ABC Ltd. wants to re-classify its investments in accordance with AS 13. Decide and state on the amount of transfer, based on the following…

As per AS 13, where investments are reclassified from current to long-term, transfers are made at the lower of cost and fair value at the date of transfer. (1) In the first case, the market value of the investment is ₹25 lakhs, which is higher than its cost i.e. ₹20 lakhs. Therefore, the transfer to long term investments should be carried at cost i.e. ₹20 lakhs. (2) In the second case, the market value of the investment is ₹6.5 lakhs, which is lower than its cost i.e. ₹15 lakhs. Therefore, the transfer to long term investments should be carried in the books at the market value i.e. ₹6.5 lakhs. The loss of ₹8.5 lakhs should be charged to profit and loss account. As per AS 13, where long-term investments are re-classified as current investments, transfers are made at the lower of cost and carrying amount at the date of transfer. (3) In the third case, the book value of the investment is ₹12 lakhs, which is lower than its cost i.e. ₹18 lakhs. Here, the transfer should be at carrying amount and hence this re-classified current investment should be carried at ₹12 lakhs.