Mutual Owings (Revaluation of Assets and Liabilities) -Advanced Corporate Accounting B Com Notes | EduRev

Advanced Corporate Accounting

B Com : Mutual Owings (Revaluation of Assets and Liabilities) -Advanced Corporate Accounting B Com Notes | EduRev

The document Mutual Owings (Revaluation of Assets and Liabilities) -Advanced Corporate Accounting B Com Notes | EduRev is a part of the B Com Course Advanced Corporate Accounting.
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Revaluation of Assets and Liabilities

Sometimes, the fixed assets of subsidiary companies are revalued at the time of acquisition of shares. There may be revaluation profit (capital profit) or revaluation loss (capital loss). The share of holding company in revaluation profit is added to the capital reserve or deducted from the goodwill. The revaluation profit due to outsiders in subsidiary company is added to the minority interest. The share of revaluation loss to holding company is added to goodwill or deducted from capital reserve. The share of revaluation loss to outsiders in subsidiary company is deducted from minority interest. Depreciation is also adjusted while calculating the revenue profit in subsidiary company.

Illustration : The following are the liabilities and assets of the holding company H Ltd. and its subsidiary S Ltd. as on 31st December 2014:

Liabilities

H Ltd. Rs.

S Ltd. Rs.

Assets

H Ltd. Rs.

S Ltd.

Rs.

Share Capital:

Shares of Re. 1 each

General Reserve Profit and Loss Account (Current Year)

300000

120000

   90000

240000

60000

30000

Investments:

192000 shares in S Ltd.

Other Assets

210000

300000

330000

510000

330000

510000

330000

 

On 1st January 2014 H Ltd. acquired the shares in S Ltd., when the plant and machinery were revalued to Rs. 240000 from Rs. 180000 and furniture of S Ltd. was revalued to Rs. 45000 from Rs. 60000. Depreciation for plant and machinery and furniture are 10% and 5% respectively. The balance sheet of S Ltd. showed these assets on revalued basis. Prepare the Consolidated Balance Sheet.

Solution:
Share of holdings by H Ltd.in S Ltd. = 192000 shares out of 240000 shares = 80%
Share of holdings by Outsiders in S Ltd. = 48000 shares out of 240000 shares = 20%
Consolidated Balance Sheet of H Ltd. and its Subsidiary S Ltd. as on 31st December 2014

Particulars

Note No.

Amount (Rs.)

A. Equity and Liabilities

Shareholders’ Fund

 

 

a. Share Capital

1

300000

b. Reserves and Surplus

2

295800

Minority Interest

 

73950

Current Liabilities

 

Nil

Total

 

669750

B. Assets

Non-current Assets

 

 

Fixed Assets

3

258750

a. Tangible

 

Nil

b. Intangible

Current Assets

 

 

Other Assets

 

411000

Total

 

669750

 

Notes to Accounts​

Note No.

Particulars

Amount

(Rs.)

1.

Share Capital

 

 

Issued and Subscribed 300000Shares of Rs. 1 each

300000

2.

Reserves and Surplus

 

 

Capital Reserve

66000

 

General Reserve

120000

 

P & L A/c (90000+19800)

109800

 

 Total 

295800

3.

Fixed Assets - Tangible

 

 

Plant and Machinery of S Ltd.         

 216000

 

Furniture of S Ltd.                              

42750

  Total 258750

 

Working Notes:​

Mutual Owings (Revaluation of Assets and Liabilities) -Advanced Corporate Accounting B Com Notes | EduRev
Mutual Owings (Revaluation of Assets and Liabilities) -Advanced Corporate Accounting B Com Notes | EduRev

Calculation of Revenue Profit in S Ltd.:

Share of revenue profit due to H Ltd. = 24750x80% = Rs. 19800
Share of revenue profit due to Outsiders in S Ltd. = 24750x20% = Rs. 4950

Calculation of Capital Profit in S Ltd.:

 

Rs.

General Reserve

60000

Revaluation Profit

45000

Capital Profit

105000

 

Share of capital profit due to H Ltd. = 105000x80% = Rs. 84000

Share of capital profit due to Outsiders in S Ltd. = 105000x20% = Rs. 21000

Calculation of Capital Reserve:

 

Rs.

Rs.

Cost of Shares in S Ltd.

 

210000

Less: Face value of shares in S Ltd.

192000

 

Capital Profit

84000

276000

Capital Reserve

 

66000

 

Calculation of Minority Interest:

Paid up value of Shares held by outsiders in S Ltd.

Add: Share of revenue profit due to Outsiders in S Ltd.

Share of capital profit due to Outsiders in S Ltd.

21000

4950

Rs.

48000

25950

Minority Interest

 

73950

Plant and Machinery of S Ltd.:

 

Rs.

Plant and Machinery

240000

Less: Depreciation @ 10% 24000
Plant and Machinery of S Ltd. 216000

Furniture of S Ltd.:

 

 

Rs.

Furniture

 

45000

Less: Depreciation @ 5%

 

2250

Furniture of S Ltd.

 

42750

Other Assets in Consolidated Balance Sheet:

 

 

Rs.

Total Other Assets as per Balance Sheet

 

330000

Less: Plant and Machinery (180000 - Depn. 18000)

162000

 

Furniture (60000 - Depn. 3000)

57000

219000

Other Assets

 

73950

 

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