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CA Final · Integrated Business Solutions (Multidisciplinary Case Study with Strategic Management) · Financial Reporting

Case: On 1 April 2024 Veda Industries Ltd. acquired 80% of Sagar Components Ltd. when Sagar's equity share capital was Rs 200 lakh and retained earnings Rs 100 lakh; fair values equalled book values. Goodwill was Rs 40 lakh with NCI at proportionate share. On 31 March 2025 Sagar's retained earnings were Rs 180 lakh, after Rs 20 lakh dividend paid during the year (Veda received its share). Ignoring other adjustments, what is NCI in the consolidated balance sheet on 31 March 2025?

NCI is Rs 76 lakh. Sagar's net assets at year-end are share capital Rs 200 lakh plus retained earnings Rs 180 lakh, already net of the dividend, totalling Rs 380 lakh. Under the proportionate method, NCI is 20% of this and no goodwill is attributed to it.

  1. ARs 12 lakh
  2. BRs 56 lakh
  3. CRs 76 lakhCorrect
  4. DRs 96 lakh

Explanation

Sagar's net assets at 31 March 2025 = 200 + 180 = Rs 380 lakh (dividend already deducted from retained earnings). NCI = 20% x 380 = Rs 76 lakh. Rs 96 lakh wrongly adds back the dividend (400 x 20%) ; Rs 56 lakh uses only post-acquisition profit plus wrongly deducts items; goodwill is not allocated to NCI under the proportionate method.

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