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CA Intermediate · Advanced Accounting · AS 21 Consolidated Financial Statements

Himalaya Ltd acquired 80% of the equity shares of Sutlej Ltd on 1 April 2025. On that date Sutlej Ltd had equity share capital of ₹10,00,000 and general reserve of ₹4,00,000, and no other items in equity. Under AS 21, what is the minority interest in Sutlej Ltd's net worth at the date of investment?

The minority interest is ₹2,80,000. It is the outside shareholders' 20% of Sutlej Ltd's net worth at the date of investment, which is share capital of ₹10,00,000 plus reserves of ₹4,00,000, totalling ₹14,00,000.

  1. A₹2,00,000
  2. B₹2,80,000Correct
  3. C₹3,20,000
  4. D₹11,20,000

Explanation

Net worth at the date of investment = 10,00,000 + 4,00,000 = ₹14,00,000. Minority share = 20% × 14,00,000 = ₹2,80,000. ₹2,00,000 takes only share capital, ignoring reserves. ₹11,20,000 is the parent's 80% share, not the minority's.

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