X Ltd. purchased 70% of the shares of Y Ltd. at a price on 1,00,000. Share capital of Y Ltd. was of Rs. 70,000 and its accumulated profits amounted to Rs. 90,000. What would be the amount of Minority Interest in the consolidated balance sheet?
A. Rs. 25,000
B. Rs. 70,000
C. Rs. 1,00,000
D. Rs. 40,000
Answer: Option B
This Question Belongs to Commerce >> Accounting
Join The Discussion
Comments (2)
Related Questions on Accounting
Accounting provides information on
A. Cost and income for managers
B. Company's tax liability for a particular year
C. Financial conditions of an institutions
D. All of the above
The long term assets that have no physical existence but are rights that have value is known as
A. Current assets
B. Fixed assets
C. Intangible assets
D. Investments
The assets that can be converted into cash within a short period (i.e. 1 year or less) are known as
A. Current assets
B. Fixed assets
C. Intangible assets
D. Investments
Patents, Copyrights and Trademarks are
A. Current assets
B. Fixed assets
C. Intangible assets
D. Investments
Minority interest is the portion of the equity of a subsidiary that is not owned by the parent company. It is calculated as the difference between the subsidiary’s net assets and the parent company’s share of the subsidiary’s equity.
In this case, X Ltd. purchased 70% of the shares of Y Ltd. at a price of Rs. 1,00,000. This means that X Ltd. now owns 70% of Y Ltd.’s net assets. Y Ltd.’s net assets are equal to its share capital plus its accumulated profits, which is Rs. 70,000 + Rs. 90,000 = Rs. 160,000. Therefore, X Ltd.’s share of Y Ltd.’s net assets is 70% x Rs. 160,000 = Rs. 112,000.
The minority interest is the remaining 30% of Y Ltd.’s net assets, which is Rs. 160,000 – Rs. 112,000 = Rs. 48,000. Since X Ltd. owns 70% of Y Ltd., the minority interest is equal to 30% x Rs. 48,000 = Rs. 25,000.
Option B is incorrect because it is the total value of Y Ltd.’s net assets. Option C is incorrect because it is the price that X Ltd. paid for Y Ltd.’s shares. Option D is incorrect because it is the share capital of Y Ltd.
Explain it