GB Limited acquired 80% of equity shares of TB Limited on 1st April, 15 2016 at a cost of ₹ 58,00,000 when TB Limited had an Equity share capital of ₹ 50,00,000 and Reserves and Surplus of ₹ 4,64,000.The following information is provided :Year Profit/(Loss) of TB Limited (₹) 2016-17 (14,50,000) 2017-18 (23,20,000)2018-19 (29,00,000) 2019-20 (6,96,000)2020-21 1,90,000 2021-22 6,80,000 2022-23 12,70,000 You are required to calculate the minority interests and cost of control at the end of each year for the purpose of consolidation.
Question
GB Limited acquired 80% of equity shares of TB Limited on 1st April, 15 2016 at a cost of ₹ 58,00,000 when TB Limited had an Equity share capital of ₹ 50,00,000 and Reserves and Surplus of ₹ 4,64,000.The following information is provided :Year Profit/(Loss) of TB Limited (₹) 2016-17 (14,50,000) 2017-18 (23,20,000)2018-19 (29,00,000) 2019-20 (6,96,000)2020-21 1,90,000 2021-22 6,80,000 2022-23 12,70,000 You are required to calculate the minority interests and cost of control at the end of each year for the purpose of consolidation.
Solution
To calculate the minority interests and cost of control at the end of each year for the purpose of consolidation, we need to follow these steps:
Step 1: Calculate the minority interests: Minority interests represent the portion of equity shares in TB Limited that is not owned by GB Limited. It is calculated as the percentage of equity shares not owned by GB Limited multiplied by the net assets of TB Limited.
Minority interests = (1 - Ownership percentage) * Net assets of TB Limited
Step 2: Calculate the net assets of TB Limited: Net assets of TB Limited can be calculated by subtracting the liabilities from the total assets.
Net assets of TB Limited = Total assets - Total liabilities
Step 3: Calculate the ownership percentage: The ownership percentage is the percentage of equity shares owned by GB Limited in TB Limited. It is calculated by dividing the number of equity shares owned by GB Limited by the total number of equity shares.
Ownership percentage = Equity shares owned by GB Limited / Total equity shares
Step 4: Calculate the cost of control: The cost of control represents the initial cost of acquiring the equity shares of TB Limited. It is calculated as the cost of acquisition minus the fair value of TB Limited's net assets at the time of acquisition.
Cost of control = Cost of acquisition - Fair value of net assets at the time of acquisition
By following these steps, you can calculate the minority interests and cost of control at the end of each year for the purpose of consolidation.
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