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GROUP ACCOUNTS: Inter Company Trading (P to S)

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Advance Financial Accounting (FIN-611)
VU
LESSON # 39
GROUP ACCOUNTS
Example - [ Case ix ] Inter Company Trading (P to S)
Balance Sheet as on 31st December 2008
P
S
Rs.
Rs.
Fixed Assets
1,000
Investment in S.
500
Current Assets
400
1,900
Share Capital
1,200
Reserves
500
Current Liabilities
200
1,900
The Parent Co. (P) acquired 80% shares of the Subsidary Co. (S) on 1st January 2003 when it's reserves w
worth Rs.120. Total amount of Goodwill has been impaired. During the year 2008, P Co sold goods to S Co
Rs.500 that were costing Rs. 400. On the closing date, goods costing Rs.150 remained unsold in the invento
of S Co, on which .
Prepare the Consolidated Balance
Sheet as at 31/12/2008.
Required:
Solution - [ Case xi ]
Workings
W-1
Determine the % of holding by dividing
number of equity shares acquired with
total number of shares of the subsid
H%
80%
company
%age representing the minority intere
very simple to calculate, just subtract
MI%
20%
from 100
W-2
Analysis of Equity of S Co
Pre-
Post-
acquisition
acquisition
204
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Advance Financial Accounting (FIN-611)
VU
Share
Capital
400
Nil
Reserves
120
180
520
180
W-3
Calculation of goodwill
Cost of investment
520
x
80%
Pre acquisition equity of S Co.
Impairment loss
Goodwill
W-4
Group Reserves
All reserves of P Co
18
Post acquisition reserves of S Co to the extent of H%
80
Impairment loss
W-5
Minority Interest
Owners' equity of Subsidiary Company @ MI% = 700
x 20% = 140
W-6
The unrealized profit is given in this examp
Rs. 30.This amount of URP is to be subtract
the Consolidated Stocks and also from the g
reserves.
Consolidated Balance Sheet
As at 31 December 2008
Rs
205
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Advance Financial Accounting (FIN-611)
VU
Fixed Assets
1000+550
1
Current Assets
400+350-30
2
Owners' Equity
Share Capital
1,200
Group Reserves
530
1,730
Minority Interest
140
1
Current Liabilities
2
Example - [ Case x ] Inter Company Trading (S to P)
Balance Sheet as on 31st December 2008
P
Rs.
R
Fixed Assets
1,000
Investment in S.
500
Current Assets
400
1,900
Share Capital
1,200
Reserves
500
Current Liabilities
200
1,900
The Holding Co. (H) acquired 80% shares of the Subsidary Co. (S) on 1st January 2003 when it's reserves w
worth $120. Total amount of Goodwill has been impaired. During the year 2008, S sold goods to H for $500
profit to S being 20% of selling price. On the closing date, goods costing $150 remained unsold in
inventories of H.
Prepare the Consolidated Balance
Sheet as at 31/12/2008.
Required:
Solution - [ Case xii ]
Workings
W-1
Determine the % of holding by dividing
H%
80%
number of equity shares acquired with
total number of shares of the subsid
206
img
Advance Financial Accounting (FIN-611)
VU
company
%age representing the minority
MI%
20%
very simple to calculate, just su
from 100
W-2
Analysis of Equity of S Co
Pre-
Post-
acquisition
acquisition
Share
400
Capital
Nil
Reserves
120
180
520
180
W-3
Calculation of goodwill
Cost of investment
520
x
Pre acquisition equity of S Co.
80%
Impairment loss
Goodwill
W-4
Group Reserves
All reserves of P Co
18
Post acquisition reserves of S Co to the extent of H%
80
Impairment loss
Unrealized profit to the extent of H% 30 x 80%
W-5
Minority Interest
Owners' equity of S Co to
the extent of MI%
700 x 20%
30 x
20%
URP
W-6
207
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Advance Financial Accounting (FIN-611)
VU
The unrealized profit given in this example is Rs.
30.This amount of URP is to be subtracted form th
Consolidated Stocks and also from the group reser
Consolidated Balance Sheet
As at 31 December 2008
R
Fixed Assets
1
Current Assets
2
Share Capital
1
Reserves
Minority Interest
Current Liabilities
2
208
Table of Contents:
  1. ACCOUNTING FOR INCOMPLETE RECORDS
  2. PRACTICING ACCOUNTING FOR INCOMPLETE RECORDS
  3. CONVERSION OF SINGLE ENTRY IN DOUBLE ENTRY ACCOUNTING SYSTEM
  4. SINGLE ENTRY CALCULATION OF MISSING INFORMATION
  5. SINGLE ENTRY CALCULATION OF MARKUP AND MARGIN
  6. ACCOUNTING SYSTEM IN NON-PROFIT ORGANIZATIONS
  7. NON-PROFIT ORGANIZATIONS
  8. PREPARATION OF FINANCIAL STATEMENTS OF NON-PROFIT ORGANIZATIONS FROM INCOMPLETE RECORDS
  9. DEPARTMENTAL ACCOUNTS 1
  10. DEPARTMENTAL ACCOUNTS 2
  11. BRANCH ACCOUNTING SYSTEMS
  12. BRANCH ACCOUNTING
  13. BRANCH ACCOUNTING - STOCK AND DEBTOR SYSTEM
  14. STOCK AND DEBTORS SYSTEM
  15. INDEPENDENT BRANCH
  16. BRANCH ACCOUNTING 1
  17. BRANCH ACCOUNTING 2
  18. ESSENTIALS OF PARTNERSHIP
  19. Partnership Accounts Changes in partnership firm
  20. COMPANY ACCOUNTS 1
  21. COMPANY ACCOUNTS 2
  22. Problems Solving
  23. COMPANY ACCOUNTS
  24. RETURNS ON FINANCIAL SOURCES
  25. IASB’S FRAMEWORK
  26. ELEMENTS OF FINANCIAL STATEMENTS
  27. EVENTS AFTER THE BALANCE SHEET DATE
  28. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
  29. ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES AND ERRORS 1
  30. ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES AND ERRORS 2
  31. BORROWING COST
  32. EXCESS OF THE CARRYING AMOUNT OF THE QUALIFYING ASSET OVER RECOVERABLE AMOUNT
  33. EARNINGS PER SHARE
  34. Earnings per Share
  35. DILUTED EARNINGS PER SHARE
  36. GROUP ACCOUNTS
  37. Pre-acquisition Reserves
  38. GROUP ACCOUNTS: Minority Interest
  39. GROUP ACCOUNTS: Inter Company Trading (P to S)
  40. GROUP ACCOUNTS: Fair Value Adjustments
  41. GROUP ACCOUNTS: Pre-acquistion Profits, Dividends
  42. GROUP ACCOUNTS: Profit & Loss
  43. GROUP ACCOUNTS: Minority Interest, Inter Co.
  44. GROUP ACCOUNTS: Inter Co. Trading (when there is unrealized profit)
  45. Comprehensive Workings in Group Accounts Consolidated Balance Sheet