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CS Executive · Corporate Accounting and Financial Management · Consolidation of Accounts

Ganga Ltd bought 75% of Yamuna Ltd for Rs 5,00,000 on the date of investment, when Yamuna Ltd had share capital of Rs 4,00,000 and reserves of Rs 4,00,000. What is the amount of capital reserve or goodwill in consolidation, and the minority interest at that date?

Capital reserve is Rs 1,00,000 and minority interest is Rs 2,00,000. Yamuna's equity is Rs 8,00,000; Ganga's 75% share is Rs 6,00,000, exceeding the cost of Rs 5,00,000 by Rs 1,00,000. Minorities hold 25% of Rs 8,00,000, which is Rs 2,00,000.

  1. ACapital reserve Rs 1,00,000; minority interest Rs 2,00,000Correct
  2. BGoodwill Rs 1,00,000; minority interest Rs 2,00,000
  3. CCapital reserve Rs 3,00,000; minority interest Rs 2,00,000
  4. DCapital reserve Rs 1,00,000; minority interest Rs 1,00,000

Explanation

Equity = 8,00,000. Parent's 75% = 6,00,000. Cost 5,00,000 is less, so capital reserve = 1,00,000. Minority 25% of 8,00,000 = 2,00,000. Check: 5,00,000 + 1,00,000 + 2,00,000 = 8,00,000.

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