The Institute of Chartered Accountants of Nepal

Revision Test Paper December 2016

ADVANCE FINANCIAL REPORTING

Questions based on Holding Company

Question No.1
As on 30th June 2015, the balance sheets of three companies showed the following positions:
Fig Ltd.
Rs. Rs.
Share Capital 2,00,000 Land & Buildings 40,000
Capital Reserve 20,000 Plant & Machinery 80,000
Revenue Reserve 60,000 Share in Run Ltd. at cost 1,15,000
Current Liabilities: Shares in Trot Ltd. at cost 70,000
Provision for Taxes 50,000 Stock in Hand 57,000
Proposed dividend 1,00,000 Sundry debtors 83,000
Creditors 40,000 Balance at Bank 25,000
4,70,000 4,70,000

Run Ltd.
Rs. Rs.
Share Capital (Rs.10 each) 80,000 Land & Buildings 1,00,000
Capital Reserve 40,000 Plant & Machinery 35,000
Revenue Reserve 42,000 Current Assets:
Current Liabilities: Stock in Hand 65,000
Creditors 40,000 Debtors 40,000
Proposed Dividend 80,000 Bank Balance 60,000
Provision for Taxes 18,000
3,00,000 3,00,000

Trot Ltd.
Rs. Rs.
Share Capital (Rs.10 each) 1,00,000 Land & Buildings 65,000
Capital Reserve ---- Plant & Machinery 25,000
Revenue Reserve 32,000 Current Assets:
Current Liabilities: Stock in Hand 60,000
Creditors 23,000 Debtors 40,000
Proposed Dividend 10,000 Bank Balance 10,000
Provision for tax 35,000
2,00,000 2,00,000
You are also given the following information:
1. Fig Ltd acquired 5,000 shares in Run Ltd in 2010, when the balance on capital reserve had been
Rs.20,000 and on revenue reserve Rs.16,000. A further 1,000 shares were purchased in 2012 when
the balance in capital reserve and revenue reserve had been Rs.40,000 and Rs.24,000 respectively.
2. Fig Ltd had purchased 7,500 shares in Trot Ltd in 2011 when there had been adverse balance on
revenue reserve of Rs.6,000.
3. The proposed dividend from subsidiary companies have been included in the figure for debtors
in the accounts of the parent company.
You are required to prepare the consolidated balance sheet of Fig Ltd and its subsidiaries as on 30 th June
2015 together with your consolidated schedules.

Answer/Hints
Consolidated Balance Sheet of Fig Ltd and its subsidiary Trot Ltd and Run Ltd as on 30th June 2015
Liabilities Rs. Assets Rs.
Share Capital 200,000 Goodwill 24,000
Revenue Reserve 107,000 Land & Building 205,000
Capital Reserve 32,500 Plant & Machinery 140,000
Creditors 103,000 Stock 182,000
Tax 103,000 Debtors 95,500
Proposed dividend 122,500 Bank 95,000
Minority Interest 73,500
741,500 741,500

Working Note:
1. Analysis of profit of Trot Ltd
Revenue reserve Pre-acquisition Post
(6,000) 38,000

Fig (75%) M Fig (75%) M

(4,500) (1,500) 28,500 9,500
2. Analysis of profit of Run Ltd
Capital Reserve revenue Reserve
40,000 42,000
Fig (75%) M Fig (75%) M
\ 30,000 10,000 31,500 10,500
Pre Post Pre Post
(20,000 5/8) (16,000 5/8)
(40,000 1/8) (24,000 1/8)
= 17,500 12,500 = 13,000 18,500

3. Cost of Control
Cost of Investment (115,000 + 70,000) 185,000
Less: Paid up Capital 135,000
Share in pre-acquisition profit (Trot) (4,500)
Share jn pre-acquisition profit (Run) 30,500 161,000
Goodwill 24,000

4. Minority Interest
Share in paid up capital 45,000
Share in capital profit 10,000
Share in revenue profit 10,500
Share in profit of Trot (9,500-1,500) 8,000
Total 73,500

5. Revenue reserve
Of Fig 60,000
 Share in Trot 28,500
Share in Run 18,500
Total 107,000

6. Capital reserve
Of Fig 20,000
Share in Run 12,500
Total 32,500

7. Proposed Dividend
Of Fig 100,000
Of Run 80,000
Of Trot 10,000
Share in Run Mutual (60,000)
Share in Trot Mutual (7,500)
Consolidated 122,500
8. Debtors
Total 163,000
Proposed dividend Mutual (67,500)
Consolidated 95,500

