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CA Intermediate · Advanced Accounting · AS 13 Accounting for Investments

Arjun Ltd holds a long-term investment of 10,000 shares of Pushpa Ltd, carried at cost Rs 80 per share. Due to a prolonged decline in Pushpa Ltd's business, the market value fell to Rs 55 per share, and the decline is judged to be other than temporary. What is the amount to be charged to profit and loss under AS 13?

Rs 2,50,000 is charged to profit and loss. AS 13 requires a long-term investment to be written down when the fall in value is other than temporary. The write-down equals the difference of Rs 25 per share between cost Rs 80 and value Rs 55, on 10,000 shares.

  1. ANil, as long-term investments are never written down
  2. BRs 2,50,000Correct
  3. CRs 8,00,000
  4. DRs 5,50,000

Explanation

Long-term investments are carried at cost, but a reduction is made to recognise a decline other than temporary. Reduction = (80 - 55) x 10,000 = Rs 2,50,000. Rs 5,50,000 is the new carrying value, not the loss.

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