INVESTMENT ACCOUNTS

ADVANCE ACCOUNTS BLESSING BY TRG CA Rahul Garg Gold Medalist (AIR 1)

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Question 1 Concept No. Register No. Page No. Answer :

P Ltd. acquires 2000, 12% Debentures of T Ltd. on 1.4.2012 at ₹ 105 Cum-interest (face value of
debentures ₹ 100). Interest is paid on 30th June and 31st December every year. Accounts are closed on
31st Dec 2012. Ascertain the amount of interest and cost of debentures.

TRG Key Note :

Question 2 Concept No. Register No. Page No. Answer :

P Ltd. acquires 2000, 12% Debentures of T Ltd. on 1.4.2012 at ₹ 95 Ex-interest (face value of
debentures ₹ 100). Interest is paid on 30th June and 31st December every year. Accounts are closed on
31st Dec 2012. Ascertain the amount of interest and cost of debentures.

TRG Key Note :

Question 3 Concept No. Register No. Page No. Answer :

P Ltd. sells 2000, 12% Debentures of T Ltd. on 1.9.2012 at ₹ 105 Cum-interest (face value of debentures
₹ 100). Interest is paid on 30th June and 31st December every year. Accounts are closed on 31st Dec 2012.
Find out actual amount to be received.

TRG Key Note :

Question 4 Concept No. Register No. Page No. Answer :

P Ltd. sells 200, 12% Debentures of T Ltd. on 1.11.2012 at ₹ 95 Ex-interest (face value of debentures ₹
100). Interest is paid on 30th September and 31st March every year. Accounts are closed on 31st Dec 2012.
Find out actual amount to be received.

TRG Key Note :

Question 5 Concept No. Register No. Page No. Answer :

In 2011, M/s. Wye Ltd. issued 12% fully paid debentures of ₹ 100 each, interest being payable half yearly
on 30th September and 31st March of every accounting year.
On 1st December, 2012, M/s. Bull & Bear purchased 10,000 of these debentures at ₹ 101 cum-interest
price, also paying brokerage @ 1% of cum-interest amount of the purchase. On 1st March, 2013 the firm
sold all of these debentures at ₹ 106 cum-interest price, again paying brokerage @ 1 % of cum-interest
amount.
Prepare Investment Account in books of M/s. Bull & Bear for the period 1st Dec, 2012 to 1st Mar, 2013.

TRG Key Note :

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ADVANCE ACCOUNTS BLESSING BY TRG CA Rahul Garg Gold Medalist (AIR 1)

Question 6 Concept No. Register No. Page No. Answer :

Mr. Sanjay furnishes the following details relating to his holding in 8% Debentures (₹ 100 each) of P
Ltd., held as Current assets :
1.4.2012 Opening balance – Face value ₹ 1,20,000, Cost ₹ 1,18,000
1.7.2012 100 Debentures purchased ex-interest at ₹ 98
1.10.2012 Sold 200 Debentures ex-interest at ₹ 100
1.1.2013 Purchased 50 Debentures at ₹ 98 cum-interest
1.2.2013 Sold 200 Debentures ex-interest at ₹ 99
Due dates of interest are 30th September and 31st March.
Mr. Sanjay closes his books on 31.3.2013. Brokerage at 1% is to be paid for each transaction.
Show Investment account as it would appear in his books. Market value of 8% Debentures of P Limited
on 31.3.2013 is ₹ 99. Assume FIFO method.

TRG Key Note :

Question 7 Concept No. Register No. Page No. Answer :

Following information is presented by Mr. Golmal, relating to his holding in 9% Central Government
Bonds.
Opening balance (face value) ₹ 1,20,000, Cost ₹ 1,18,000 (Face value of each unit is ₹ 100).
1.3.2012 Purchased 200 units, ex-interest at ₹ 98.
1.7.2012 Sold 500 units, ex-interest out of original holding at ₹ 100.
1.10.2012 Purchased 150 units at ₹ 98, cum interest.
1.11.2012 Sold 300 units, ex-interest at ₹ 99 out of original holdings.
Interest dates are 30th September and 31st March. Mr. Golmal closes his books every 31st December.
Show the investment account as it would appear in his books. Mr. Golmal follows FIFO method.
TRG Key Note :

Question 8 Concept No. Register No. Page No. Answer :

On 1.4.2012, Mr. Krishna Murty purchased 1,000 equity shares of ₹ 100 each in TELCO Ltd. @ ₹ 120
each from a Broker, who charged 2% brokerage. He incurred 50 paise per ₹ 100 as cost of shares
transfer stamps. On 31.1.2013 Bonus was declared in the ratio of 1:2. Before and after the record date of
bonus shares, the shares were quoted at ₹ 175 per share & ₹ 90 per share respectively. On 31.3.2013 Mr.
Krishna Murty sold bonus shares to a Broker, who charged 2% brokerage.
Show the Investment Account in the books of Mr. Krishna Murty, who held the shares as Current assets
and closing value of investments shall be made at Cost or Market value whichever is lower.

