Rose Ltd acquired a 75 per cent interest in Daisy Ltd on 1 July 2004 for a cash consideration of $758,000. On the same date, Daisy Ltd acquired a 56 per cent interest in Tulip Ltd for a cash consideration of $534,000. The fair value of the net assets of each of the companies at acquisition is as follows:

Goodwill has been determined not to have been impaired. Information for the period ended 30 June 2005 for Daisy and Tulip is as follows:

Neither dividend had been paid at the end of the period. There were no other intragroup transactions during the period. What is the minority interest in Daisy and Tulip as at 30 June 2005?
E) None of the given answers.

Question

Rose Ltd acquired a 75 per cent interest in Daisy Ltd on 1 July 2004 for a cash consideration of $758,000. On the same date, Daisy Ltd acquired a 56 per cent interest in Tulip Ltd for a cash consideration of $534,000. The fair value of the net assets of each of the companies at acquisition is as follows:

Goodwill has been determined not to have been impaired. Information for the period ended 30 June 2005 for Daisy and Tulip is as follows:

Neither dividend had been paid at the end of the period. There were no other intragroup transactions during the period. What is the minority interest in Daisy and Tulip as at 30 June 2005?
E) None of the given answers.

Quizplus · Accepted Answer

To calculate the minority interest in Daisy, we have to subtract the parent's share from the subsidiary's net assets. 
Subsidiary's net assets = $1,520,000
Parent's share (75%) = $1,140,000
Minority interest = $1,520,000 - $1,140,000 = $380,000

To calculate the minority interest in Tulip, we have to subtract the parent's share from the subsidiary's net assets. 
Subsidiary's net assets = $890,000
Parent's share (56%) = $498,400
Minority interest = $890,000 - $498,400 = $391,600

Therefore, the total minority interest for both Daisy and Tulip is $380,000 + $391,600 = $771,600 or choice (B).

Rose Ltd Acquired a 75 Per Cent Interest in Daisy