Question No.2
The following summarized balance sheet as on December 31, 2015 as given:
A Ltd. B Ltd.
Share Capital (fully paid shares of Rs.100 each) 20,00,000 5,00,000
Reserve & surplus 6,00,000 2,40,000
Loans from B Ltd. (including interest) 2,25,000 ---
Bank Overdraft ---- 1,50,000
Sundry Creditors 2,40,000 2,10,000
30,65,000 11,00,000
Fixed Assets 16,00,000 5,00,000
Investments:
(i) In B Ltd. 4,72,500
(ii) Other 5,70,000
Loans to A Ltd --- 2,00,000
Cash at Bank 1,20,000 12,000
Other Current Assets (including interest receivable) 3,02,500 3,84,000
30,65,000 11,00,000
The following other information are available:
a. The Reserve of the companies as on January 1, 2015 were: A Ltd. Rs.4,30,000 and B Ltd.
Rs.2,50,000.
b. B Ltd. has advanced the loan to A Ltd on January 1, 2015.
c. On July 1, 2015 B Ltd issued fully paid bonus shares at the rate of one shares for every four held. On
the same date, a dividend of 10 percent was paid for 2014.
d. A Ltd has purchased 3,500 shares in B Ltd on April 1, 2015 but had disposed of 375 shares on
October 31, 2015 at Rs.140 the sale proceeds of being credited to the concerned investment account
which so far has only this entry in addition to that made on the acquisition of the shares.

Prepare consolidated balance sheet.

Answer/Hints
Consolidated Balance Sheet of A Ltd and Its Subsidiary B Ltd
Liabilities Rs. Assets Rs.
Share Capital 2,000,000 Fixed Assets 2,100,000
Reserve and Surplus 653,500 Other Investments 570,000
Bank overdraft 150,000 Other Current Assets 661,500
Sundry Creditors 450,000 Bank 136,000
Minority Interest 148,000
Capital Reserve 66,000
3,467,500 3,467,500

Working Note:
1. Analysis of profit of B Ltd as on 31.12. 2015
Pre-acquisition Post acquisition
(upto 1.4) (1.4 31.12)
Reserve 250,000
Less: Bonus (100,000)
Less: Dividend (40,000) 110,000
Profit of current year (130,000 in 3:9) 32,500 97,500
Total 142,500 97,500
H (80%) M H M
114,000 28,500 78,000 19,500

2. Minority Interest
Share in paid up capital 100,000
Share in pre-acquisition profit 28,500
Share in post-acquisition profit 19,500
Total 148,000

3. Cost of control
Cost of investment 480,000
Less: share in paid up capital 400,000
Pre-acquisition dividend 32,000
Pre-acquisition profit 114,000 546,000
Goodwill 66,000

4. Reserve & Surplus

Of A Ltd 600,000
Post-acquisition profit 78,000
Pre-acquisition dividend (35,000)
Profit on sale of shares 10,500
Consolidated 653,500

Question No.3
The following are the balance sheets of A Ltd, B Ltd and C Ltd as at 31st December 2015: (Prepare
consolidated Balance Sheet)
A Ltd. B Ltd C Ltd.
Rs. Rs. Rs.
Shares Capital ( Rs.10 each) 10,00,000 5,00,000 2,00,000
General Reserve 2,00,000 36,000 ---
Profit & Loss A/c 1,70,000 1,19,000 ---
Liabilities 1,60,000 3,75,000 1,40,000
15,30,000 10,30,000 3,40,000
4,000 shares in B Ltd. 6,00,000 -- ---
500 shares in C Ltd. 25,000 --- --
1,500 shares in C Ltd -- 90,000 ---
Profit & loss A/c --- --- 80,000
Other Assets 9,05,000 9,40,000 2,60,000
15,30,000 10,30,000 3,40,000
The following information are available:
1. A Ltd acquired its investment in B Ltd on 1st January 2015 on which date the amounts standing to the
credit of general reserve and profit and loss account in B Ltd was Rs.35,000 and 65,000 respectively.
2. A Ltd acquired its investment in C Ltd on 1st January 2015 when the debit balance in the profit and
loss account in C Ltd.s book was Rs.60,000.
3. B Ltd acquired its investment in C Ltd on 1st January 2013 when the debit balance in the profit & loss
account in C Ltd.s book was Rs.20,000.

Answer/Hints
Consolidated Balance Sheet
Liabilities Rs. Assets Rs.
Share Capital 1,000,000 Goodwill 89,000
General reserve 200,800 Other assets 2,105,000
Profit & Loss Account 196,200
Liabilities 675,000
Minority Interest 122,000
2,194,000 2,194,000

1. Analysis of profit of C Ltd

P & L A/c
(80,000)
A Ltd B Ltd
(20,000) (60,000)
Pre Post Pre Post
(60,000 25%) (20,000 75%)
= (15,000) (5,000) = (15,000) (45,000)

2. Profit of B Ltd on different dates

1.1.2015 31.12.2015
a. General Reserve of B 35,000 36,000
Consolidated 35,000 36,000
b. Profit & Loss Account
Profit of Bs own 65,000 119,000
Share of B in Cs post acquisition (30,000) (45,000)
Consolidated 35,000 74,000

3. Analysis of profit of B Ltd

Pre-acquisition Post Acquisition
GR PL
35,000 1,000
35,000 39,000
H M H M H M
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