Advance Accounting-II (Chapter-3.

4)
Consolated Balance sheet
Company-A Company-B
Share 10,000 Share 8,000
Purchase 6,000
= 2,000
Important Steps of Preparing Consolidate Balance Sheet
1: Calculation of ratio of H Ltd and S Ltd 2:
Calculation of unrealized profit:
3: Calculation of pre-acquisition profit (Capital Profit)
4: Calculation of post-acquisition profit (Revenue Profit)
5: Calculation of minority interest
6: Calculation of goodwill/capital reserve
7: Calculation of profit and loss account (H Ltd)

Format of Workings
W-1: Calculation of ratio of H Ltd and S Ltd:
Share of H Ltd **
Share of S Ltd **
Ratio
W-2: Calculation of unrealized profit:
Unrealized profit = Tk. Tk **

W-3: Calculation of pre-acquisition profit (Capital Profit):

Tk.
General Reserve (S Company) **
Add: Profit **
**
Add: Fixed assets undervalued **
**
Share of H Ltd
**
Share of S Ltd **
W-4: Calculation of post-acquisition profit (Revenue Profit):
Loss for 2015 **
Share of H Ltd **
Share of S Ltd **
W-5: Calculation of minority interest:
Share capital (600 shares @ Tk. 100 each) **
Add: Capital profit **
**
 Less: Revenue loss **
Minority interest
W-6: Calculation of goodwill/capital reserve:
Investment is S Ltd **
Less: Face value of share
Add: Capital profit of H Ltd **

Capital reserve/Goodwill **
W-7: Calculation of profit and loss account (H Ltd):
Profit and loss account **
Less: Revenue loss/Post acquisition loss **
Less: Unrealized profit **
Profit and loss account **

H Ltd and its Subsidiary S Ltd.

Consolidated Balance sheet
As at 21st Dec. 2016
Account Titles Tk. Tk.
Asset:
Fixed Asset: H
Ltd **
S Ltd **
**
Add: undervalued of Assets Stock **
in trade: **
H Ltd **
S Ltd **
**
Less: Unrealized profit **
**
Sundry debtors: H
Ltd **
S Ltd **
**
Less: Inter transaction ** **

Bills receivable:
H Ltd **
S Ltd **

Less: Inter transaction **

**
Cash in hand:
H Ltd
S Ltd **
** **
Total assets ***
 Liabilities & shareholders’ equity:
Liabilities:
Share Capital **
General Reserve (H Company) **
Notes/Bills payable:
H Ltd S **
Ltd ***
**
** **
Less: Inter transaction
Accounts payable:
**
H Ltd
**
S Ltd
**
** **
Less: Inter transaction **
Minority Interest **
Capital Reserve **
Profit & loss Account
Total Liabilities & shareholders’ equity ***

Problem and Solution

Problem-1: NU-2005, MBS-2003/2007
From the following particulars prepare the consolidated balance sheet as at 31 December,
2015:
_ Balance Sheet as at 31 December. 2015
Liabilities H. Ltd. S. Ltd. Assets H. Ltd. S. Ltd.
Taka Taka Taka Taka
Share capital of Tk. 100 10,00,000 2,00,000 Fixed assets 7,80,000 1,68,000
each Investment in S Ltd 1,56,000
Profit and loss A/c 2,80,000 (1,400 share)
Profit 34,000 26,000 Stock in trade 3,00,000 90,000
Less: loss for 2015 8,000 Sundry debtors 1,30,000 10,000
Bills payable 6,000 Bills receivables 10,000 -
General preserve 1,10,000 40,000 Cash in hand 26,000 8,000
Sundry creditors 12,000 4,000
14,02,000 2,76,000 14,02,000 2,76,000
Others information:
(i) H Ltd. bought the shares of S. Ltd. on 1 January, 2015.
(ii) The general reserve of S. Ltd. remained unchanged since 2014.
(iii) The sundry creditors S. Ltd. includes Tk. 3,000 for goods supplied by H. Ltd
(iv) The stock of S. Ltd. includes goods sent by H Ltd. at a market price of Tk. 4,000 which includes
25% profit on cost.
(v) The bills of S Ltd. are payable only to H. Ltd.
(vi) The fixed assets of S Ltd. are undervalued by Tk. 4,000. Solution:
Workings:
W-1: Calculation of ratio of H Ltd and S Ltd:
Share of H Ltd 1400
Share of S Ltd (2000-1400) 600
Ratio = 𝟏𝟒𝟎𝟎: 𝟔𝟎𝟎 7:3
W-2: Calculation of unrealized profit:
Tk. 800
Unrealized profit = Tk. 4,000 ×
W-3: Calculation of pre-acquisition profit (Capital Profit):
Tk.
General Reserve 40,000
Add: Profit 34,000
74,000
Add: Fixed assets undervalued 4,000

