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Working Notes:
Adjustments of Fair Value
The Plant & Machinery of XYZ Ltd. would stand in the books at Rs. 14,25,000 on 1st October, 20X1,

considering only six months‖ depreciation on Rs. 15,00,000 total depreciation being Rs. 1,50,000. The value put
on the assets being Rs. 20,00,000 there is an appreciation to the extent of Rs. 5,75,000.

Acquisition date profits of XYZ Ltd. Rs.
Reserves on 1.4. 20X1 10,00,000
Profit & Loss Account Balance on 1.4. 20X1 3,00,000
Profit for 20X2: Total Rs. 8,20,000 less Rs. 1,00,000 (3,00,000 – 3,60,000
2,00,000) i.e. Rs. 7,20,000; for 6 months i.e. up to 1.10.20X1
Total Appreciation including machinery appreciation 16,25,000
(10,00,000 1,50,000 + 5,75,000 – 1,00,000)

Share of DEF Ltd. 32,85,000

Post-acquisition profits of XYZ Ltd. Rs.
Profit after 1.10. 20X1 [8,20,000-1,00,000]x 6/12 3,60,000
Less: 10% depreciation on Rs. 20,00,000 for 6 months less (25,000)
depreciation already charged for 2nd half of 20X1-20X2 on
Rs. 15,00,000 (1,00,000-75,000)

Share of DEF Ltd. 3,35,000

Consolidated total comprehensive income Rs.
DEF Ltd.
Retained earnings on 31.3.20X2 5,72,000
Less: Retained earnings as on 1.4.20X1 Profits for the year 20X1-20X2 (0)
5,72,000
Less: Elimination of intra-group dividend (2,00,000)

Adjusted profit for the year 3,72,000
XYZ Ltd.
Adjusted profit attributable to DEF Ltd. (W.N.3) 3,35,000
Consolidated profit or loss for the year 7,07,000
No Non-controlling Interest as 100% shares of XYZ Ltd. are held by DEF Ltd.

Gain on Bargain Purchase Rs.
Amount paid for 20,000 shares 34,00,000
Par value of shares 20,00,000
DEF Ltd.‖s share in acquisition date profits of XYZ Ltd. 32,85,000 (52,85,000)
Gain on Bargain Purchase 18,85,000

Value of Plant & Machinery Rs.
DEF Ltd. XYZ Ltd. 24,00,000
Add: Appreciation on 1.10. 20X1 13,50,000
5,75,000
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