Question

Question No.04 The following are the Balance Sheet of Fazal Steel Ltd. and its subsidiary Pak
Steel Ltd as at 31st March 2012. (10 + 10 marks working)

Liabilities Fazal Steel Pak Steel Assets Fazal Steel Pak Steel
Equity share Rs.10
each
600,000 200,000 Machinery 390,000 135,000
General Reserve 340,000 80,000 Furniture 80,000 40,000
Profit and Loss A/C 100,000 60,000 80% shares in P. Steel, at cost 340,000 --------
Creditors 70,000 35,000 Stock 180,000 120,000
Debtors 50,000 30,000
Cash at Bank 70,000 50,000
1,111,000 375,000 1,111,000 375,000
1. Profit and loss account of Pak. Steel stood at Rs. 30,000 on 1.4.2011, whereas General Reserve has
remained unchanged since that date.
2. Fazal Steel acquired 80% shares in Pak. Steel on 1.1.2011 for Rs. 340,000 as mentioned above.
3. Included in Debtors of Pak. Steel is a sum of Rs. 10,000 due from Fazal Steel for good sold at a profit
of 25% on cost price. Till 31.12.2012 only one-half of the goods had been sold while the remaining
good were lying in the godown of Fazal Steel as on that date.
You are required to prepare consolidated balance sheet as at 31st March 2012, Show all necessary
calculations clearly for full marks.

Answer 1

Solution:
Consolidated balancesheet of Fazal Steel Ltd & its subsidiary Pak steel
As on 31st March 2012
Liabilities	W.N	Amount	Assets	W.N	Amount
Equity and liabilities			Non- current Assets
Share capital		6,00,000	Machinery [3,90,000+1,35,000]		5,25,000
Reserves and surplus			Furniture [80,000+40,000]		1,20,000
General reserve	5	3,40,000	Goodwill	3	92,000
Profit and loss a/c	5	1,23,000	Current Assets
Non- current Liabilities			Stock[180,000+120,000-1,000]	4	2,99,000
Minority interest	6	68,000	Debtors[50,000+30,000]		80,000
Current Liabilities			Cash at Bank [70,000+50,000]		1,20,000
Creditors		1,05,000
[70,000+35,000]
Total		12,36,000	Total		12,36,000
working notes:
1. Share holding pattern           80:20
2.Reserves and surplus of subsidairy company Pak steel
	Pre- acquisition	Post acquisition	Post Acquisition P&L A/c
Particulars	P&L A/c and	Reserves
	General reserve
Balance P&L A/c	30,000
General reserve (60,000)			30,000(Bal Figure)
Balance reserves	80,000
Total	1,10,000		30,000
Fazal Steel (80%)	88,000		24,000
Minority share(20%)	22,000		6,000
3 . Calculation of Goodwill / Capital reserve
Share capital = 1,60,000
=Cost of acquisition -Pre-acqisition reserves and profit
= 3,40,000 - 88,000 = 2,52,000
Goodwill = 1,60,000- 2,52,000 = 92,000
4 . Stock reserve
Profit margin = 25% of cost price
10,000*25/125 = 2,000
Half of goods unsold = 1,000
5.Consolidated reserves and surplus and profit & loss a/c
Particulars	General reserve	Profit & loss
Balance (Holding company)	3,40,000	1,00,000
Less: Stock reserve		1,000
Add: Post acquisition share		24,000
Total	3,40,000	1,23,000
6 . Minority interest
Share capital	40,000
Add: share in pre-acquisition	22,000
Profit and reserves
Add: share in post acqisition	6,000
Profit and reserves
Total	68,000