The summarized balance sheet of H Ltd. and S Ltd. as on 31 March, 2023 are given below : Equity and Liabilities H Ltd. (₹) S Ltd. (₹) Share Capital: Shares of ₹ 10 each 1,00,00,000 20,00,000 Reserves 16,00,000 6,00,000 P

Answer 3(b) Calculation of cost of control before issue of bonus shares Step Calculation Amount (₹) 1 Amount of consideration paid by H Ltd. for acquisition of shares in S Ltd. 28,00,000 2 Less: Face Value of shares acquired (1,60,000 shares * ₹ 10) 16,00,000 3 Less: H Ltd.'s share in capital profits (Reserves of S Ltd. at acquisition) (₹ 6,00,000 x 8/10) 4,80,000 4 Cost of control/Goodwill 7,20,000 Calculation of cost of control after issue of bonus shares S Ltd. decided to issue bonus shares out of post-acquisition profits in the ratio of 1 share for every 5 shares held. Total shares of S Ltd. = ₹ 20,00,000 / ₹ 10 = 2,00,000 shares Bonus shares to be issued = 2,00,000 shares / 5 = 40,000 shares Value of bonus shares = 40,000 shares * ₹ 10 = ₹ 4,00,000 H Ltd.'s shareholding in S Ltd. = 1,60,000 shares / 2,00,000 shares = 8/10 or 80% H Ltd.'s share in bonus = 40,000 shares * 8/10 = 32,000 shares Value of bonus shares received by H Ltd. = 32,000 shares * ₹ 10 = ₹ 3,20,000 Step Calculation Amount (₹) 1 Amount of consideration paid by H Ltd. for acquisition of shares in S Ltd. 28,00,000 2 Less: Face Value of Shares acquired (1,60,000 shares * ₹ 10) 16,00,000 3 Less: H Ltd.'s share in capital profits (Reserves of S Ltd. at acquisition) (₹ 6,00,000 x 8/10) 4,80,000 7,20,000 4 Less: H Ltd.'s share in bonus (2,00,000 shares * 8/10 * 1/5 * ₹ 10) 3,20,000 5 Cost of Control/Goodwill 4,00,000 Journal Entries Books of S Ltd. Particulars Amount in ₹ Dr. Amount in ₹ Cr. P & L A/c Dr. To Equity Share Capital A/c (Being issue of bonus shares in the ratio of 1 share for every 5 shares held) 4,00,000 4,00,000 Books of H Ltd. No entry is passed (Bonus shares received by H Ltd. are recorded at nil value as they represent a capitalization of profits already accounted for in the investment value).