P acquired 70% of S on 1 January 20X1 for Rs.

450,000
The retained earnings of S were Rs. 50,000 at that date.
It is P’s policy to recognise non-controlling interest at the date of acquisition as a
proportionate share of net assets.

The statements of financial position P and S as at 31 December 20X1 were as follows:

P S Total
Assets
Investment in S, at cost 450,000 - 450,000 1
Other Assets 500,000 350,000 850,000

Total Assets 950,000 350,000 1,300,000

-
Equity -
Share Capital 100,000 100,000 200,000 2
Retained Earnings 650,000 100,000 750,000
Total Equity 750,000 200,000 950,000
-
Liabilities 200,000 150,000 350,000

- 3

Total Equity + Liability 950,000 350,000 1,300,000

P
Assets
Goodwill 345,000 4
Other Assets 850,000

Total Assets 1,195,000

Equity
Share Capital 100,000
Retained Earnings 685,000
Total Equity 785,000
NCI 60,000
Liabilities 350,000

Total Equity + Liability 1,195,000

Net Assets (S) 1-Jan CI NCI 31-Dec
Share Capital 100,000.00 100,000
Retained Earnings at the time of
50,000.00 100,000
acquisition
Total Net Assets 150,000.00 70% 30% 200,000
105,000 45,000
Goodwill 60,000
Purchase Price 450,000.00
Net Assets (Purchased 70%) 105,000.00
Goodwill 345,000.00

Non Controlling Interests - Proportionate share of Net

Assets
Net Assets (30% of 150,000) 45,000.00 48000
Gain in Retained Earnings at 12/31/20x1 15,000.00 12000
(30% of 50,000)
Non Controlling Interests 60,000.00

Consolidated Retained Profits (P)

Retained Earnings 650,000.00
Gain in Retained Earnings at 12/31/20x1
35,000.00
(70% of 50,000)
685,000.00
 50,000

30%
15,000
35,000
685,000
P acquired 70% of S on 1 January 20X1 for Rs.450,000

The retained earnings of S were Rs. 50,000 at that date.

It is P’s policy to recognise non-controlling interest at the date of acquisition at fair value.

The fair value of the non-controlling interest at the date of acquisition was Rs. 75,000.

The statements of financial position P and S as at 31 December 20X1 were as follows:

P S Total 1
Assets

Investment in S, at cost 450,000 - 450,000

Other Assets 500,000 350,000 850,000

Total Assets 950,000 350,000 1,300,000
- 2
Equity - 450,000.00

Share Capital 100,000 100,000 200,000 75,000.00

Retained Earnings 650,000 100,000 750,000 525,000.00

Total Equity 750,000 200,000 950,000 150,000.00
- 375,000.00
Liabilities 200,000 150,000 350,000

Total Equity + Liability 950,000 350,000 1,300,000

 P Share P Share
Ret'd Earnings (S) Non Controlling
(Controlling) (amount)

Beginning 50,000 70% 35,000 30%

Ending 100,000 70% 70,000 30%
Increase/
50,000 70% 35,000 30%
(Decrease)

Net Assets (S) 3% Consolidated Retained Profits (P)

Share Capital 100,000.00 Retained Earnings
Retained Earnings at the time of Gain in Retained Earnings at
acquisition 50,000.00 12/31/20x1 (70% of 50,000)
Total Net Assets 150,000.00 ret profits

Goodwill 4 Non Controlling Interests - Fair value

Purchase Price 450,000.00 Fair Value of NCI
Gain in Retained Earnings at
NCI 75,000.00
12/31/20x1 (30% of 50,000)
Goodwill 375,000.00 Non Controlling Interests

P
Assets

Goodwill 375,000 Purchase price Minus NCI

Other Assets 850,000 P + S Total

Total Assets 1,225,000 Above 2 numbers added

Equity
Share Capital 100,000 P Only

Retained Earnings increased

Retained Earnings
from 50,000 on acquisition
date to 100,000 on date of
685,000
consolidation.. therefore
650,000 + 70% of gain of
50,000 included

NCI 90,000 See working

Liabilities 350,000 P + S Total

Total Equity + Liability 1,225,000
 NCI (Amount)

15,000
30,000

15,000

ed Retained Profits (P)

650,000.00

35,000.00

685,000.00

erests - Fair value

75,000.00

15,000.00

90,000.00
On 1 January 20Xx, X and Y entered into a joint operation to purchase and operate an oil
pipeline.
Both entities contributed equally to the purchase cost of Rs.20 million and this was financed by a
joint loan of Rs.20,000,000.

Contract terms
Y carries out all maintenance work on the pipeline but maintenance expenses are shared
between X and Y in the ratio 40%: 60%.

Both entities use the pipeline for their own operations and share any income from third parties
50%: 50%. Sales to third parties are invoiced by Y.

The full interest on the loan is initially paid by X but the expense is to be shared equally.
During the year ended 31 December 20X7
Y carried out maintenance at a cost of Rs. 1,200,000.
Income from third parties was Rs. 900,000, all paid to Y.
Interest of Rs. 1,500,000 was paid for the year on 31 December by X.
Required
Show the relevant figures that would be recognised in the financial statements of X and Y for the
year to 31 December 20Xx.

Total Amount In X Statement In Y Statement

Statement of Profit/Loss
Income from 3rd party (50:50) 900,000 450,000 450,000

Maintenance Cost (40:60) 1,200,000 480,000 720,000

Interest on Loans (50:50) 1,500,000 750,000 750,000

Total (1,800,000) (780,000) (1,020,000)

Cash Expenses
Interest paid by X entirely (1,500,000)
Maintenance Paid by Y (1,200,000)
Cash collected by Y 900,000
Net Cash Expense (1,500,000) (300,000)
Cash Due to X from Y 720,000 (720,000)

83% 17%
(780,000) (1,020,000)
 Total Amount In X Statement In Y Statement

Statement of Financial Position

Jointly Controlled Assets
Property, Plant and Equipment
cost 20,000,000 10,000,000 10,000,000
Share of Liabilities incurred
Bank Loan 20,000,000 10,000,000 10,000,000

Current: Account with Y Owed by Y 720,000

Current: Account with X Owed to X 720,000

Share of Revenue
Income from third Party (50:50) 900,000 450,000 450,000
Share of Expenses
Maintenance Cost (40:60) 1,200,000 480,000 720,000
Interest on Loans (50:50) 1,500,000 750,000 750,000

Total Expenses 2,700,000 1,230,000 1,470,000