Model: Bonus shares—Overvaluation of assets and contingent liability X Ltd. acquired 16,000 shares of Rs.10 each in Y Ltd. on 31 March 2011. The summarized balance sheets of the two companies as on that date were as follows:
|
Particulars |
X Ltd.Rs. |
Y Ltd.Rs. |
|
Share Capital: |
||
|
60,000 Shares of Rs.10 Each |
6,00,000 |
– |
|
20,000 Shares of Rs.10 Each |
— |
2,00,000 |
|
Capital Reserve |
— |
1,04,000 |
|
General Reserve |
50,000 |
10,000 |
|
Profit and Loss Account |
76,400 |
36,000 |
|
Loan from Y Ltd. |
4,200 |
— |
|
Bills Payable (Including Rs.1,000 to X Ltd.) |
— |
3,400 |
|
Creditors |
35,800 |
10,000 |
|
Note on the Balance Sheet of X Ltd: |
||
|
There is a Contingent Liability for Bills Discounted of Rs.2,000 |
7,66,400 |
3,63,400 |
|
Fixed Assets |
3,00,000 |
2,89,400 |
|
Investments in Y Ltd. as Cost |
3,40,000 |
— |
|
Stock in Hand |
80,000 |
40,000 |
|
Loan to X Ltd. |
— |
4,000 |
|
Bills Receivable (Including Rs.400 from Y Ltd.) |
2,400 |
— |
|
Debtors |
40,000 |
20,000 |
|
Bank |
4,000 |
10,000 |
|
7,66,400, |
3,63,400 |
You are given the following information:
- Y Ltd. made a bonus issue on 31 March 2010 of one share for every two shares held, reducing the capital reserve equivalently, but the transaction is not shown in the above balance sheets.
- Interest receivable (Rs. 200) in respect of loan due by X Ltd. to Y Ltd. has not been credited in the accounts of Y Ltd.
The directors decided that the fixed assets of Y Ltd. were overvalued and should be written down by Rs.10,000. Prepare the consolidated balance sheet as at 31 March 2011, showing your workings.