Welkins Educational Network
Business Combination achieved in stages
12.1
Entity A acquired 35 % of Entity B in 2021 for Rs.35,000. In 2022, fair value of shares of entity B is Rs.42,000,
thus Rs.7,000 reported under OCI In 2022, A further acquired 40% stake in B. Consideration paid Rs.60,000.
Entity A identifies the net assets of B as Rs.1,20,000, value 35% shares at Rs.45,000. NCI is valued at
proportionate net assets.
Show workings and Journal entries. Show workings and Journal entries.
Year 21
A 35% Stakes / Rs. 35,000 B
Year 22
A DOA B
FV Rs. 42,000
FV Rs. 45,000 Additional stakes 40% Rs. 60,000
FV of NA of B Limited Rs. 1,20,000
FV of Net Assets of B on the DOA Rs. 1,20,000
NCI share 25% of 1,20,000 A's share of NA in B on the DOA
= Rs. 30,000 1,20,000 less 30,000 = 90,000
A's additional share of NA in B on the DOA: 90,000 - 45,000 i.e. FV of
previously held Investments Rs. 45,000
A's Additional share of NA in B on the DOA: 45,000
Consideration for additional Investment: 60,000. Thus goodwill = Rs. 15,000
Workings:
Measurement of Goodwill by A
NIFA 1,20,000
Less NCI (25% × 1,20,000) 30,000
Share of Acquirer in net Assets Balance 90,000
Less Fair Value of previously-held interest 45,000
Acquirer's Additional share in NA of B on the DOA 45,000
Less: Consideration 60,000
Goodwill 15,000
Journal Entry:
Identifiable Net Assets Dr. 1,20,000
Goodwill (Balancing figure) Dr. 15,000
To, Consideration a/c 60,000
To Investment a/c 45,000
To NCI a/c 30,000
Investment a/c Dr. 7,000
To OCI 7000
Investment a/c Dr. 3,000
To OCI 3,000
1
Advanced Accounts
Consolidation :
4.1
DQ Ltd acquired 60% shares of RK Ltd. on 1-4-21. Fair value of net assets at the time of acquisition was
3,00,000. In 21-22 RK made a profit of 60,000. Individual and consolidated balance sheets as at 31-3-22:
DQ RK Consolidated
Goodwill 50,000
PPE 5,00,000 2,80,000 7,80,000
Investment in RK 2,30,000
Current Assets 2,00,000 1,80,000 3,80,000
9,30,000 4,60,000 12,10,000
Equity Share Capital 4,00,000 2,00,000 4,00,000
Other Equity 4,10,000 1,60,000 4,46,000
NCI - - 1,44,000
Current Liabilities 1,20,000 1,00,000 2,20,000
9,30,000 4,60,000 12,10,000
On 1-4-22 DQ acquired further 10% shares of RK. at 46,000. NCI is measured at proportionate carrying
amount. Pass journal entry for change in holding and prepare Separate and Consolidated balance sheet as at
01-04-2022.
Complete Standard Solution –
1. Degree of Control:
Parent NCI
Given 60% 40%
2. Analysis of Accounting Period of Subsidiary Company:
A M J JL A S O N D J F M
1.4.21 31.3.22
DOA
Complete accounting period is Post-Acquisition Period
3. Analysis of Other Equity of Subsidiary
`
Closing Balance 1,60,000
Opening Balance Balancing figure 1,00,000
Earned during the year Given 60,000
Pre-Acquision Profits : -
Post - Acquisition Profits : 60,000
4. Analysis Table
` in lakhs
Amount Parent NCI
a. Equity Share Capital of Subsidiary 2,00,000
b. Other Equity:
in the beginning 1,00,000 + Pre-Acq. 0 1,00,000
Equity on the DOA: 3,00,000 1,80,000 1,20,000
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Welkins Educational Network
Post Acquisition Other Equity / Changes in Other 60,000 36,000 24,000
Equity / Revenue profits :
24,000
5. Cost of Control: GW /GOBP
Consideration / Price paid for Investments 2,30,000
Less: Share in Equity on the DOA 1,80,000
= Goodwill 50,000
6. NCI at Reporting date
NCI as at DOA 1,20,000
+ Share In Revenue Profits 24,000
1,44,000
7. Consolidated b/s at the end of the year i.e. 31.03.22
I. Assets Amount `
NCA:
PPE 5,00,000 + 2,80,000 7,80,000
Goodwill 50,000
Investment -
Current Assets: 2,00,000 + 1,80,000 3,80,000
Total 12,10,000
II. Equity and Liability
Share Capital 4,00,000
Other Equity on the Reporting date 4,10,000 +Post Acq. share 36,000 4,46,000
NCI on the Reporting date 1,44,000
Current Liabilities: 1,20,000 + 1,00,000 2,20,000
Total 12,10,000
8. On 1.4.22
Further Acquisition of 10% Stakes:
NCI ( 40%) Carrying amount as 31.3.22 / 1.4.22 = 1,44,000
Therefore , 10% Shall have carrying amount of : 144,000 x 10/ 40 = 36,000
Entry:
NCI Dr. 36,000
Other Equity (Loss on acquisition) Dr. 10,000
To Bank 46,000
10. Consolidated balance Sheet as at 1.4.22, after 10% Disposal
I. Assets Amount `
NCA:
PPE 5,00,000 + 2,80,000 7,80,000
Goodwill 50,000
Investment -
Current Assets: 2,00,000 - 46,000 + 1,80,000 3,34,000
Total 11,64,000
II. Equity and Liability
Share Capital 4,00,000
3
Advanced Accounts
Other Equity on the Reporting date 4,10,000 + Post Acq. share 36,000 - 4,36,000
Loss on disposal 10,000
NCI after Disposal 1,44,000 - 36,000 1,08,000
Current Liabilities: 1,20,000 + 1,00,000 2,20,000
Total 11,64,000
11. Separate and Consolidated Balance sheet after Disposal of DQ Limited
Amount `
NCA:
PPE 5,00,000
Investments in RK 2,30,000 + 46,000 2,76,000
Current Assets 2,00,000 - 46,000 1,54,000
9,30,000
Equity Share Capital 4,00,000
OE 4,10,000
NCI -
CL 1,20,000
9,30,000
