NON CONTROLLING INTEREST USING PROPORTIONATE SHARE METHOD Suppose Oak only acqui
ID: 2560053 • Letter: N
Question
NON CONTROLLING INTEREST USING PROPORTIONATE SHARE METHOD
Suppose Oak only acquired 80% of the ordinary share capital and all the preference shares of Acorn for £25,000. Revised balance sheets are shown below:
Oak
Acorn
Property, plant and equipment
100,000
10,000
Investment at cost
25,000
Net current assets
33,000
20,000
158,000
30,000
Ordinary £1 shares
100,000
20,000
Preference shares
5,000
Retained reserves
58,000
5,000
158,000
30,000
Oak
Acorn
Property, plant and equipment
100,000
10,000
Investment at cost
25,000
Net current assets
33,000
20,000
158,000
30,000
Ordinary £1 shares
100,000
20,000
Preference shares
5,000
Retained reserves
58,000
5,000
158,000
30,000
Explanation / Answer
Controlling interest = 80%; Non controlling interest = 20%.
In Acron, it's enough to consider only assets because there were no liabilities other than equity.
In proportionate consolidation, the non controlling interest calculation is as follows :
Ordinary shares = 20000 X 20% = 4000
Preference shares = 5000 X 0 % = 0
Retained earnings = 5000 X 20% = 1000
Total of non controlling interest = 4000 + 1000 = 5000
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