TRG Key Note :

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 INVESTMENT ACCOUNTS
ADVANCE ACCOUNTS BLESSING BY TRG CA Rahul Garg Gold Medalist (AIR 1)

Question 9 Concept No. Register No. Page No. Answer :

On 1st April, 2011, Rajat has 50,000 equity shares of P Ltd. at a book value of ₹ 15 per share (face value
₹ 10 each). He provides you the further information :
On 20th June, 2011 he purchased another 10,000 shares of P Ltd. at ₹ 16 per share.
On 1st August, 2011, P Ltd. issued one equity bonus share for every six shares held by the shareholders.
On 31st October, 2011, the directors of P Ltd. announced a right issue which entitles the holders to
subscribe three shares for every seven shares at ₹ 15 per share. Shareholders can transfer their rights in
full or in part.
Rajat sold 1/3rd of entitlement to Umang for a consideration of ₹ 2 per share and subscribed the rest on
5th November, 2011.
You are required to prepare Investment A/c in the books of Rajat for the year ending 31st March, 2012.

TRG Key Note :

Question 10 Concept No. Register No. Page No. Answer :

On 1st January 20X1, Singh had 20,000 equity shares in X Ltd. Nominal value of the shares was ₹ 10
each but their book value was ₹ 16 per share. On 1st June 20X1, Singh purchased 5,000 more equity
shares in the company at a premium of ₹ 4 per share.
On 30th June, 20X1, the directors of X Ltd. announced a bonus and rights issue. Bonus was declared at
the rate of one equity share for every five shares held and these shares were received on 2nd August,
20X1.
The terms of the rights issue were :
a. Rights shares to be issued to the existing holders on 10th August, 20X1.
b. Rights issue would entitle the holders to subscribe to additional equity shares in the Company at
the rate of one share per every three held at ₹ 15 per share-the whole sum being payable by
30th September, 20X1.
c. Existing shareholders were entitled to transfer their rights to outsiders, either wholly or in part.
d. Singh exercised his option under the issue for 50% of his entitlements and the balance of rights
he sold to Ananth for a consideration of ₹ 1.50 per share.
e. Dividends for the year ended 31st March, 20X1, at the rate of 15% were declared by the Company
and received by Singh on 20th October, 20X1.
f. On 1st November, 20X1, Singh sold 20,000 equity shares at a premium of ₹ 3 per share.
g. The market price of share on 31-12-20X1 was ₹ 14. Show the Investment Account as it would
appear in Singh’s books on 31-12-20X1 and the value of shares held on that date.

TRG Key Note :

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 INVESTMENT ACCOUNTS
ADVANCE ACCOUNTS BLESSING BY TRG CA Rahul Garg Gold Medalist (AIR 1)

Question 11 Concept No. Register No. Page No. Answer :

On 1st April, 2009 XY Ltd. has 15,000 equity shares of ABC Ltd. at a book value of ₹ 15 per share (face
value ₹ 10 per share). On 1st June, 2009, XY Ltd. acquired 5,000 equity shares of ABC Ltd. for ₹ 1,00,000
on cum right basis. ABC Ltd. announced a bonus and right issue.
1. Bonus was declared at the rate of one equity share for every five shares held, on 1 st July 2009.
2. Right shares are to be issued to the existing shareholders on 1 st September 2009. The company will
issue one right share for every 6 shares at 20% premium. No dividend was payable on these shares.
3. Dividend for the year ended 31.3.2009 were declared by ABC Ltd. @ 20%, which was received by XY
Ltd. On 31st October 2009.
XY Ltd.
: Took up half the right issue.
: Sold the remaining rights for ₹ 8 per share.
: Sold half of its shareholding on 1st January, 2010 at ₹ 16.50 per share. Brokerage being 1%.
You are required to prepare Investment account of XY Ltd. for the year ended 31st March 2010 assuming
the shares are being valued at average cost.

