Conversion of loan into equity

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

19 December 2014 36 X (A Pvt. Ltd. Company in India) purchased
500 shares @ 1 Euro each of B (A company
incorporated outside India). Since B shares
capital consisted of 500 shares, it became wholly
owned susbsidiary of X.

X also gave loan of 700 Euro to B during
financial year 2013-14 which was recoverted
in indian Rs. As on 31/03/14.

Now, during financial year 2014-15, this
loan is converted into 700 shares of 1 Euro
each.

Please advise
1 What entry is to be passed
2 At what value, transaction to be booked

CA Kumar Mukesh

CA Kumar Mukesh (Expert)
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19 December 2014 Journal Entry will be
Investment in XYZ dr
to Loan A/c
to foreign Exchange fluctuation
if gain is there
or
Investment in XYZ dr
foreign Exchange fluctuation dr.
to Loan A/c
if loss is there

the Exchange rate will be rate effective on the date of conversion.

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