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CA Intermediate · Advanced Accounting · AS 13 Accounting for Investments

Meera Textiles Ltd. acquired 2,000 equity shares of Kaveri Ltd. as a long-term investment at Rs 150 per share. Brokerage and stamp duty paid were Rs 6,000 in total. At the year-end, the market price was Rs 120 per share, and the fall is considered temporary. At what amount should the investment be carried in the balance sheet?

The investment is carried at Rs 3,06,000. Under AS 13, a long-term investment is shown at cost, which includes brokerage and stamp duty, and is written down only for a decline that is other than temporary. The fall in market price here is temporary, so no provision is made.

  1. ARs 2,40,000
  2. BRs 3,06,000Correct
  3. CRs 3,00,000
  4. DRs 2,46,000

Explanation

Cost = 2,000 x 150 = 3,00,000 plus brokerage and stamp duty 6,000 = 3,06,000. Long-term investments are carried at cost, and a diminution is provided for only if it is other than temporary. Since the fall is temporary, no write-down is made. Rs 2,46,000 wrongly uses market value plus brokerage.

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