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CA Intermediate · Advanced Accounting · AS 13 Accounting for Investments

Meenakshi Textiles Ltd. acquired 2,000 equity shares of Kaveri Mills Ltd. as a long-term investment for Rs 150 per share and paid brokerage of Rs 3,000 and stamp duty of Rs 1,000 in addition. As per AS 13, at what amount should the investment be initially recorded?

The investment is recorded at Rs 3,04,000. Under AS 13, cost includes the purchase price plus acquisition charges like brokerage, fees and duties. Purchase price is 3,00,000, brokerage 3,000 and stamp duty 1,000, so all are capitalised into the cost of the investment.

  1. ARs 3,00,000
  2. BRs 3,03,000
  3. CRs 3,04,000Correct
  4. DRs 3,01,000

Explanation

Cost of an investment includes acquisition charges such as brokerage, fees and duties. Cost = 2,000 x 150 = 3,00,000 + 3,000 + 1,000 = Rs 3,04,000. Option Rs 3,03,000 omits stamp duty, which is also an acquisition charge.

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