The following are the Profit & Loss Account of H Ltd. and S Ltd. for the year ended 31st March, 2017: H Ltd. ₹ S Ltd. ₹ H Ltd. ₹ S Ltd. ₹ To Opening Stock 1,00,000 By Sales 8,00,000 6,50,000 By closing stock (1,50,00

CS Executive · Company Accounts & Auditing Practices · PYQS · December 2017
The following are the Profit & Loss Account of H Ltd. and S Ltd. for the year ended 31st March, 2017: H Ltd. ₹ S Ltd. ₹ H Ltd. ₹ S Ltd. ₹ To Opening Stock 1,00,000 By Sales 8,00,000 6,50,000 By closing stock (1,50,000 + 1,00,000) 1,50,000 1,00,000 To Purchases 5,00,000 4,00,000 To Productive Wages 1,50,000 1,00,000 To Gross Profit c/d 2,00,000 2,50,000 9,50,000 7,50,000 9,50,000 7,50,000 To Sundry Expenses 75,000 1,00,000 By Gross Profit b/d 2,00,000 2,50,000 To Debenture Interest 6,000 By Debenture Interest 3,000 To Provision for Taxation 60,000 70,000 To Profit c/d 68,000 74,000 2,03,000 2,50,000 2,03,000 2,50,000 To Preference Dividend 3,000 By Profit b/d 68,000 74,000 To Proposed Dividend 20,000 20,000 To Tax on distributed Profit @ 15% 3,000 3,450 To Balance c/d 45,000 47,550 68,000 74,000 68,000 74,000 You are also given the following additional information: (1) H Ltd. holds 1500 equity shares of ₹100 each in S Ltd. whose capital consists of 2,000 equity shares of ₹100 each and 6% 500 cumulative preferences shares of ₹100 each. S Ltd. has also issued 6% Debentures of ₹1,00,000 out of which H Ltd. holds ₹50,000. (2) The shares in S Ltd. were acquired by H Ltd. on 1st July 2016 but the debentures were acquired on 1st April 2016. S Ltd. was incorporated on 1st April, 2016. (3) During the year S Ltd. sold to H Ltd. goods costing ₹50,000 at the selling price of ₹75,000. One fourth of the goods manufactured remained unsold on 31st March, 2017. The goods were valued at cost to the holding company for closing stock purposes. Prepare a consolidated profit and Loss Account, showing separately the working notes.

Answer & Explanation:

Consolidated Profit and Loss Account of H Ltd. and its subsidiary S Ltd. for the year ended 31st March, 2017 Particulars Note No. Amount (₹) I. Revenue from operations 1 13,75,000 II. Total Revenue 13,75,000 III. Expenses Cost of Material Purchased / consumed 2 8,25,000 Changes in Inventories of finished goods 3 (1,50,000) Employee Benefit Expenses (₹1,50,000 + ₹1,00,000) 2,50,000 Finance Cost (₹6,000 - ₹3,000) 3,000 Other Expenses (₹75,000 + ₹1,00,000) 1,75,000 Total Expenses 11,03,000 IV. Profit after Tax (II-III) 2,72,000 V. Tax Expenses (Provision for taxation) (₹70,000 + ₹60,000) (1,30,000) VI. Profit after Tax (IV-V) 1,42,000 Preference Dividend (3,000) Proposed Equity dividend 4 (25,000) Tax on distributed profits @ 15% (₹3,000 + ₹3,450) (6,450) Stock Reserve 5 (6,250) Capital Reserve 6 (13,229) Minority Interest / share 7 (11,888) Profit to be transferred to consolidated balance sheet 76,183 Notes to Accounts 1. Revenue from operation H Ltd. = ₹8,00,000 S Ltd. = ₹6,50,000 Total = ₹14,50,000 Less: Intra group sales = (₹75,000) Net Revenue from operation = ₹13,75,000 2. Cost of material purchase / consumed H Ltd. = ₹5,00,000 S Ltd. = ₹4,00,000 Total = ₹9,00,000 Less: Intra group Purchase = (₹75,000) Net Cost of material purchase / consumed = ₹8,25,000 3. Changes in inventory Opening stock H Ltd. = ₹1,00,000 Opening stock S Ltd. = ₹0 Less: Closing Stock H Ltd. = (₹1,50,000) Less: Closing Stock S Ltd. = (₹1,00,000) Net Changes in inventory = (₹1,50,000) 4. Proposed Equity Dividend H Ltd. = ₹20,000 S Ltd. = ₹20,000 Total = ₹40,000 Less: Dividend of S Ltd. due to H Ltd. (20,000 * 3/4) = (₹15,000) Net Proposed dividend = ₹25,000 5. Stock Reserve Total Profit made by S Ltd. on goods sold to H Ltd. (₹75,000 - ₹50,000) = ₹25,000 1/4 of goods remained unsold. Hence profit on 1/4 of the goods = ₹6,250 6. Capital Reserve Profit of S Ltd. after preference dividend and tax thereon = ₹74,000 - ₹3,000 - ₹450 = ₹70,550 Pre-acquisition profit upto 1st July, 2016 i.e. 1/4 of ₹70,550 = ₹17,638 H Ltd. share (Capital Reserve) = 3/4 of ₹17,638 = ₹13,229 7. Minority Interest (Share) Net Profit after all appropriation of S Ltd. = ₹47,550 1/4 share of minority (1/4 * ₹47,550) = ₹11,888

Topics: Consolidated Financial Statements

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