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CA Intermediate · Advanced Accounting · AS 13 Accounting for Investments

Sundaram Textiles Ltd acquired 2,000 equity shares of Kaveri Ltd (face value Rs 10) at Rs 60 per share. It also paid brokerage of Rs 2,400 and stamp duty of Rs 600 on the purchase. Under AS 13, at what amount will the investment be initially recorded?

The investment is recorded at Rs 1,23,000. AS 13 says cost includes acquisition charges like brokerage, fees and duties. Purchase price of Rs 1,20,000 plus brokerage Rs 2,400 and stamp duty Rs 600 gives the total initial carrying amount.

  1. ARs 1,20,000
  2. BRs 1,23,000Correct
  3. CRs 1,22,400
  4. DRs 20,000

Explanation

Cost of an investment includes acquisition charges such as brokerage and stamp duty. Cost = 2,000 x 60 = 1,20,000 + 2,400 + 600 = Rs 1,23,000. Rs 1,20,000 ignores acquisition charges; Rs 1,22,400 omits stamp duty.

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