Skip to content

CMA Intermediate · Corporate Accounting and Auditing · Audit of Various Items of Financial Statements

Sagar Industries Ltd. holds quoted current investments with cost ₹12,00,000 and fair value ₹10,50,000 on the balance sheet date, and a long-term investment with cost ₹8,00,000 whose decline in value is judged temporary. Under the Indian GAAP principles an auditor tests, at what total amount should these two investments be carried?

The total carrying amount is ₹18,50,000. Current investments are valued at the lower of cost and fair value, which is ₹10,50,000, while the long-term investment stays at cost of ₹8,00,000 because the fall is temporary. The sum is ₹18,50,000.

  1. A₹18,50,000Correct
  2. B₹20,00,000
  3. C₹18,00,000
  4. D₹22,50,000

Explanation

Current investments are carried at the lower of cost and fair value: ₹10,50,000. Long-term investments are carried at cost, with provision only for a decline other than temporary: ₹8,00,000. Total = ₹18,50,000. Using cost for both gives ₹20,00,000, which ignores the write-down on current investments.

Did you get it right without looking?

One question tells you little. A timed set on Audit of Various Items of Financial Statements shows your real accuracy, how long you take and where you lose marks.

Practise Audit of Various Items of Financial StatementsFree diagnostic mock

More Audit of Various Items of Financial Statements questions