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282 Corporate Finance BRILLIANT’S

ments immediately after their becoming ex- níMmV² {Zdoe H$m ~mOma ‘yë¶ Cg bmJV go H$‘ hmoVm
right is lower than the cost for which they were h¡ {OgHo$ {bE CÝh| A{O©V {H$¶m J¶m Wm Vmo ¶h ~mOma
acquired, it may be appropriate to apply the ‘yë¶ Ho$ {bE Eogo {Zdoem| H$s H¡$[a¨J A‘mC§Q> H$mo H$‘
sale proceeds of rights to reduce the carrying
H$aZo Ho$ A{YH$ma H$s {dH«$¶ H$m¶©dmhr bmJy H$aZo Ho$
amount of such investments to the market
value. {bE Cn¶w³V hmo gH$Vm h¡&
For example, X Limited purchased 1,000 CXmhaU Ho$ {bE, X {b{‘Q>oS> Zo Y {b{‘Q>oS> Ho$
shares (cum-rights) of ` 10 each at ` 15 per < 15 à{V eo¶a na < 10 à{V Ho$ 1,000 eo¶g©
share of Y Limited and paid ` 500 as brokerage. (H$‘-amBQ²>g) IarXo VWm ~«moH$aoO Ho$ ê$n ‘| < 500 H$m
Y Limited offered rights issue at one share of ^wJVmZ {H$¶m& Y {b{‘Q>oS> Zo aIo J¶o à˶oH$ Xmo eo¶a Ho$
` 12 for every two held. X Limited sold the
rights in the market and realized ` 1,000. After {bE < 12 Ho$ {bE EH$ eo¶a na amBQ²>g Bí¶y àXmZ {H$¶m&
the rights issue was subscribed, the market X {b{‘Q>oS> Zo ~mOma ‘| amBQ²>g ~oMo VWm < 1,000 àmá
value of share fell down from ` 15 to ` 14.50 per {H$¶o& amBQ²>g Bí¶y H$mo gãñH«$mB~ {H$¶m J¶m Vmo eo¶a H$m
share. In such a case, the decline in the market ~mOma ‘yë¶ < 15 go < 14.50 à{V eo¶a {Ja J¶m& Eogr
value ` 500 [1,000 × (` 15 - ` 14.50)] should be pñW{V ‘| ~mOma ‘yë¶ ‘| {JamdQ> H$mo {Zdoe H$s bmJV Ho$
adjusted against cost of investment and the {déÕ g‘m¶mo{OV H$aZm Mm{hE VWm eof < 500 H$mo Am¶
balance of ` 500 is to be treated as income and
is to be credited to Profit and Loss Account/ ‘mZm OmZm Mm{hE VWm bm^ VWm hm{Z ImVo/bm^ VWm
Statement of Profit and Loss. hm{Z ñQ>oQ>‘|Q> go H«o${S>Q> {H$¶m OmZm hmoVm h¡&

Illustration 3.3.7
On 1.4.2017 X Limited had 10,000 equity shares of P Ltd, purchased at ` 12 each (face value
being ` 10 per share). On 1.1.2018, P Ltd. offered two rights shares for every five shares held at a
premium of ` 3 per share. X Limited, however, sold these rights entitlement in the market at ` 2
per share. On 1.2.2018 immediately after the shares became ex-right, the market price of the
shares fell to ` 11.50 each. Show Investment Account upto 1.2.2018.
1.4.2017 H$mo X {b{‘Q>oS> Zo < 12 à˶oH$ (’o$g d¡ë¶y < 10 à{V eo¶a) na P {b{‘Q>oS> Ho$ 10,000 B{³dQ>r
eo¶g© IarXo& 1.1.2018 H$mo P {b{‘Q>oS> Zo < 3 à{V eo¶a Ho$ àr{‘¶‘ na aIo J¶o à˶oH$ nm§M eo¶g© Ho$ {bE Xmo amBQ²>g
eo¶g© àXmZ {H$¶o& ¶Ú{n X {b{‘Q>oS> Zo < 2 à{V eo¶a na ~mOma ‘| BZHo$ amBQ²>g H$m EZQ>mBQ>b‘|Q> ~oM {X¶m&
1.2.2018 H$mo eo¶g© Ho$ E³g-amBQ> ~ZmZo Ho$ VËH$mb ~mX eo¶g© H$m ~mOma ‘yë¶ < 11.50 à{V {Ja J¶m& 1.2.2018
VH$ B§doñQ>‘|Q> AH$mC§Q> Xem©B¶o&

Solution: In the Books of X Ltd.
Dr. Investment in Equity Shares of P Ltd. Account Cr.
Date Particulars No. of Divi- Cost Date Particulars No. of Divi- Cost
Shares dend (`) Shares dend (`)
1.4.17 To Bal. b/d 10,000 - 1,20,000 1.2.18 By Bank A/c
(WN1) - - 5,000
1.2.18 By Bal. c/d 10,000 - 1,15,000
10,000 - 1,20,000 10,000 - 1,20,000