TRG Key Note :

Question 12 Concept No. Register No. Page No. Answer :

On 1st May 2012, Sumedha purchased 5,000, 13.5% Convertible Debentures in X Ltd. of face value of ₹
100 each @ 105 ex-interest. Interest on Debentures is payable each year on 31st March and 30th
September. The accounting year is the calendar year. The following other transactions were entered into
during 2012 :
Aug 1 Purchased ₹ 2,50,000 Debentures @ 107 cum interest.
Oct 1 Sale of ₹ 2,00,000 Debentures @ 103.
Dec 31 Receipt of 10,000 Equity shares in X Ltd. of ₹ 10 each on conversion of 20% Debentures
held. Further, it also received interest on Debentures converted in cash at the time of
conversion.
The market price of a Debenture and an Equity share in X Ltd. as on 31st Dec., 2012 was ₹ 106 and ₹
15. Sumedha held the Debentures as current assets.
You are required to prepare Debenture Investment account in books of Sumedha on Average cost basis.

TRG Key Note :

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ADVANCE ACCOUNTS BLESSING BY TRG CA Rahul Garg Gold Medalist (AIR 1)

अ ा सका
Question 13 Concept No. Register No. Page No. Answer :

On 1st December, 2015, M/s Blue & Black purchased, 20,000 12% fully paid debentures of ₹ 100 each at
₹ 105 cum interest price, also paying brokerage @ 1% of cum interest amount of the purchase. On 1st
March, 2016, the firm sold all these debentures at ₹ 110 cum-interest price, again paying brokerage @
1% of cum interest amount. Prepare Investment Account in the books of M/s. Blue & Black for the period
1st December, 2015 to 1st March, 2016. Interest being payable half yearly on 30th September and 31st
March of every accounting year.

TRG Key Note :

Question 14 Concept No. Register No. Page No. Answer :

Mr. Chatur had 12% Debentures of Face Value ₹ 100 of M/s. Unnati Ltd. as current investments.
He provides the following details relating to investments :
Date Particulars
1-4-2014 Opening balance 4000 debentures costing ₹ 98 each.
1-6-2014 Purchased 2000 debentures @ ₹ 120 cum interest.
1-9-2014 Sold 3000 debentures @ ₹ 110 cum interest.
1-12-2014 Sold 2000 debentures @ ₹ 105 ex interest.
31-1-2015 Purchased 3000 debentures @ ₹ 100 ex interest.
31-3-2015 Market value of the investments ₹ 105 each.
Interest due dates are 30th June and 31st December.
Mr. Chatur closes his books on 31-3-2015. He incurred 2% brokerage for all his transactions.
Show investment account in the books of Mr. Chatur assuming FIFO method is followed.

TRG Key Note :

Question 15 Concept No. Register No. Page No. Answer :

Mr. Z purchased 1,000 equity shares of ₹ 100 each in Omega Co. Ltd. for ₹ 1,25,000 inclusive of
brokerage and stamp duty. Some years later the company resolved to capitalize its profits and to issue to
the holders of equity shares, one equity bonus share for every share held by them. Prior to capitalization,
the shares of Omega Co. Ltd. were quoted at ₹ 200 per share. After the capitalisation, the shares were
quoted at ₹ 195 per share. Mr. Z sold the bonus shares and received at ₹ 98 per share.
Prepare the Investment Account in Z’s books on average cost basis.

TRG Key Note :

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ADVANCE ACCOUNTS BLESSING BY TRG CA Rahul Garg Gold Medalist (AIR 1)

Question 16 Concept No. Register No. Page No. Answer :

On 1.4.20X1, Sundar had 25,000 equity shares of ‘X’ Ltd. at a book value of ₹ 15 per share (Nominal
value ₹ 10). On 20.6.20X1, he purchased another 5,000 shares of the company at ₹ 16 per share. The
directors of ‘X’ Ltd. announced a bonus and rights issue.
No dividend was payable on these issues. The terms of the issue are as follows :
Bonus basis 1:6 (Date 16.8.20X1).
Rights basis 3:7 (Date 31.8.20X1) Price ₹ 15 per share.
Due date for payment 30.9.20X1.
Shareholders were entitled to transfer their rights in full or in part. Accordingly, Sundar sold 33.33% of
his entitlement to Sekhar for a consideration of ₹ 2 per share.
Dividends: Dividends for the year ended 31.3.20X1 at the rate of 20% were declared by X Ltd. and
received by Sundar on 31.10.20X1. Dividends for shares acquired by him on 20.6.20X1 are to be adjusted
against the cost of purchase.
On 15.11.20X1, Sundar sold 25,000 equity shares at a premium of ₹ 5 per share.
You are required to prepare in the books of Sundar.
1. Investment Account
2. Profit & Loss Account.
For your exercise, assume that the books are closed on 31.12.20X1 and shares are valued at average cost.

TRG Key Note :

“If I had six hours to chop down a tree,

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