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Advance
Financial Accounting
(FIN-611)
VU
LESSON
# 42
GROUP
ACCOUNTS
Profit
& Loss
Example
- [ Case i ] Simple
Consolidation
Income
Statement for the year ended
31st December 2008
P
S
Rs.
Rs.
Sales
7,500
4,000
(2,900)
Cost
of Goods Sold
(4,500)
Gross
Profit
3,000
1,100
Operating
Expenses
(1,800)
(600)
Operating
Profit
1,200
500
Income
Tax
(480)
(200)
Net
Profit after Tax
720
300
Retained
Profits b/f
1,000
450
750
Retained
Profits c/f
1,720
The
Parent Co. (P) acquired
100% equity of the Subsidary
Co. (S) on 1st
January
2008 for
Rs.1,700 when S's paid up
share capital was Rs.1,250
& it's reserves
were
worth Rs.450. (Assume all reserves
comprise only of Retained
Profits).
Prepare
the Consolidated Income
Statement for the
year
ended 31/12/2008.
Required:
Solution
- [ Case i ]
Computation
of Goodwill
Rs.
Rs.
Cost of
Acquisition
1,700
Ordinary
Share Capital of S
1,250
Pre-acquisition
Retained Profits of
S
450
0
Goodwill
1,700
Computation
of opening balance of Group's Retained
Profits
Rs.
Rs.
Total
amount of opening balance of
retained
profits
of P Co
1,000
Post
acquisition part in opening balance of
retained profits of
S
Co
220
Advance
Financial Accounting
(FIN-611)
VU
opening
balance of
retained
profits of S
Co
450
pre-acquisition
retained
profits
-450
0
Opening
balance of Group's
Retained
Profits
b/f
1,000
Consolidated
Income Statement
For
the year ended 31st December
2008
Rs.
Sales
11,500
Cost of
Goods Sold
(7,400)
Gross
Profit
4,100
Operating
Expenses
(2,400)
Operating
Profit
1,700
Income
Tax
(680)
Net
Profit after Tax
1,020
Retained
Profits b/f
1,000
Retained
Profits c/f
2,020
Example
- [ Case ii ] Post acquisition opening
balance of retained
profits
Income
Statement for the year ended
31st December 2008
P
S
Rs.
Rs.
Sales
7,500
4,000
Cost
of Goods Sold
(4,500)
(2,900)
Gross
Profit
3,000
1,100
Operating
Expenses
(1,800)
(600)
Operating
Profit
1,200
500
Income
Tax
(480)
(200)
Net
Profit after Tax
720
300
Retained
Profits b/f
1,000
450
Retained
Profits c/f
1,720
750
The
Parent Co. (P) acquired
100% equity of the Subsidary
Co. (S) on 1st
January
2007 for
Rs.1,700 when S's paid up
share capital was Rs.1,250
& it's reserves
were
worth Rs.150. (Assume all reserves
comprise only of Retained
Profits).
Prepare
the Consolidated Income
Statement for the
Required:
year
ended 31/12/2008.
221
Advance
Financial Accounting
(FIN-611)
VU
Solution
- [ Case ii ]
Computation
of Goodwill
Rs.
Rs.
Cost of
Acquisition
1,700
Ordinary
Share Capital of S
1,250
Pre-acquisition
Retained Profits of
(1,400)
S
150
300
Computation
of opening balance of Group's Retained
Profits
Rs.
Rs.
Total
amount of opening balance of
retained
profits
of P Co
1,000
Post
acquisition part in opening balance of
retained profits of
S
Co
opening
balance of
retained
profits of S
Co
450
pre-acquisition
retained
profits
-150
300
Opening
balance of Group's
Retained
Profits
b/f
1,300
Consolidated
Income Statement
For
the year ended 31st December
2008
Rs.
Sales
11,500
Cost of
Goods Sold
(7,400)
Gross
Profit
4,100
Operating
Expenses
(2,400)
Operating
Profit
1,700
Income
Tax
(680)
Net
Profit after Tax
1,020
Retained
Profits b/f
1,300
Retained
Profits c/f
2,320
Example
- [ Case iii ] Inter Co.
Dvidends
Income
Statement for the year ended
31st December 2008
P
S
Rs.
Rs.
