A subsidiary sold goods to the holding company on the basis of cost plus 25%. At the end of the year…


Question Description:

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1. A subsidiary sold goods to the holding company on the basis of cost plus 25%. At the end of the year the stock in trade of the holding company included such goods amounting to Rs.80,000. 25% of the shares of the subsidiary are held by outsiders. What is the amount of stock reserve required? 2. On 1st April, 2010, Broad Ltd. acquired 20 lakh fully paid equity shares of Rs.10 each in Ways Ltd. for Rs.3.75 crore. The balance sheets of two companies as on 31s1 March, 2011 are given below: Liabilities (Rupees in Lakhs) (Rupees in Lakhs) Broad Ltd. Ways Ltd. Equity share capital of Rs.10 each, fully paid 500 250 Securities premium 50 — General reserve 60 140 Profit and loss account 230 75 Creditors 95 85 Proposed dividends 75 — 1,010 550 Assets Land and buildings 90 80 Plant and machinery 210 135 Furniture and fixtures 100 25 Shares in Ways Ltd. 375 145 Stock 110 85 Debtors 75 70 Cash at bank 50 10 Preliminary expenses — 550 Additional information is as under: (i) The balances of general reserve and profit and loss account on the date of acquisition of shares by Broad Ltd. were Rs.100 lakh and Rs.15 lakh respectively, (ii) In July 2010, Ways Ltd. distributed 10% dividend for the year 2009-10. Broad Ltd. credited the entire amount of dividend received to its profit and loss account. (iii) On 31st March, 2011, Ways Ltd. owed Rs.30 lakh to Broad Ltd. For goods purchased from it, which sold goods at cost plus 25%. Goods costing Rs.15 lakh to Ways Ltd. were still lying unsold with Ways Ltd. On 31st March, 2011. (iv) No part of preliminary expenses has been written off during the year. You are required to prepare the consolidated balance sheet of Broad Ltd. and its subsidiary Ways Ltd. as on 31st March, 2011.

Answer

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