In IPCC Paper 1 Accounting Chapter 12 Investment Accounts, illustration 1 "Sundar Problem" it is indicated in the problem that Sundar sold 33.33% of right shares entitled to him 5000shares @ Rs 2 per share = 10,000/- this transaction was entered on the credit side of Investment Account.
I read the provision regarding right shares that if the "Investments are acquired on cum-right basis and the market value of investments immediately after their becoming ex right is lower than the cost for which they were acquired, it may be appropriate to apply the sale proceeds of the rights to reduce the carrying amount of such investments to the market value"
i thought this provision leads to the reason that sale of rights was credited to investment a/c but in the problem no market value was stated
the same problem in Padhuka's Costing Jan 2009 PCC edition book the sale of rights was credited to P&L account
anyone pls clarify how to treat the sale proceeds of right shares & why in brief? i've attached the Study Material file for better understanding
- Regards
Subhash Peri
CAclubindia
