Z Ltd. is engaged in manufacturing of Automobiles with its registered office in Pune and is listed on the Bombay Stock Exchange. It also owns a…

Z Ltd. is engaged in manufacturing of Automobiles with its registered office in Pune and is listed on the Bombay Stock Exchange. It also owns a chain of retail stores across 20 different locations in the twin cities of Pune and Kolhapur. Following are the brief facts about the transaction entered into by the company for which accounting advice is sought by the CFO of Z Ltd. from you: Z Limited owns two vehicles on 1st July, 20X1 and a local statute was passed which necessitated Z Ltd. to undertake modifications to its vehicles to enable reduction of harmful emissions. The modifications should have been completed by 31st December, 20X1 at an estimated cost to Z Ltd. of 20 lakhs. Actually, by 31st March, 20X2, none of the vehicles had been modified although they continued to be used. It is quite likely that Z Ltd. will have to pay a penalty of 2 lakhs per month for the illegal usage of the vehicles. The directors of Z Ltd. intend to carry out the modifications only at the end of March, 20X3, due to paucity of funds. They expect that penalty will become payable very shortly as legal action has been initiated against Z Ltd. On 1st April, 20X1, Z Ltd. issued 1,00,000 Loan Notes of 5 each at par. The loan notes entitle the holders for an interest payment of 8% p.a., payable annually in arrears. The loan notes are repayable at par on 31st March, 20X5. As an alternative to repayment, the holders can elect to convert the notes into equity shares in A Ltd. On 1st April, 20X1, investors in non-convertible notes expect an annual return of 10%. You are given the following discount factors: Discount Rate Present Value of 1payable At end of year 4 Cumulative at end of years 1-4 8% 73.50 paise 3.31 10% 68.30 paise 3.17 On 1st April, 20X1, Z Ltd. had two equity investments that it designated as "fair value through other comprehensive income" in accordance with Ind AS 109: Name Original Cost Fair Value 31.3.20X1 Fair Value 31.3.20X2 (₹ in 000) (₹ in 000) (₹ in 000) K Ltd. 30,000 37,500 NA H Ltd. 27,500 35,000 38,500 On 28th February, 20X2, Z Ltd. disposed off its investment in K Ltd. for 50,000 and shown a profit on sale as part of investment income. Apart from recording the receipt of dividend income, no other entries have been made in the financial statements for the year ended 31st March, 20X2 regarding the investment in H Ltd. Both investments had been correctly treated in the financial statements for the year ended 31st March, 20X1. Analyze the transactions mentioned above and choose the most appropriate option in the below mentioned questions 1 to 3 in line with the relevant Ind AS: