Solution is explained below:
(i) As the acquisition has happened on 31st March 2022, i.e. on the last day of the financial year, the whole period of 12 months will be considered as pre period and hence, all the profits will be Capital in nature.
(ii) Now, the subsidiary company may be having some profits or reserves on the date of 'acquisition'. These profits and reserves have technically been earned and accumulated during the previous years and the current year and hence not earned by the Majority i.e. Sigma Ltd.
(iii) This means, all that you see on the date of acquisition i.e. General Reserves and Profit & Loss a/c will be considered as Pre elements and thereby, they will become Capital Profits. Just remember, these are the profits that have been earned by the subsidiary in the past and present, but now being acquired by the Parent Company.
1 - First box i.e. Rs.9,000/- is the total capital profits which is being acquired by the Parent Company. This amount will be considered used in computing Cost of Control.
2 - Second box represents Revenue Profits which is absent in this case as all the profits of the Subsidiary are acquired by the Parent Company on the year end.
3 - Third and Fourth box are the capital and revenue profits belonging to the non-majority (Minority). This has to be added with the non-majority share capital in the minority company to derive Minority Interest, which is Rs. 0/- in this case.
Minority Interest is the amount which is not owned by the Parent Co. i.e. Wipro Ltd.
In this problem, there is no minority interest as the subsidiary is completely owned by the Parent Co.
After preparing necessary working, Notes to Accounts have to be prepared carefully. The final values in the notes are to be disclosed in the Balance Sheet along with the Note Number. It is recommended to understand Company Final Accounts first before preparing Consolidated Final Accounts.