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Investment Questions

1. X Ltd purchased Rs. 200,000 of 6% government stock at Rs. 95 per share cum-interest on March 31, 2001. Interest is paid half-yearly on June 30 and December 31. 2. The document provides the journal entries to record the purchase of the stock and receipt of interest for the year ended December 31, 2001. 3. It also includes an investment ledger with debits for the purchase and credit to profit and loss for interest, and credits for receipt of interest on the payment dates.

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0% found this document useful (0 votes)
111 views4 pages

Investment Questions

1. X Ltd purchased Rs. 200,000 of 6% government stock at Rs. 95 per share cum-interest on March 31, 2001. Interest is paid half-yearly on June 30 and December 31. 2. The document provides the journal entries to record the purchase of the stock and receipt of interest for the year ended December 31, 2001. 3. It also includes an investment ledger with debits for the purchase and credit to profit and loss for interest, and credits for receipt of interest on the payment dates.

Uploaded by

Garima Garima
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© © All Rights Reserved
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Cum – Interest (cum = With)

Que. 1 On 31st March, 2001, X Ltd. purchased Rs. 2,00,000 6% Government stock (face value of Rs. 100
each) at Rs. 95 each cum – interest. Half yearly interest is payable on 30 th June and 31st December
every year.
Show entries in the investment ledger of X Ltd. for its financial year ended on 31 st December,
2001 ignoring tax and brokerage.

Sol:

Step 1: Calculation of period (in months) From 01/01/2001 to 31/03/2001 = 3 months


Step 2: Calculation of Accrued interest = 12% X 3/12 X Rs. 2,00,000 = Rs. 3,000
Step 3: Cost = (Rs. 95 X 200) – Rs. 3,000 = Rs. 1,87,000
Step 4: On June 30th, 2001 interest will be received @ 6% on Rs. 2,00,000 for the entire 6 months
i.e. 6/100 X 2,00,000 X 6/12 = Rs. 6,000
Step 5: On Dec 31st, 2001 interest will be received @ 6% on Rs. 2,00,000 for the entire 6 months
i.e. 6/100 X 2,00,000 X 6/12 = Rs. 6,000
Step 6: Net income from interest = Rs. 6,000 + Rs. 6,000 – Rs. 3,000 = Rs. 9,000 will be
credited to profit and loss account.

Investment A/c Dr. 1,87,000


Interest A/c Dr. 3,000
To Bank A/c 1,90,00

Bank A/c Dr. 6,000


To Interest A/c 6,000
(Being interest received for 6 months upto June 30th, 2001)

Bank A/c Dr. 6,000


To Interest A/c 6,000
(Being interest received for 6 months upto Dec 31st, 2001)

Investment A/c Dr. 9,000


To Profit & Loss A/c 9,000

In the books of X Ltd.


6% Government Stock Account
[Interest Payable: 30th June & 31st December]
Dr. Cr.

Date Particulars Nomina Interest Cost Date Particulars Nominal Interest Cost
l Value (Rs.) (Rs.) Value (Rs.) (Rs.)
31.03.01 To Bank A/c 2,00,00 3,000 1,87,000 30.06.01 By Bank A/c - 6,000 -
0
31.12.01 To P&L A/c - 9,000 - 31.12.01 By Bank A/c - 6,000 -
By Bal. c/d 2,00,000 - 1,87,000
2,00,00 12,000 1,87,000 2,00,000 12,000 1,87,000
0
Ex – Interest (Ex = Without)

Que. 2 On 31st March, 2001, X Ltd. purchased Rs. 2,00,000 6% Government stock (face value of Rs. 100
each) at Rs. 95 each ex – interest. Half yearly interest is payable on 30 th June and 31st December every
year.
Show entries in the investment ledger of X Ltd. for its financial year ended on 31 st December,
2001 ignoring tax and brokerage.

Sol:

Step 1: Calculation of period (in months) From 01/01/2001 to 31/03/2001 = 3 months


Step 2: Calculation of Accrued interest = 12% X 3/12 X Rs. 2,00,000 = Rs. 3,000
Step 3: Cost = (Rs. 95 X 200) + Rs. 3,000 = Rs. 1,93,000
Step 4: On June 30th, 2001 interest will be received @ 6% on Rs. 2,00,000 for the entire 6 months
i.e. 6/100 X 2,00,000 X 6/12 = Rs. 6,000
Step 5: On Dec 31st, 2001 interest will be received @ 6% on Rs. 2,00,000 for the entire 6 months
i.e. 6/100 X 2,00,000 X 6/12 = Rs. 6,000
Step 6: Net income from interest = Rs. 6,000 + Rs. 6,000 – Rs. 3,000 = Rs. 9,000 will be
credited to profit and loss account.

Investment A/c Dr. 1,90,000


Interest A/c Dr. 3,000
To Bank A/c 1,93,00

Bank A/c Dr. 6,000


To Interest A/c 6,000
(Being interest received for 6 months upto June 30th, 2001)

Bank A/c Dr. 6,000


To Interest A/c 6,000
(Being interest received for 6 months upto Dec 31st, 2001)

Investment A/c Dr. 9,000


To Profit & Loss A/c 9,000

In the books of X Ltd.


