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4. What is the carrying amount of investment as on 31st March, 2024 as per AS 13 and suggest the treatment of dividend received from P. Ltd.?

Options

ACarrying amount of Investment as on 31st March, 2024 is ` 72,000 and the dividend is deducted from the nominal value of investment.
BCarrying amount of Investment as on 31st March, 2024 is `90,000 and the dividend is credited to Profit & Loss A/c.
CCarrying amount of Investment as on 31st March, 2024 is` 1,00,000 and the dividend is credited to Profit & Loss A/c.
DCarrying amount of Investment as on 31st March, 2024 is 82,000 and the dividend is deducted from the cost of investment. ADVANCED ACCOUNTING Case Scenario 2 Kay Ltd. sold goods of ` 22,00,000 to Mr. Ravi Kumar on 1st February, 2024 but at the request of the buyer, these goods were delivered on 10th April 2024. Kay Ltd. also sold ` 2,00,000 goods on approval basis on 1st January, 2024 to Sheetal Enterprises. The period of approvals 3 months after which they were considered sold. Buyer sent disapproval for 25% of goods and approval for 50% of goods till 31 March, 2024. Mr. Ravi Kumar has commenced legal action against Kay Ltd. for supply of faulty goods to claim damages. The lawyers of Kay Ltd. have advised that it is not remote yet that resources may be required to settle the claim. Legal cost to be incurred irrespective of the outcome of the case is ` 45,000. Settlement amount if the claim is required to be paid ` 5,00,000, Sheetal Enterprises, a trade receivable of Kay Ltd. suffered a heavy loss due to an earthquake that occurred on 30th March, 2024. The loss was not covered by any insurance policy. In April, 2024, Sheetal Enterprises became bankrupt. The Balance due from Sheetal Enterprises as on 31 March, 2024 is ` 75,000. Kay Ltd. makes provision for doubtful debts @ 5%. Based on the information given in above Case Scenario, answer the following
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Correct Answer

✅ Option D — Carrying amount of Investment as on 31st March, 2024 is 82,000 and the dividend is deducted from the cost of investment. ADVANCED ACCOUNTING Case Scenario 2 Kay Ltd. sold goods of ` 22,00,000 to Mr. Ravi Kumar on 1st February, 2024 but at the request of the buyer, these goods were delivered on 10th April 2024. Kay Ltd. also sold ` 2,00,000 goods on approval basis on 1st January, 2024 to Sheetal Enterprises. The period of approvals 3 months after which they were considered sold. Buyer sent disapproval for 25% of goods and approval for 50% of goods till 31 March, 2024. Mr. Ravi Kumar has commenced legal action against Kay Ltd. for supply of faulty goods to claim damages. The lawyers of Kay Ltd. have advised that it is not remote yet that resources may be required to settle the claim. Legal cost to be incurred irrespective of the outcome of the case is ` 45,000. Settlement amount if the claim is required to be paid ` 5,00,000, Sheetal Enterprises, a trade receivable of Kay Ltd. suffered a heavy loss due to an earthquake that occurred on 30th March, 2024. The loss was not covered by any insurance policy. In April, 2024, Sheetal Enterprises became bankrupt. The Balance due from Sheetal Enterprises as on 31 March, 2024 is ` 75,000. Kay Ltd. makes provision for doubtful debts @ 5%. Based on the information given in above Case Scenario, answer the following

All Options:

  • ACarrying amount of Investment as on 31st March, 2024 is ` 72,000 and the dividend is deducted from the nominal value of investment.
  • BCarrying amount of Investment as on 31st March, 2024 is `90,000 and the dividend is credited to Profit & Loss A/c.
  • CCarrying amount of Investment as on 31st March, 2024 is` 1,00,000 and the dividend is credited to Profit & Loss A/c.
  • DCarrying amount of Investment as on 31st March, 2024 is 82,000 and the dividend is deducted from the cost of investment. ADVANCED ACCOUNTING Case Scenario 2 Kay Ltd. sold goods of ` 22,00,000 to Mr. Ravi Kumar on 1st February, 2024 but at the request of the buyer, these goods were delivered on 10th April 2024. Kay Ltd. also sold ` 2,00,000 goods on approval basis on 1st January, 2024 to Sheetal Enterprises. The period of approvals 3 months after which they were considered sold. Buyer sent disapproval for 25% of goods and approval for 50% of goods till 31 March, 2024. Mr. Ravi Kumar has commenced legal action against Kay Ltd. for supply of faulty goods to claim damages. The lawyers of Kay Ltd. have advised that it is not remote yet that resources may be required to settle the claim. Legal cost to be incurred irrespective of the outcome of the case is ` 45,000. Settlement amount if the claim is required to be paid ` 5,00,000, Sheetal Enterprises, a trade receivable of Kay Ltd. suffered a heavy loss due to an earthquake that occurred on 30th March, 2024. The loss was not covered by any insurance policy. In April, 2024, Sheetal Enterprises became bankrupt. The Balance due from Sheetal Enterprises as on 31 March, 2024 is ` 75,000. Kay Ltd. makes provision for doubtful debts @ 5%. Based on the information given in above Case Scenario, answer the following ✓

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Detailed Solution & Explanation

To calculate the carrying amount of investment as on 31st March, 2024 as per AS 13:
1. Nominal Value of investment = 9,000 sharesב 10=‘ 90,000\displaystyle 9,000 \text{ shares} \times `\,10 = `\,90,000.
2. Cost of Investment = ‘ 1,00,000\displaystyle `\,1,00,000.
3. Dividend received @ 20% on nominal value = ‘ 90,000×20%=‘ 18,000\displaystyle `\,90,000 \times 20\% = `\,18,000.
4. Since the shares were acquired on 25th March, 2024 (just before dividend declaration), the dividend is pre-acquisition.
5. Pre-acquisition dividends are regarded as recovery of cost and deducted from the cost of investment:
Carrying Amount=‘ 1,00,000−‘ 18,00,0=‘ 82,000\text{Carrying Amount} = `\,1,00,000 - `\,18,00,0 = `\,82,000
Hence, **Option D** is the correct answer.

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