H Ltd. acquire 70% of equity share of S Ltd. as on 1 st January, 2021 at a cost of 5,00,000 when S Ltd. had an equity share capital of 5,00,000 and…

The losses applicable to the minority in a consolidated subsidiary may exceed the minority interest in the equity of the subsidiary. The excess, and any further losses applicable to the minority, are adjusted against the majority interest except to the extent that the minority has a binding obligation to, and is able to, make good the losses. If the subsidiary subsequently reports profits, all such profits are allocated to the majority interest until the minority's share of losses previously absorbed by the majority has been recovered. Year Profit/ (Loss) Minority Interest (30%) Additional Consolidated P & L (Dr.) or Cr. Minority's Share of losses borne by H Ltd. Cost of Control At the time of acquisition on 1.1.2021 1,62,000 (W.N.) 1,22,000 (W.N.) 2021 (1,25,000) (37,500) (87,500) Balance 1,24,500 2022 (2,00,000) (60,000) (1,40,000) 1,22,000 Balance 64,500 2023 (2,50,000) (75,000) (1,75,000) 1,22,000 Loss of minority borne by Holding Co. (10,500) 10,500 (10,500) 10,500 10,500 Balance Nil (1,85,500) 2024 (60,000) (18,000) (42,000) 1,22,000 Loss of minority borne by Holding Co. 18,000 (18,000) 18,000 28,500 Balance Nil (60,000) 2025 25,000 7,500 17,500 1,22,000 Profit share of minority adjusted against losses of minority absorbed by Holding Co. (7,500) 7,500 (7,500) 21,000 Balance Nil 25,000 2026 50,000 15,000 35,000 (15,000) 6,000 1,22,000 (15,000) 15,000 Balance Nil 50,000 2027 75,000 22,500 52,500 (6,000) Nil 1,22,000 (6,000) 6,000 Balance 16,500 58,500 Working Note: Calculation of Minority interest and Cost of control on 1.1.2021 Share of Holding Co. Minority Interest 100% 70% 30% (₹) (₹) (₹) Share Capital 5,00,000 3,50,000 1,50,000 Reserve 40,000 28,000 12,000 3,78,000 1,62,000 Less: Cost of investment (5,00,000) Cost of Control 1,22,000