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CA Intermediate · Advanced Accounting · AS 21 Consolidated Financial Statements

Ria Ltd acquired 75% of the equity shares of Sahil Ltd on 1 October 2025 for ₹10,50,000. Sahil's equity share capital is ₹8,00,000. Its reserves were ₹4,00,000 on 1 April 2025, and it earned a profit of ₹3,00,000 for the year ended 31 March 2026, accruing evenly through the year. No dividend was paid. Which pair correctly gives the goodwill on consolidation and the minority interest at 31 March 2026?

Goodwill is ₹37,500 and minority interest is ₹3,75,000. Net assets at acquisition include the six months' profit of ₹1,50,000, giving ₹13,50,000, and Ria's 75% share is ₹10,12,500 against the cost of ₹10,50,000. Minority interest is 25% of closing net assets of ₹15,00,000.

  1. AGoodwill ₹37,500; minority interest ₹3,75,000Correct
  2. BGoodwill ₹37,500; minority interest ₹3,37,500
  3. CGoodwill ₹1,50,000; minority interest ₹3,75,000
  4. DCapital reserve ₹37,500; minority interest ₹3,75,000

Explanation

Profit up to 1 October is 3,00,000 × 6/12 = ₹1,50,000, which is pre-acquisition. Net assets at acquisition are 8,00,000 + 4,00,000 + 1,50,000 = ₹13,50,000, and 75% of that is ₹10,12,500. Goodwill is 10,50,000 − 10,12,500 = ₹37,500. Minority interest is 25% × 15,00,000 (closing net assets) = ₹3,75,000. The ₹3,37,500 option uses acquisition-date net assets for minority interest. The ₹1,50,000 goodwill option ignores the pre-acquisition profit of the current year.

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