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CA Intermediate · Advanced Accounting · AS 13 Accounting for Investments

Neel Ltd. holds long-term investments in two companies at the year end. Investment A has cost Rs 5,00,000 and market value Rs 4,00,000, with the decline judged to be temporary. Investment B has cost Rs 3,00,000 and market value Rs 2,40,000, with the decline judged to be other than temporary. Under AS 13, what is the total carrying amount of the long-term investments at the year end?

The total carrying amount is Rs 7,40,000. Under AS 13, long-term investments are shown at cost less a provision only for a decline other than temporary, so A stays at Rs 5,00,000 while B is reduced to its market value of Rs 2,40,000.

  1. ARs 6,40,000
  2. BRs 8,00,000
  3. CRs 7,40,000Correct
  4. DRs 7,00,000

Explanation

Long-term investments are carried at cost, with a reduction only for a decline other than temporary. A stays at Rs 5,00,000 because the decline is temporary. B is written down to Rs 2,40,000. Total = 5,00,000 + 2,40,000 = Rs 7,40,000. Rs 6,40,000 wrongly writes down both.

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