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?
To find the non-controlling interest in the net assets of Mahlangu Limited, we need to calculate the proportionate share of the net assets of Mahlangu Limited that belongs to the non-controlling interest.
The proportionate share can be calculated using the formula:
Proportionate share = Net assets of Mahlangu Limited * Non-controlling interest percentage
Given that Mashego Limited acquired 75% of Mahlangu Limited's outstanding ordinary shares, the non-controlling interest percentage would be 100% - 75% = 25%.
Net assets of Mahlangu Limited can be calculated as follows:
Net assets = Total assets - Liabilities
Net assets = R216,000 - R72,000 = R144,000
Therefore, the non-controlling interest in the net assets of Mahlangu Limited would be:
Non-controlling interest = R144,000 * 25% = R36,000
Thus, R36,000 should be recorded as non-controlling interest in the consolidated statement of financial position of Mashego Limited at 30 April 2016.