(b) From the balance sheets given below, prepare a consolidated balance sheet of [tex]$M$[/tex] Ltd and [tex]$C$[/tex] Ltd. The interest of the minority shareholders is to be shown as a separate item. Shares were acquired on 1.1.2016.

\begin{tabular}{|c|c|c|c|c|c|}
\hline
Liabilities & M Ltd & C Ltd & Assets & M Ltd & C Ltd \\
\hline
\begin{tabular}{l}
Share capital of \\
Rs. 10 each
\end{tabular} & [tex]$1,50,000$[/tex] & [tex]$30,000$[/tex] & Sundry assets & [tex]$1,40,000$[/tex] & [tex]$40,000$[/tex] \\
\hline
Reserves & [tex]$20,000$[/tex] & [tex]$-$[/tex] & \begin{tabular}{l}
2,000 shares in \\
C Ltd
\end{tabular} & [tex]$27,000$[/tex] & [tex]$-$[/tex] \\
\hline
Creditors & [tex]$25,000$[/tex] & [tex]$9,500$[/tex] & Current assets & [tex]$58,000$[/tex] & [tex]$10,000$[/tex] \\
\hline
P and L a/c & [tex]$30,000$[/tex] & [tex]$4,500$[/tex] & & & \\
\hline
Profit for the year & [tex]$-$[/tex] & [tex]$6,000$[/tex] & & & \\
\hline
& [tex]$25,000$[/tex] & [tex]$50,000$[/tex] & & [tex]$2,25,000$[/tex] & [tex]$50,000$[/tex] \\
\hline
\end{tabular}



Answer :

To prepare a consolidated balance sheet for M Ltd and C Ltd, we need to combine both companies' assets and liabilities, while accounting for the minority shareholders' interest. Let's go step-by-step:

### Initial Liabilities and Assets

#### Liabilities:

- M Ltd Liabilities:
- Share capital of Rs. 10 each: 150,000
- Reserves: 20,000
- Creditors: 25,000
- Profit and Loss account: 30,000
- Profit for the year: 25,000

- C Ltd Liabilities:
- Share capital of Rs. 10 each: 30,000
- Creditors: 9,500
- Profit and Loss account: 4,500
- Profit for the year: 6,000

#### Assets:

- M Ltd Assets:
- Sundry assets: 140,000
- 2,000 shares in C Ltd: 27,000
- Current assets: 58,000

- C Ltd Assets:
- Sundry assets: 40,000
- Current assets: 10,000

### Consolidated Liabilities Calculation

1. Share capital of Rs. 10 each:
[tex]\[ 150,000 (M Ltd) + 30,000 (C Ltd) = 180,000 \][/tex]

2. Reserves:
[tex]\[ 20,000 (M Ltd) + 0 (C Ltd) = 20,000 \][/tex]

3. Creditors:
[tex]\[ 25,000 (M Ltd) + 9,500 (C Ltd) = 34,500 \][/tex]

4. Profit and Loss account:
[tex]\[ 30,000 (M Ltd) + 4,500 (C Ltd) = 34,500 \][/tex]

5. Profit for the year:
[tex]\[ 25,000 (M Ltd) + 6,000 (C Ltd) = 31,000 \][/tex]

### Consolidated Assets Calculation

1. Sundry assets:
[tex]\[ 140,000 (M Ltd) + 40,000 (C Ltd) = 180,000 \][/tex]

2. Current assets:
[tex]\[ 58,000 (M Ltd) + 10,000 (C Ltd) = 68,000 \][/tex]

3. 2,000 shares in C Ltd:
[tex]\[ 27,000 (M Ltd only) \][/tex]

### Minority Interest Calculation

- The minority interest is calculated as the difference between the share capital of C Ltd and the value of shares in C Ltd owned by M Ltd:
[tex]\[ Minority Interest = 30,000 (C Ltd Share Capital) - 27,000 (Value of 2,000 shares in C Ltd) = 3,000 \][/tex]

### Consolidated Balance Sheet

#### Consolidated Liabilities
[tex]\[ \begin{array}{|c|} \hline \textbf{Consolidated Liabilities} \\ \hline \text{Share capital of Rs. 10 each} & 180,000 \\ \hline \text{Reserves} & 20,000 \\ \hline \text{Creditors} & 34,500 \\ \hline \text{Profit and Loss account} & 34,500 \\ \hline \text{Profit for the year} & 31,000 \\ \hline \text{Minority Interest} & 3,000 \\ \hline \end{array} \][/tex]

#### Consolidated Assets
[tex]\[ \begin{array}{|c|} \hline \textbf{Consolidated Assets} \\ \hline \text{Sundry assets} & 180,000 \\ \hline \text{Current assets} & 68,000 \\ \hline \text{2,000 shares in C Ltd} & 27,000 \\ \hline \end{array} \][/tex]

These calculations represent a bird’s-eye view of M Ltd and C Ltd's financial status after the consolidation. The interests of the minority shareholders are properly accounted for as a separate item in the liabilities.