Share of H Ltd = (Tk. 78,000 × )

Share of S Ltd = (Tk. 78,000 × ) 23,400

W-4: Calculation of post-acquisition profit (Revenue Profit):
Loss for 2015
Share of H Ltd = (Tk. 8,000 × )
Share of S Ltd = (Tk. 8,000 × ) 2,400
W-5: Calculation of minority interest:
Share capital (600 shares @ Tk. 100 each) 60,000
Add: Capital profit 23,400
Less: Revenue loss Minority (2,400)
interest 81,000
W-6: Calculation of goodwill/capital reserve:
Investment is S Ltd 1,56,000
Less: Face value of share (1,400 shares × Tk. 100 each ) 1,40,000
Add: Capital profit of H Ltd 54,600
1,94,600
Capital reserve 38,600
W-7: Calculation of profit and loss account (H Ltd):
Profit and loss account 2,80,000
Less: Revenue loss/Post acquisition loss (5,600)
Less: Unrealized profit (800)
Profit and loss account 2,73,600

H Ltd and its Subsidiary S Ltd.

Consolidated Balance sheet
As at 21st Dec. 2016
Account Titles Tk. Tk.
Asset:
Fixed Asset: H
Ltd 7,80,000
S Ltd 1,68,000
 9,48,000
Add: undervalued of Assets 4,000 9,52,000
Stock in trade: H
Ltd 3,00,000
S Ltd 90,000
3,90,000
Less: Unrealized profit (800)
3,89,200
Sundry debtors:
H Ltd 1,30,000
S Ltd 10,000
1,40,000
Less: Inter transaction 3,000
1,37,000
Bills receivable:
H Ltd 10,000
S Ltd -
10,000
6,000 4,000
Less: Inter transaction
Cash in hand:
26,000
H Ltd
8,000
S Ltd 34,000

Total assets 15,16,200

Liabilities & shareholders’ equity:
Liabilities:
Share Capital 10,00,000
General Reserve 1,10,000
Notes/Bills payable:
-
H Ltd 6,000
S Ltd 6,000
6,000
Less: Inter transaction
Accounts payable: 12,000
H Ltd 4,000
S Ltd 16,000
3,000 13,000
Less: Inter transaction 81,000
Minority Interest 38,600
Capital Reserve 2,73,600
Profit & loss Account
Total Liabilities & shareholders’ equity 15,16,200

Problem-2: Following are the Balance Sheet of H. Ltd. and S. Ltd. as at 31st December 2016:
 Liabilities H. Ltd S. Ltd. Assets H. Ltd. S. Ltd.
Tk. Tk. Tk. Tk.
Share capital: Goodwill 60,000 40,000
Shares of Tk. 100 each 5,00,000 2,00,000 Fixed Assets 3,60,000 2,20,000
General reserve (1-1-16) 1,20,000 70,000 Stock 1,00,000 90,000
Creditors 80,000 50,000 Debtors 30,000 75,000
Bills payable - 40,000 1,500 shares in S. Ltd. at cost 2,40,000
Profit and Loss A/c 1,50,000 90,000 Cash at Bank 60,000 25,000
8,50,000 4,50,000 8,50,000 4,50,000
The Profit and Loss Account of S. Ltd. showed a credit balance of Tk. 55,000 on 1st January, 2016. A
dividend of 12.5% was paid in October. 2016 for the year 2015. This dividend was credited by H Ltd.
to its Profit and Loss Account. H Ltd acquired the shares of S. Ltd. as on 1st July, 2016. The Bills
payable of S. Ltd. were all issued in favor of H. Ltd. discounted these bills. Included in the creditors
of S. Ltd. is Tk. 24,000 for goods supplied by H. Ltd. Included in the stock of S. Ltd. are goods to the
value of Tk. 12,000 which were supplied by H Ltd. at a profit of 25% on cost. The fixed assets of S.

