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CA Intermediate · Advanced Accounting · AS 13 Accounting for Investments

Meera Traders Ltd. purchased 2,000 equity shares of Kaveri Ltd. at Rs 150 per share as a long-term investment. Brokerage and stamp duty paid were Rs 6,000 in total. As per AS 13, at what amount should the investment be initially recorded?

The investment is recorded at Rs 3,06,000. Under AS 13, cost of an investment includes acquisition charges like brokerage, fees and duties. Purchase price of Rs 3,00,000 (2,000 shares at Rs 150) plus Rs 6,000 of brokerage and stamp duty gives the initial carrying amount.

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

Explanation

Cost of investment includes acquisition charges such as brokerage, fees and duties. Cost = 2,000 x 150 = 3,00,000 plus 6,000 = 3,06,000. Recording Rs 3,00,000 wrongly ignores acquisition charges, and Rs 2,94,000 wrongly deducts them.

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