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A ltd. acquired 80% of shares of B. The balance of reserve is $18000 as on 1 Jan 2003. The closing balance of reserve is $50000 on 31 dec 2023. Calculate pre and post acquisition and non controlling interest share.

Question

A ltd. acquired 80% of shares of B. The balance of reserve is 18000ason1Jan2003.Theclosingbalanceofreserveis18000 as on 1 Jan 2003. The closing balance of reserve is 50000 on 31 dec 2023. Calculate pre and post acquisition and non controlling interest share.

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Solution

To calculate the pre and post-acquisition and non-controlling interest share, we need to follow these steps:

Step 1: Calculate the pre-acquisition reserve balance: The pre-acquisition reserve balance is the balance of reserves before the acquisition took place. In this case, the balance of reserves on 1 Jan 2003 is given as $18,000.

Step 2: Calculate the post-acquisition reserve balance: The post-acquisition reserve balance is the balance of reserves after the acquisition took place. In this case, the closing balance of reserves on 31 Dec 2023 is given as $50,000.

Step 3: Calculate the total reserve increase: To calculate the total reserve increase, we subtract the pre-acquisition reserve balance from the post-acquisition reserve balance: Total reserve increase = Post-acquisition reserve balance - Pre-acquisition reserve balance Total reserve increase = 50,000−50,000 - 18,000 Total reserve increase = $32,000

Step 4: Calculate the subsidiary's share of the reserve increase: Since A ltd. acquired 80% of shares of B, the subsidiary's share of the reserve increase is 80% of the total reserve increase: Subsidiary's share of the reserve increase = 80% * Total reserve increase Subsidiary's share of the reserve increase = 0.8 * 32,000Subsidiary′sshareofthereserveincrease=32,000 Subsidiary's share of the reserve increase = 25,600

Step 5: Calculate the non-controlling interest's share of the reserve increase: The non-controlling interest's share of the reserve increase is the remaining 20% of the total reserve increase: Non-controlling interest's share of the reserve increase = 20% * Total reserve increase Non-controlling interest's share of the reserve increase = 0.2 * 32,000Non−controllinginterest′sshareofthereserveincrease=32,000 Non-controlling interest's share of the reserve increase = 6,400

Therefore, the pre-acquisition reserve balance is 18,000,thepost−acquisitionreservebalanceis18,000, the post-acquisition reserve balance is 50,000, the subsidiary's share of the reserve increase is 25,600,andthenon−controllinginterest′sshareofthereserveincreaseis25,600, and the non-controlling interest's share of the reserve increase is 6,400.

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