Ltd. are undervalued by Tk. 10,000.

Required: Prepare consolidated balance sheet of H Ltd. as at 31st December. 2016.

Solution: Workings:
W-1: Calculation of ratio of H Ltd and S Ltd:

Share of H Ltd 1,500

Share of S Ltd (2000-1500) 500
Ratio = 𝟏𝟓𝟎𝟎: 𝟓𝟎𝟎 3:1
W-2: Calculation of unrealized profit:
Tk. 2,400
Unrealized profit = Tk. 12,000 ×
W-3: Calculation of Current Year profit:
Tk.
Profit and loss account (31.12.16) 90,000
Less : Profit and loss account (01.01.16) 55,000
Less : Dividend paid (Tk. 2,00,000 × 12.5%) 25,000 30,000
Profit during the year
Pre-acquisition profit for 6 months (Jan. to June) = (Tk.60,000 × )
Post-acquisition profit for 6 months (July to Dec.) = (Tk. 60,000 × ) 30,000
W-4: Calculation of pre-acquisition profit (Capital Profit):
Tk.
General Reserve (01.01.16) 70,000
Add: Profit and loss account (01.01.16) 55,000
Less : Dividend paid 25,000 30,000
1,00,000
Add : Profit for 6 month (pre-acquisition profit) 30,000
 1,30,000
Add : undervalued of fixed assets 10,000

Share of H Ltd = (Tk. 1,40,000 × )

Share of S Ltd = (Tk. 1,40,000 × )
35,000
W-5: Calculation of post-acquisition profit (Revenue Profit):

Profit for 6 months (Post Acquisition Profit)

Share of H Ltd = (Tk. 30,000 × )

Share of S Ltd = (Tk. 30,000 × )
7,500
W-6: Calculation of minority interest:
Share capital (500 shares @ Tk. 100 each) 50,000
Add: Capital profit of S 35,000
Add: Revenue profit Minority 7,500
interest 92,500
W-7: Calculation of goodwill/capital reserve:
Investment is S Ltd 2,40,000
Less: Face value of share (1,500 shares × Tk. 100 each) 1,50,000
Add: Capital profit of H Ltd 1,05,000
Add: Dividend from S Ltd (25,000 × ) 18,750
2,73,500
Capital reserve 33,750
W-8: Calculation of profit and loss account (H Ltd):
Profit and loss account 1,50,000
Add: Revenue profit 22,500
Less: Unrealized profit (2,400)
(18,750)
Less: Dividend from S Ltd (25,000 × )
Profit and loss account 1,51,350

Consolidated Balance Sheet

Account Titles Tk. Tk.
Assets
Goodwill:
H Ltd 60,000
S Ltd 40,000
1,00,000
Fixed Assets:
H Ltd 3,60,000
S Ltd 2,20,000
5,80,000
Add : Undervalued assets 10,000
5,90,000
Stock :
H Ltd 1,00,000
S Ltd 90,000
1,90,000
Less : Unrealized profit (2,400)
1,87,600
Debtors:
H Ltd 30,000
S Ltd 75,000
1,05,000
Less : Inter transaction 24,000
81,000
Cash at bank: H
Ltd 60,000
S Ltd 25,000
85,000
Total assets 10,43,600
Liabilities & shareholders’ Equity :
Liabilities :
Share Capital 5,00,000
General Reserve 1,20,000
Capital reserve 33,750
Profit & Loss Account 1,51,350
Creditors :
H Ltd 80,000
S Ltd 50,000
1,30,000
Less : Inter transaction 24,000
1,06,000
Bills payable 40,000
Minority interest 92,500
Total liabilities & Shareholders’ equity 10,43,600