Consider the following summarized Balance Sheets of subsidiary MNT Ltd. Liabilities 2022-23 2023-24 Amount in ₹ Amount in ₹ Share Capital Issued and…

CA Intermediate · Advanced Accounting · MTP · January 2025
Consider the following summarized Balance Sheets of subsidiary MNT Ltd. Liabilities 2022-23 2023-24 Amount in ₹ Amount in ₹ Share Capital Issued and subscribed 7500 Equity Shares of 100 each 7,50,000 7,50,000 Reserve and Surplus Revenue Reserve 2,14,000 5,05,000 Securities Premium 72,000 2,07,000 Current Liabilities and Provisions Trade Payables 2,90,000 2,46,000 Bank Overdraft - 1,70,000 Provision for Taxation 2,62,000 4,30,000 15,88,000 23,08,000 Assets Fixed Assets (Cost) 9,20,000 9,20,000 Less: Accumulated Depreciation (1,70,000) (2,82,500) 7,50,000 6,37,500 Investment at Cost 5,30,000 Current Assets Inventory 4,12,300 6,90,000 Trade Receivable 2,95,000 3,43,000 Prepaid expenses 78,000 65,000 Cash at Bank 52,700 42,500 15,88,000 23,08,000 Other Information: (1) MNT Ltd. is a subsidiary of LTC Ltd. (2) LTC Ltd. values inventory on FIFO basis, while MNT Ltd. used LIFO basis. To bring MNT Ltd.'s inventories values in line with those of LTC Ltd., its value of inventory is required to be reduced by - 5,000 at the end of 2022-2023 and increased by - 12,000 at the end of 2023-2024. (Inventory of 2022-23 has been sold out during the year 2023-24) (3) MNT Ltd. deducts 2% from Trade Receivables as a general provision against doubtful debts. (4) Prepaid expenses in MNT Ltd. include Sales Promotion expenditure carried forward of 25,000 in 2022-23 and - 12,500 in 2023-24 being part of initial Sales Promotion expenditure of 37,500 in 2022-23, which is being written off over three years. Similar nature of Sales Promotion expenditure of LTC Ltd. has been fully written off in 2022-23. Restate the balance sheet of MNT Ltd. as on 31st March, 2024 after considering the above information for the purpose of consolidation. Such restatement is necessary to make the accounting policies adopted by LTC Ltd. and MNT Ltd. uniform.

Suggested Answer and Working Notes:

Restated Balance Sheet of MNT Ltd. as at 31st December, 2024 Particulars Note No. (₹) I. Equity and Liabilities (1) Shareholder's Funds (a) Share Capital 7,50,000 (b) Reserves and Surplus 1 7,18,500 (2) Current Liabilities (a) Short term borrowings 2 1,70,000 (b) Trade Payables 2,46,000 (c) Short-term provision 3 4,30,000 Total 23,14,500 II. Assets (1) Non-current assets (a) Property, Plant & Equipment 4 6,37,500 (b) Non-current Investment 5,30,000 (2) Current assets (a) Inventories (6,90,000 +12,000) 5 7,02,000 (b) Trade Receivables (3,43,000 -x 100) 3,50,000 (c) Cash & Cash Equivalents 42,500 (d) Other current assets 6 52,500 Total 23,14,500 Notes to Accounts ₹ 1. Reserves and Surplus Revenue Reserve (refer W.N.) 5,11,500 Securities Premium 2,07,000 7,18,500 2. Short term borrowings Bank overdraft 1,70,000 3. Short-term provision Provision for taxation 4,30,000 4. Property, Plant and Equipment Cost 9,20,000 Less: Depreciation to date (2,82,500) 6,37,500 5. Inventories Increase in value as per FIFO 6,90,000 12,000 7,02,000 6. Other current assets Prepaid expenses (After adjusting sales promotion expenses to be written off each year) (65,000 -12,500) 52,500 Working Note: Adjusted revenue reserves of MNT Ltd.: ₹ ₹ Revenue reserves as given 5,05,000 Add: Provision for doubtful debts [3,43,000 X 2/98) 7,000 Add: Increase in value of inventory 12,000 19,000 5,24,000 Less: Sales Promotion expenditure to be written off (12,500) Adjusted revenue reserve 5,11,500

Topics: AS 21

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