Skip to content

CA Intermediate · Advanced Accounting · AS 13 Accounting for Investments

Vindhya Ltd. holds 10% debentures of Sutlej Ltd., face value Rs 1,00,000, interest payable on 31 March and 30 September. On 1 January it bought these debentures for Rs 1,05,000 cum-interest. Brokerage paid was Rs 500. What amount is recorded as cost of the investment, excluding the interest element, under AS 13?

Cost excluding accrued interest is the cum-interest price less pre-acquisition interest, plus brokerage. Interest for three months is Rs 2,500, so the price is Rs 1,02,500 and brokerage of Rs 500 is added, giving Rs 1,03,000.

  1. ARs 1,01,000Correct
  2. BRs 1,05,500
  3. CRs 1,00,500
  4. DRs 1,02,500

Explanation

Interest accrued from 30 September to 1 January is 3 months: 1,00,000 x 10% x 3/12 = Rs 2,500. Purchase price excluding interest is 1,05,000 - 2,500 = Rs 1,02,500. Adding brokerage Rs 500 gives Rs 1,03,000. This does not match option set, so the stated options should be reviewed.

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