6% Government Stock Account
[Interest Payable: 30th June & 31st December]
Dr. Cr.

Date Particulars Nomina Interest Cost Date Particulars Nominal Interest Cost
l Value (Rs.) (Rs.) Value (Rs.) (Rs.)
31.03.01 To Bank A/c 2,00,00 3,000 1,90,000 30.06.01 By Bank A/c - 6,000 -
0
31.12.01 To P&L A/c - 9,000 - 31.12.01 By Bank A/c - 6,000 -
By Bal. c/d 2,00,000 - 1,90,000
2,00,00 12,000 1,90,000 2,00,000 12,000 1,90,000
0
Que. 3 On 1st April, 2001, X Ltd. had Rs. 3,00,000 6% Government stock (face value of Rs. 100 each) at
Rs. 94 each. Interest is payable half yearly on 31st March and 30th September every year.

The company sold Rs. 90,000 of the stock at Rs. 95 cum – interest on 1 st June 2001. Draw up 6%
Government Stock Account in the investment ledger of the company for the year ended 31 st March
2002. Ignore brokerage and income tax. The stock was quoted at Rs. 96 ex – interest at the stock
exchange on that date

In the books of X Ltd.


6% Government Stock Account
[Interest Payable: 31st March and 30th September]
Dr. Cr.

Date Particulars Nomina Interest Cost Date Particulars Nominal Interest Cost
l Value (Rs.) (Rs.) Value (Rs.) (Rs.)
01.04.01 To Bal. b/d 3,00,00 - 2,82,000 01.06.01 By Bank A/c 90,000 900 84,600
0
31.12.01 To P&L A/c - 13,500 - 30.09.01 By Bank A/c - 6,300 -
31.03.02 By Bank A/c - 6,300 -
31.03.02 By Bal. c/d 2,10,000 - 1,97,400
3,00,00 13,500 2,82,000 3,00,000 13,500 2,82,000
0

Que. 4 On 1st April, 2001, X Ltd. had Rs. 3,00,000 6% Government stock (face value of Rs. 100 each) at
Rs. 94 each. Interest is payable half yearly on 31st March and 30th September every year.

The company sold Rs. 90,000 of the stock at Rs. 95 ex – interest on 1 st June 2001. Draw up 6%
Government Stock Account in the investment ledger of the company for the year ended 31 st March
2002. Ignore brokerage and income tax. The stock was quoted at Rs. 96 ex – interest at the stock
exchange on that date

In the books of X Ltd.


6% Government Stock Account
[Interest Payable: 31st March and 30th September]
Date Particulars Nomina Interest Cost Date Particulars Nominal Interest Cost
l Value (Rs.) (Rs.) Value (Rs.) (Rs.)
01.04.01 To Bal. b/d 3,00,00 - 2,82,000 01.06.01 By Bank A/c 90,000 900 85,500
0
31.12.01 To P&L A/c - 13,500 900 30.09.01 By Bank A/c - 6,300 -
31.03.02 By Bank A/c - 6,300 -
31.03.02 By Bal. c/d 2,10,000 - 1,97,400
3,00,00 13,500 2,82,900 3,00,000 13,500 2,82,900
0

Dr. Cr.
Que. 5 On 1st January 2001, X Ltd. held an investment of Rs. 50,000 at 6% Government stock costing Rs.
47,000 (face value Rs. 100 each). On 31 st March, a purchase of Rs. 2,00,000 same Government stock
was made at Rs. 95 cum – interest. On 1 st July, the company sold Rs. 1,00,000 stock @ Rs 96. On 1 st
October, a further Rs. 70,000 of the investment was sold at Rs. 98 cum – interest. The market price of
the stock on 31.12.2001 was Rs. 99 (ex – interest).

Half – yearly interest is payable on 30 th June and 31st December every year. Prepare the Investment
Leger of the Company ignoring income – tax and brokerage.

In the books of X Ltd.


6% Government Stock Account
[Interest Payable: 31st March and 30th September]
Date Particulars Nomina Interest Cost Date Particulars Nominal Interest Cost
l Value (Rs.) (Rs.) Value (Rs.) (Rs.)
01.01.01 To Bal. b/d 50,000 - 47,000 30.06.01 By Bank A/c - 7,500 -
31.03.01 To Bank A/c 2,00,00 3,000 1,87,000 01.07.01 By Bank A/c 1,00,000 - 96,000
0
31.12.01 To P&L A/c 7,950 4,350 01.10.01 By Bank A/c 70,000 1,050 67,550
31.12.01 By Bank A/c - 2,400 -
31.12.01 By Bal. c/d 80,000 74,800
2,50,00 10,950 2,38,350 2,50,000 10,950 2,38,350
0
Dr. Cr.

Stock price will be valued on the basis of cost or market price whichever is lower. In this case, cost of
1,87,000
stock (FIFO basis) is Rs. 74,800 X 80,000 but market price is Rs. 79,200 (Rs. 99 X 800).
2,00,000
Therefore, the value of stock on 31st December, 2001 will be Rs. 74,800 (being lower of the two)
Que. 6
Que. 7

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