On 3 May 2016, Mashego Limited acquired 75% (and control) of Mahlangu Limited’s outstanding ordinary shares for R112 000. The fair value of the non-controlling interest was equal to a proportionate share of the book value of Mahlangu Limited’s net assets at the date of acquisition. The selected balance sheet data for the two companies as at 30 April 2016 are as follows:
Mashego
Mahlangu
Limited
Limited
R
R
Total assets
504 000
216 000
Liabilities
144 000
72 000
Ordinary shares
120 000
60 000
Retained earnings
240 000
84 000
Equity & liabilities
504 000
216 000
What amount should be recorded as non-controlling interest in the net assets of Mahlangu Limited in the consolidated statement of financial position of Mashego Limited at 30 April 2016?
Select one:
a. R90 000
b. R108 000
c. R36 000
d. R54 000
The non-controlling interest in the net assets of Mahlangu Limited should be recorded at a proportionate share of the book value of Mahlangu Limited's net assets at the date of acquisition.
The proportionate share can be calculated as:
Proportionate share = (Non-controlling interest percentage) * (Book value of net assets)
The non-controlling interest percentage can be calculated as:
Non-controlling interest percentage = (100% - Acquirer's ownership percentage)
In this case, Mashego Limited acquired 75% of Mahlangu Limited's outstanding ordinary shares, so the non-controlling interest percentage is 25%.
The book value of Mahlangu Limited's net assets is calculated as:
Book value of net assets = Total assets - Liabilities
Book value of net assets = R216,000 - R72,000
Book value of net assets = R144,000
Therefore, the non-controlling interest in the net assets of Mahlangu Limited is:
Non-controlling interest = 25% * R144,000
Non-controlling interest = R36,000
The correct answer is c. R36,000.