A Ltd. purchased on 1st April, 2023 8% convertible debenture in C Ltd. of face value of 2,00,000 @108. On 1st July, 2023 A Ltd. purchased another…

Investment Account for the year ending on 31st December, 2023 Scrip: 8% Convertible Debentures in C Ltd. [Interest Payable on 31st March and 30th September] Date Particulars Nominal Value ₹ Interest ₹ Cost ₹ Date Particulars Nominal Value ₹ Interest ₹ Cost ₹ 1.4.23 To Bank A/c 2,00,000 - 2,16,000 30.09.23 By Bank A/c [₹ 3,00,000 X 8% X 6/12] 12,000 1.7.23 To Bank A/c (W.N.1) 1,00,000 2,000 1,10,000 1.10.23 By Bank A/c 80,000 84,000 31.12.23 To P & L A/c [Interest] 14,033 1.10.23 By P & L A/c (loss) (W.N.3) 2,933 3,00,000 16,033 3,26,000 1.12.23 By Bank A/c (Accrued interest) (55,000 x .08 x 2/12) 733 1.12.23 By Equity shares in C Ltd. (W.N. 3 and 4) 55,000 59,767 31.12.23 By Balance c/d (W.N.5) 1,65,000 1,79,300 3,00,000 16,033 3,26,000 SCRIP: Equity Shares in C LTD. Date Particulars Cost (₹) Date Particulars Cost (₹) 1.12.23 To 8% debentures 59,767 31.12.23 By balance c/d 59,767 Working Notes: (i) Cost of Debenture purchased on 1st July = 1,12,000 - 2,000 (Interest) = 1,10,000 (ii) Cost of Debentures sold on 1st Oct. = (2,16,000 +1,10,000) x 80,000/3,00,000 = 86,933 (iii) Loss on sale of Debentures = 86,933- 84,000 = 2,933 Nominal value of debentures converted into equity shares = 55,000 [(₹ 3,00,000 – 80,000) x.25] Interest received before the conversion of debentures Interest on 25% of total debentures = 55,000 x 8% x 2/12 = 733 (iv) Cost of Debentures converted = (₹ 2,16,000 +1,10,000) x 55,000/3,00,000 = 59,767 (v) Cost of closing balance of Debentures = (₹ 2,16,000 +1,10,000) X 1,65,000 / 3,00,000 = 1,79,300 (vii) Closing balance of Debentures has been valued at cost. (viii) 5,000 equity Shares in C Ltd. will be valued at cost of 59,767 being lower than the market value - 75,000 (15x5,000) Note: It is assumed that interest on debentures, which are converted into cash, has been received at the time of conversion.