How to Make Consolidated Income Statement - Part 2

Yesterday, we had explained basic steps of making consolidated income statement. Today, we will clear these basic steps through an example.

The trial balance of H Ltd and S Ltd are given below as on 31-3-2010

H Ltd.  S Ltd.
Dr. Cr. Dr. Cr.
Equity share capital (Rs. 10) 10,00,000 4,00,000
6% Pref. share capital (Rs. 10) - 1,00,000
Fixed Assets less depreciation up to 31-3-2009 5,50,000 3,50,000
Sales including 200000 sales by H Ltd to S ltd 12,00,000 10,00,000
Cost of goods sold 960,000 8,00,000
stock 31-3-2010 120,000 90,000
debtors and creditors 2,00,000 1,30,000 1,60,000 60,000
general expenses 32000 shares in S ltd. 4,00,000
interim dividend paid
preference 3000
equity 20,000
Dividend received 16000
profit and loss account ( 31-3-2009 76,000 48,000
Bank 62,000 65,000
24,22,000 24,22,000 16,08,000 16,08,000

1) Shares were purchased on 1-4-2008

2) S Ltd has paid and provided Rs. 20,000 dividend  for 2007-2008 and
46000 for 2008-2009. The net profit for 2008-2009 was 74,000

3)H ltd. proposed 80,000 fir 2009-2010 and S ltd provided for final dividend
of 3000 as preference dividend and 20,000 equity dividend

4) Goods sold by H ltd to S ltd were at 20% profit on sales price. Closing
stock of S Ltd includes 20,000 such stocks.

5) Depreciation is charged @ 10% p.a. on reducing balance method. There is no
addition in 2009. Fixed assets of S Ltd were valued at 10,000 in excess, but not adjustment has
been made in books. Provision for additional depreciation is to be made only to the extent to
holdings of H ltd.

Prepare consolidated trading and profit and loss account  and p/l  appropriation account for the year
 ended 31st march 2010.

Working notes :

1. Calculation of extra depreciation on fixed assets


Amount written up on 1-4-2008  ================  10,000
Less depreciation 10% depreciation ( 10,000 X 10/100) =  1000
-------------------------------------------------------------------
Book value on 1-4-2009 ==================== 9000
10% Depreciation 2009-2010 ================= 900
Holding company's share of depreciation 900 X 4/5 = 720


2. Calculation of capital reserve


Profit and loss account balance of S ltd on 31-3-2009 = 48000
Less : Profit of S ltd for 2008-2009 = 74000
Less : Dividend for 2008-2009      = 46000
--------------------------------------------
 ====================== 28000  ========  - 28000
----------------------------------------------------------------
Profit and loss balance on 1-4-2008 ===========     20000
============================================
Share of holding company 20,000 X 4/5 ========= 16000

3. Calculation of Share of Minority interest in Net Profit of S ltd

Sales --------------------10,00,000
Less cost of goods sold    8,00,000
------------------------------------------
Gross profit -------------- 2,00,000
Less general exp. ------- 1,20,000
Less depreciation ------ 35,000
=============================
current Net profit ------------- 45,000
Old profit  ---------- ---------- 48,000
=============================
Total profit ------------------ 93,000
Less interim dividend ------- 23000 ( Pref. + equity)
Less proposed dividend ----23000 ( Pref. + equity)
========================================
Balance of net profit ------ 47000
==========================================
Share of Minority interest in Net Profit of S ltd  47000 X 1/5
= 9400

Consolidated Trading and profit and loss account and P/L Appropriation account

 Total total          
To cost of goods sold
HLtd  960000
 + S Ltd 8,00,000
--------------------
 ============1760,000
Less internal transfer 2,00,000
----------------------------
============1560,000








15,60,000
By Sales
HLtd  12,00,000
 + S Ltd 10,00,000
--------------------------------
 ================22,00,000
Less internal transfer          
2,00,000
------------------------------------
================20,00,000







20,00,000
To Gross profit c/d 4,40,000
20,00,000 20,00,000
To General Expenses By Gross Profit b/d 4,40,000
H Ltd  130,000 By Dividend Received
S Ltd 1,20,000 H Ltd 16,00,000
250,000 2,50,000 Less received from S ltd - 16,00,000  Nil
By Dividend Proposed
H Ltd 16,000
Less proposed  from S ltd - 16,000  Nil
To Depreciation
H Ltd 55000
S ltd 35000
90000  90,000
To Net Profit C/d 1,00,000
4,40,000 4,40,000
To interim dividend By Balance B/d 1,24,000
Pref. By Net Profit B/d 1,00,000
H Ltd Nil
S ltd 3000 3,000
Equity
H Ltd Nil
S Ltd 20,000
total 20,000
Less internal transfer -16,000
Net 4,000 4,000
To Proposed Divided
Pref.
H ltd Nil
S ltd 3,000 3,000
Equity
H ltd 80,000
S ltd 20,000
total 1,00,000
Less internal transfer -16,000
Net 84000 84,000
To balance C/d 1,30,000
2,40,000 2,40,000
To Share of Minority interest in Net Profit of Sltd  9400 By Balance B/d 1,30,000
To stock reserve
20,000 X 20/100 X 4/5
3200
To capital reserve 16,000
To extra depreciation on value written off
9000 X 10/100 X 4/5
720
To Balance C/d 1,00680
1,30,000 1,30,000


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Accounting Education: How to Make Consolidated Income Statement - Part 2
How to Make Consolidated Income Statement - Part 2
Accounting Education
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