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CA Intermediate · Advanced Accounting · AS 13 Accounting for Investments

Ananya Textiles Ltd acquired 2,000 equity shares of Kaveri Mills Ltd at Rs 150 per share on 1 June. Brokerage and stamp duty paid amounted to Rs 6,000. Ananya Textiles intends to hold the shares for the long term. What is the initial carrying cost of this investment under AS 13?

The initial carrying cost is Rs 3,06,000. Under AS 13, the cost of an investment includes acquisition charges like brokerage and stamp duty. The purchase price of 2,000 shares at Rs 150 is Rs 3,00,000, and adding Rs 6,000 of charges gives Rs 3,06,000.

  1. ARs 3,00,000
  2. BRs 3,06,000Correct
  3. CRs 2,94,000
  4. DRs 3,12,000

Explanation

Cost of an investment includes acquisition charges such as brokerage, fees and duties. Cost = 2,000 x 150 = Rs 3,00,000 plus Rs 6,000 = Rs 3,06,000. Rs 3,00,000 is wrong because it ignores acquisition charges, which AS 13 requires to be capitalised.

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