Page 289 - Corporate Finance PDF Final new link

NPP

BRILLIANT’S Investment Accounting 289

5. Sale of Stock (ex-interest) on 1.9.2016
Nominal Value 4,000
Sale proceeds (` 4,000 × 0.93125) 3725
Less: Brokerage 5
Effective sale proceeds 3,720

 6 5 
Accrued interest receivable in addition:  ` 4,000   = 100
 100 12 
Profit on Sale of ` 4,000 stock on 1.09.2016
Sale Proceeds 3,720

12,740 5,490
Less: Average cost: × ` 4,000 3,646
14,000 6,000
Profit on Sale 74
12,740 5,490
Closing value = × ` 16,000 = ` 14,584
14,000 6,000
6. Interest for 6 months ending on 30.9.2016
Interest will be received on (` 24,000 + ` 6,000 - ` 10,000 - ` 4,000) = ` 16,000 for 6 months.
6 6
Therefore, interest = ` 16,000 ×  = ` 480
100 12
7. Purchase of Stock (cum-interest) on 1.12.2016
Nominal Value 12,000
Cost (` 12,000 × 0.94125) 11,295

 6 2 
Less: Accrued interest included  ` 12,000   120
 100 12 
11,175
Add: Brokerage 26
11,190
8. Accrued Interest to be carried forward
6 3
` 28,000 ×  420
100 12
Balance of Investment on 31.12.2016 (` 14,584 + ` 11,190) 25,774
Illustration 3.3.11
On 1.4.2016, Sundar had 25,000 equity shares of WMB Ltd. at a book value of ` 15 per share
(face value ` 10). On 20.6.2016, he purchased another 5,000 shares of the company at ` 16 per
share. The Directors of WMB Ltd. announced a bonus and rights issue. No dividend was payable
on these issues. The terms of the issue are as follows: