Skip to content

CA Intermediate · Advanced Accounting · AS 13 Accounting for Investments

Tara Industries Ltd. acquired 1,000 shares of Dhruv Ltd. in exchange for issuing 500 of its own equity shares of face value Rs 100 each. The fair value of Tara's shares at the date of exchange was Rs 260 per share. The fair value of Dhruv shares was not separately determinable. At what amount should the investment in Dhruv Ltd. be recorded?

The investment is recorded at Rs 1,30,000. AS 13 says an investment acquired by issuing shares is stated at the fair value of the shares issued, not their face value. Tara issued 500 shares with fair value Rs 260 each.

  1. ARs 50,000
  2. BRs 1,30,000Correct
  3. CRs 1,00,000
  4. DRs 2,60,000

Explanation

AS 13 states that when an investment is acquired by issue of shares, the acquisition cost is the fair value of the securities issued. Fair value = 500 x 260 = 1,30,000. Face value (50,000) is not the basis, and 2,60,000 wrongly uses the per-share fair value for 1,000 shares.

Did you get it right without looking?

One question tells you little. A timed set on AS 13 Accounting for Investments shows your real accuracy, how long you take and where you lose marks.

Practise AS 13 Accounting for InvestmentsFree diagnostic mock

More AS 13 Accounting for Investments questions