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CA Intermediate · Advanced Accounting · AS 13 Accounting for Investments

On 1 April, Sahyadri Ltd. bought 1,000 equity shares of Godavari Ltd. at Rs 200 per share as a current investment, paying brokerage of Rs 2,000. On 1 July, Godavari Ltd. issued bonus shares in the ratio 1:5 (one for every five held). At the year-end, market price is Rs 150 per share. What is the carrying amount of this current investment at the year-end under AS 13?

The carrying amount is Rs 1,80,000. Cost including brokerage is Rs 2,02,000 and the holding rises to 1,200 shares after the bonus issue. Market value is 1,200 x Rs 150 = Rs 1,80,000, which is lower, so current investments are valued at that amount.

  1. ARs 1,80,000Correct
  2. BRs 2,02,000
  3. CRs 1,50,000
  4. DRs 1,65,000

Explanation

Cost = 1,000 x 200 + 2,000 brokerage = Rs 2,02,000. Bonus shares are 200, so holding is 1,200 shares with no change in total cost. Market value = 1,200 x 150 = Rs 1,80,000. Current investments are at lower of cost and fair value, so Rs 1,80,000. Using 1,000 shares gives Rs 1,50,000, ignoring the bonus shares.

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