On 01.04.2023, Mr. Day has 25,000 shares of Squares Ltd. at a book value of 25 per share (nominal value of 10 each). Further information is as…

CA Intermediate · Advanced Accounting · PYQS · September 2024
On 01.04.2023, Mr. Day has 25,000 shares of Squares Ltd. at a book value of 25 per share (nominal value of 10 each). Further information is as under: (i) On 31st July 2023, the Directors of Squares Ltd. issued one equity bonus share for every five shares held by the shareholders. (ii) On 30th September 2023, the Directors of Squares Ltd. announced a right issue which entitled the holders to subscribe three shares for every two shares at 20 per share. Shareholders can transfer their rights in full or in part. Mr. Day sold 1/4th of entitlement to Dhwani for a consideration of 5 per share and subscribed the rest on 5th October, 2023. You are required to prepare Investment A/c in the books of Mr. Day for the year ending 31.03.2024.

Suggested Answer and Working Notes:

In the books of Mr. Day Investment Account (Equity shares in Square Ltd.) Date Particulars No. of shares Amount (₹) Date Particulars No. of shares Amount (₹) 1.4.23 To Balance b/d 25,000 6,25,000 31.3.24 By Balance c/d (Bal. fig.) 63,750 13,00,000 31.7.23 To Bonus issue (W.N.1) 5,000 - 5.10.23 To Bank A/c (right shares) (W.N.4) 33,750 6,75,000 63,750 13,00,000 63,750 13,00,000 Working Notes: (1) Bonus shares = 25,000 / 5 = 5,000 shares (2) Right shares = (25,000 + 5,000) / 2 × 3 = 45,000 shares (3) Sale of rights = 45,000 shares × 1/4 × ₹ 5 = 11,250 x 5 = 56,250 56,250 to be credited to statement of profit and loss (4) Rights subscribed = 45,000 shares × 3/4 × ₹ 20 = 6,75,000

Topics: AS 2, AS 13

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