Star Ltd.acquires 70% of equity shares of Moon Ltd.as on 31st March, 2024 at a cost of 140 lakhs. The following information is available from the…

CA Intermediate · Advanced Accounting · MTP · May 2024
Star Ltd.acquires 70% of equity shares of Moon Ltd.as on 31st March, 2024 at a cost of 140 lakhs. The following information is available from the balance sheet of Moon Ltd.as on 31st March, 2024: in lakhs Property, plant and equipment 240 Investments 110 Current Assets 140 Loans & Advances 30 15% Debentures 180 Current Liabilities 100 The following revaluations have been agreed upon (not included in the above figures): Property, plant and equipment Up by 20% Investments Down by 10% Moon Ltd. declared and paid dividend @ 20% on its equity shares as on 31st March, 2024 (Face value -10 per share). Star Ltd. purchased the shares of Moon Ltd.@20 per share. Calculate the amount of goodwill/capital reserve on acquisition of shares of Moon Ltd. 31st March, 2024.

Suggested Answer and Working Notes:

Revalued net assets of Moon Ltd.as on 31st March, 2024 in lakhs in lakhs Property, plant and equipment [240 x 120%] 288.0 Investments [110 X 90%] 99 Current Assets 140.0 Loans and Advances 30.0 Total Assets after revaluation 557 Less: 15% Debentures 180.0 Current Liabilities 100.0 (280.0) Equity / Net Worth 277 Star Ltd.'s share of net assets (70% of 277) 193.9 Star Ltd.'s cost of acquisition of shares of Moon Ltd. (140lakhs – 14lakhs*) 126.00 Capital reserve 67.9 * Total Cost of 70 % Equity of Moon Ltd. 140 lakhs

Topics: AS 21

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