Sales
7,500
4,000
222
Advance
Financial Accounting
(FIN-611)
VU
Cost
of Goods Sold
(4,500)
(2,900)
Gross
Profit
3,000
1,100
Operating
Expenses
(1,800)
(600)
Operating
Profit
1,200
500
Dividend
Income
125
500
Net
Profit before Tax
1,325
Income
Tax
(530)
(200)
Net
Profit after Tax
795
300
Dividend
Paid
(250)
(125)
545
175
Retained
Profits b/f
1,000
450
Retained
Profits c/f
1,545
625
The
Parent Co. (P) acquired
100% equity of the Subsidary
Co. (S) on 1st
January
2006 for
Rs.1,700 when S's paid up
share capital was Rs.1,250
& it's reserves
were
worth Rs.50. (Assume all reserves
comprise only of Retained
Profits).
Prepare
the Consolidated Income
Statement for the
year
ended 31/12/2008.
Required:
Solution
- [ Case iii ]
Computation
of Goodwill
Rs.
Rs.
Cost of
Acquisition
1,700
Ordinary
Share Capital of S
1,250
Pre-acquisition
Retained Profits of
S
50
(1,300)
400
Computation
of opening balance of Group's Retained
Profits
Rs.
Rs.
Total
amount of opening balance of
retained
profits
of P Co
1,000
Post
acquisition part in opening balance of
retained profits of
S
Co
opening
balance of
retained
profits of S
Co
450
pre-acquisition
retained
profits
-50
400
Opening
balance of Group's
Retained
Profits
b/f
1,400
223
Advance
Financial Accounting
(FIN-611)
VU
Income
Statement for the year ended
31st December 2008
P
S
Rs.
Rs.
Sales
7,500
4,000
Cost of
Goods Sold
(4,500)
(2,900)
Gross
Profit
3,000
1,100
Operating
Expenses
(1,800)
(600)
Operating
Profit
1,200
500
Dividend
Income
125
Net
Profit before Tax
1,325
500
Income
Tax
(530)
(200)
Net
Profit after Tax
795
300
Dividend
Paid
(250)
(125)
545
175
Retained
Profits b/f
1,000
450
Retained
Profits c/f
1,545
625
Consolidated
Income Statement
For
the year ended 31st December
2008
Rs.
Sales
11,500
Cost of
Goods Sold
(7,400)
Gross
Profit
4,100
Operating
Expenses
(2,400)
Operating
Profit
1,700
Income
Tax
(730)
Net
Profit after Tax
970
Dividend
Paid
(250)
720
Retained
Profits b/f
1,400
Retained
Profits c/f
2,120
Example
- [ Case iv ] Minority
Interest
Income
Statement for the year ended
31st December 2008
P
S
Rs.
Rs.
4,000
Sales
7,500
Cost
of Goods Sold
(4,500)
(2,900)
Gross
Profit
3,000
1,100
Operating
Expenses
(1,800)
(600)
Operating
Profit
1,200
500
Income
Tax
(480)
(200)
Net
Profit after Tax
720
300
224
Advance
Financial Accounting
(FIN-611)
VU
Dividend
Paid
(200)
520
300
Retained
Profits b/f
1,000
450
Retained
Profits c/f
1,520
750
The
Parent Co. (P) acquired
80% equity of the Subsidary
Co. (S) on 1st
January
2006 for
Rs.1,700 when S's paid up
share capital was Rs.1,250
& it's reserves
were
worth Rs.50. (Assume all reserves
comprise only of Retained
Profits).
Prepare
the Consolidated Income
Statement for the
Required:
year
ended 31/12/2008.
Solution
- [ Case iv ]
Computation
of Goodwill
Rs.
Rs.
Cost of
Acquisition
1,700
Ordinary
Share Capital of S
80%
of Rs.1,250
1,000
Pre-acquisition
Retained Profits of
S
80%
of Rs.50
40
(1,040)
80%
of Rs. 1300
660
Computation
of opening balance of Group's Retained
Profits
Rs.
Rs.
Total
amount of opening balance of
retained
1,000
profits
of P Co
Post
acquisition part in opening balance of
retained profits of
S
Co
opening
balance of
retained
profits of S
Co
450
pre-acquisition
retained
profits
-50
to the
extent of
400
320
H%
i.e.80%
Opening
balance of Group's
Retained
Profits
b/f
1,320
Computation
of Minority Interest
Rs.
Profits
after tax of S Co. to the
extent of
MI%
20%
of Rs.300
60
225
Advance
Financial Accounting
(FIN-611)
VU
Consolidated
Income Statement
For
the year ended 31st December
2008
Rs.
Rs.
Sales
11,500
Cost of
Goods Sold
(7,400)
Gross
Profit
4,100
Operating
Expenses
-2,400
Operating
Profit
1,700
Income
Tax
(680)
Net
Profit after Tax
1,020
Minority
Interest
(60)
960
Dividend
Paid
(200)
760
Retained
Profits b/f
1,320
Retained
Profits c/f
2,080
226
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