Question

    Holding Ltd. owns 80% shares of Subsidiary Ltd. As on

    the date of consolidation, the subsidiary has reserves of ₹5 lakh, including ₹2 lakh earned before acquisition. What amount of reserves will be shown in the consolidated balance sheet?
    A ₹4 lakh Correct Answer Incorrect Answer
    B ₹2.4 lakh Correct Answer Incorrect Answer
    C ₹3 lakh Correct Answer Incorrect Answer
    D ₹3.4 lakh Correct Answer Incorrect Answer

    Solution

    Only post-acquisition reserves are considered in consolidation attributable to the parent company’s shareholding. So, 80% of ₹3 lakh (post-acquisition reserves) = ₹2.4 lakh will be added. Also, 20% of ₹5 lakh = ₹1 lakh is attributed to minority interest. So total shown is ₹3.4 lakh (rounded down to ₹3 lakh in simplified answer).

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