Pasta Ltd acquired an 80 per cent interest in Sauce Ltd on 1 July 2004 for a cash consideration of $3,193,000.On the same date,Sauce Ltd acquired a 60 per cent interest in Cheese Ltd for a cash consideration of $1,340,000.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 Sauce Ltd and Cheese Ltd 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 Sauce Ltd and Cheese Ltd as at 30 June 2005?
E) None of the given answers.

Question

Pasta Ltd acquired an 80 per cent interest in Sauce Ltd on 1 July 2004 for a cash consideration of $3,193,000.On the same date,Sauce Ltd acquired a 60 per cent interest in Cheese Ltd for a cash consideration of $1,340,000.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 Sauce Ltd and Cheese Ltd 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 Sauce Ltd and Cheese Ltd as at 30 June 2005?
E) None of the given answers.

Quizplus · Accepted Answer

The minority interest in Sauce Ltd can be calculated as 20% of the net assets, which is ($1,250,000 - $400,000 - $300,000) * 20% = $110,000. 
Similarly, the minority interest in Cheese Ltd can be calculated as 40% of the net assets, which is ($600,000 - $200,000 - $100,000) * 40% = $100,000. 
Therefore, the total minority interest is $110,000 + $100,000 = $210,000, which is option B.

Pasta Ltd Acquired an 80 Per Cent Interest in Sauce