Page 291 - Corporate Finance PDF Final new link

NPP

BRILLIANT’S Investment Accounting 291

30.9.16 To Bank A/c 31.12.16 By Bal. c/d
(Rights) 10,000 - 1,50,000 (WN6) 20,000 - 2,64,444
15.11.16 To State. of
P&L (WN7) - - 44,444
31.12.16 To State-
ment of P/L - 50,000 -
45,000 50,000 6,49,444 45,000 50,000 6,49,444
Dr. Profit and Loss Account for the year ended 31st December, 2016 (includes) Cr.

Date Particulars ` Date Particulars `
By Income from Sale of Rights 10,000
By Dividends 50,000
By Profit on Sale of Shares 44,444
Working Notes:

25,000 Shares + 5,000 Shares
1. Bonus Shares = = 5,000 Shares
6

25,000 Shares + 5,000 Shares + 5,000 Shares
2. Rights Shares = × 3 = 15,000 Shares
7
2
3. Rights shares subscribed = × 15,000 = 10,000 Shares.
3

1
4. Sale of rights entitlement = × 15,000 × ` 2 = ` 10,000
3
Amount received by selling rights entitlement will be credited to Profit and Loss Ac-
count / Statement of Profit and Loss (AS-13, Para 13].
5. Dividend received on shares held on 1.4.2016 = 25,000 × 10 × 20% = ` 50,000
Dividend received on shares purchased on 20.6.2016 = 5,000 × 10 × 20% = ` 10,000 will be
adjusted to Investment Account.
6. At the time of calculating cost of shares ` 10,000 (sale of rights) will not be taken into
consideration. It will be treated as windfall gain and it will be credited to Profit and Loss
Account. However, dividend received on shares purchased on 20.6.2016: ` 10,000 will be
taken into consideration.
Cost of 20,000 shares (average basis)

3,75,000 80,000 1,50,000 10,000   
= × 20,000
45,000
= ` 2,64,444