments in B Ltd. = 3, 30, 000

Less: Dividend Received = (16,000)
Less:
Share Capital = (1, 60, 000)
Pre-Acquisition Profit = (1, 08, 400)
Revaluation Profit = (30, 000)

Goodwill = 15,600

MINORITY INTEREST

Share Capital = 40, 000

Revaluation Profit = 7, 500
Pre-Acquisition Profit = 27,100
Post-Acquisition Profit = 5,200

M.I. = 83,525

CONSOLIDATED BALANCE SHEET

PARTICULARS AMOUNT
Equity & Liabilities
Shareholders’ Funds
Share Capital 5,00,000
Reserves & Surplus 3,08,500
Minority Interest 83,525

Current liabilities 2,02,800

6
Total 10,94,825

Assets
Non- current assets
Fixed assets
Land & Building 3,70,000
Plant & Machinery 4,10,625
Goodwill 7,200

Current assets
Stock 1,86,000
Sundry debtors 84,000
Trade receivables 14,800
Cash 22,200

Total 10,94,825

Soln 5-
IN THE BOOKS OF GREEN LTD.
Particulars Dr. Cr.
Bank a/c Dr. 10,00,000
To Equity Share Capital 10,00,000
(Being uncalled amount of rs 10 per share
called for 1 lakh shares.)

Equity Share Capital a/c Dr. 75,00,000

To Equity Share Capital a/c 30,00,000
To Capital Reduction a/c 45,00,000
(Being shares converted into rs 20 & rs 30 is
sacrificed.)

12% First Debentures a/c Dr. 3,00,000

12% Second Debentures a/c Dr. 7.00,000
7
Sundry Creditors a/c Dr. 2,00,000
To X 12,00,000
(Being the amount due to X)

Bank a/c Dr. 2,00,000

To X 2,00,000
(Being amount paid by X under the
reconstruction scheme.)
12% First Debentures a/c Dr. 2,00,000
12%Second Debentures a/c Dr. 3,00,000
Sundry creditors a/c Dr. 1,00,000
To Y 6,00,000
(Being total amount due to Y.)

X Dr. 14,00,000
To 14% First Debentures a/c 7,00,000
To Capital Reduction a/c 7,00,000
(Being cancellation of rs 7 lakh of X &
balance amount paid in the form of
debentures.

Capital Reduction a/c Dr. 55,00,000

To Goodwill a/c 20,00,000
To P & L a/c 20,00,000
To Computers a/c 15,00,000
(Being the Capital Reduction a/c amount
utilized.)

Balance sheet of Green Ltd after reconstruction on 1/04/2012

Particular Note no. Amount
Equity & Liabilities
Shareholders’ Fund
Share Capital 1 30,00,000

Non – Current liabilities

Long Term Borrowings 2 10,00,000

Current liabilities 2,00,000

Trade Payables

8
Total 42,00,000

Assets
Non-Current Assets
Fixed assets
Building 10,00,000
Plant 10,00,000
Computers 10,00,000

Current assets
Cash & Cash Equivalents 12,00,000

Total 42,00,000

Notes to Accounts
1. Share Capital
1, 50, 000 equity shares of rs 20 each = 30, 00, 000
2. Long Term Borrowings
14% First Debentures = 10, 00, 000