Illustration: Holding company with direct share holding
Rain Ltd., Storm Ltd. and Thunder Ltd. are in the business of manufacturing tents. Their balance sheets as at 30 September 2003 were as below:
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Rain Ltd.
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Storm Ltd.
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Thunder Ltd.
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Sh. “000”
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Sh. “000”
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Sh. “000”
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Sh. “000”
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Sh. “000”
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Sh. “000”
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Non-current assets:
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Non-current assets
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(net of depreciation)
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14,000
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6,300
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1,700
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Shares in subsidiaries
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5,000
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1,900
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-
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19,000
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8,200
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1,700
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Current assets:
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Inventory
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2,000
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1,200
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1,600
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Trade payables
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4,800
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2,000
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800
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Cash
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2,700
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1,400
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1,100
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9,500
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4,600
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3,500
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Current liabilities:
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Trade payables
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( 5,000 )
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( 2,600 )
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( 1,800 )
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Net current assets
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4,500
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2,000
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1,700
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23,500
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10,200
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3,400
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Financed by:
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Authorised and issued
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Share capital:
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Ordinary shares of Sh.100
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15,000
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5,000
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2,000
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10% preference shares of Sh. 100 each fully paid
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-
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3,000
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-
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General reserve
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6,000
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3,000
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1,000
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Retained Profits
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2,500
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( 800 )
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400
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23,500
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10,200
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3,400
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Additional information:
1. Rain Ltd. purchased 30,000 ordinary shares in Storm Ltd. on 1 October 2001 for Sh. 3,400,000 and 5,000 preference shares on 1 October 2002 for Sh. 600,000. On 1 October 2002, Rain Ltd. purchased 5,000 ordinary shares in Thunder Ltd. for Sh. 1,000,000. Storm Ltd. purchased 11,000 ordinary shares in Thunder Ltd. for Sh. 1,900,000 on the same date.
2. Balances are as given below:
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Profit and loss account
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Storm Ltd.
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1 October 2001
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Sh. 500,000 (debit).
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1 October 2002
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Sh. 600,000 (debit).
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Thunder Ltd.
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1 October 2002
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Sh. 300,000 (debit).
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General reserve
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Storm Ltd.
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1 October 2001
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Sh. 1,000,000
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1 October 2002
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Sh. 2,000,000
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Thunder Ltd.
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1 October 2002
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-
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3. The following inter-company balance are included in the balances of trade debtors and trade creditors:
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Receivables
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Rain Ltd.
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Sh. 600,000 due from Thunder Ltd.
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Thunder Ltd.
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Sh. 300,000 due from Rain Ltd.
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Sh. 200,000 due from Thunder Ltd.
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4. On 30 September 2003, thunder Ltd. remitted Sh.200,00 to Rain Ltd. which was not received until 3 October. There were no other inter-company balances.
5. Rain Ltd. sold goods to Storm Ltd. for Sh.800,000. The goods had originally cost Rain Ltd. Sh.600,000. Storm Ltd. still had Sh.200,000 worth of these goods (at invoiced price) in stock as at 30 September, 2003.
Required:
Prepare the consolidated balance sheet of Rain Ltd. and its subsidiaries as at 30 September 2003.
Solution: