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Case 1 : Purchased investment for 1 lac. Its value as on 31 st March14 Rs.90000. Next year 2015 Its value increase to 1.05 lac. Pass the entries
Investment a/c Dr. 1lac
To Bank 1 Lac
Investment a/c Dr. 10000
To P&L 10000
No entry for increase of Rs.5000/-
P&L a/c Dr. 10000
To Investment 10000
Case 2 : Asset purchased for Rs.1 lac. Value at 31 st March 2014 Rs.108 Lacs. 31 st March 2015 Rs.93000
Investment A/c Dr. 100000
To bank 100000
No entry on 31 st March 2014 for increase in value
P&L A/c Dr. 7000
To investment 7000
Case 3 : Company purchased shares of a subsidiary company for Rs.1 lac . value declined at Rs.80000 as on 31 march 2014. Next year Its value increased to Rs.1.07 lac because of temporary boom. Entries ?
Investment A/c Dr. 100000
To Bank 100000
P&L A/c Dr. 20000
To Investment 20000
Increase is temporary so it will not put any effect
Sale of Investment
Case1 : The company purchased 10000 shares of 10 each. Company sold 6000 shares at Rs.9 each. Entries ?
Investment a/c Dr. 100000
To Bank 100000
Bank a/c Dr. 54000
P&L a/c Dr. 6000
To Investment 60000
Investment purchased cum Dividend
Case1 : Purchased shares for Rs.1 lac, on which Rs.10000 dividend has been declared but received one month later
Investment A/c Dr. 1Lac
To Bank 1Lac
Bank a/c Dr. 10000
To Investment 10000
Note : Pre-acquisition benefits should be lessed from investment cost (investment a/c to be credited) , if declared on or before purchases the investment.
Case 2 : Purchased 10000 debentures of 10 each . Rate of interest is 12%. On 1 oct company declared and paid interest in Dec. For the whole year. Pass the entries ?
12% Debentures A/c Dr. 1 Lac
To Bank 1 Lac
Bank A/c Dr. 12000
To 12% Debentures 9000
To interest on debenture 3000
Note : In case of debentures, interest for before acquisition period should be lessed from debentures cost
Investment purchase cum right
Case 1 : Company purchased 10000 shares of Rs.10 each. These shares were acquired cum right i.e. investment has right to purchase 1000 shares more at a discount price of Rs.8 . the investment exercise the option.
Investment a/c Dr. 100000
To Bank 100000
Investment a/c Dr. 8000
To Bank 8000
Case 2 : Suppose in previous case the investment did not exercise the option but sold right share entitlement of 1000 shares at 1 rupee per share
Investment a/c Dr. 100000
To Bank 100000
Bank A/c Dr. 1000
To investment 1000
Case 3 : Solve last question assuming right was declared after purchasing the shares
It will be treated as profit
Bank A/c Dr. 1000
To investment income 1000
