Q.4 On 15th March, 2016 Hemangi purchased Rs.

1, 00,000, 9% Government Stock

(Interest payable on 1st April, 1st July 1st October and 1st January) at Rs. 88.50 cum-
interest (face value Rs. 100 each).
On 1st August, Rs. 20,000 stock in sold at Rs. 89 cum – interest and on 1st September Rs.
30,000 stocks in sold at Rs. 89.25 ex – interest.
On 31st December, the date of the Balance Sheet, the market price was Rs. 90.
Show the Ledger Account of the investment of the year ignoring income tax, brokerage
etc. and making apportionment in months.

Solution:
Interest Interest Interest Interest
P S S Clo
J F M A M J J A S O N D

Investment A/c
Date Particulars Face Int. Cost Date Particulars Face Int. Cost
Value Value
15-3-16 To C/B A/c 1,00,000 1,875 86,625 1-4-16 By C/B A/c - 2,250 -
(Purchase) (Interest)
1-8-16 To P/L A/c - - 325 1-7-16 By C/B A/c - 2,250 -
(Profit) (Interest)
1-9-16 To P/L A/c - - 787
(Profit) 1-8-16 By C/B A/c 20,000 150 17,650
(Sale)
31-12-16 To P/L A/c 5,475 1-9-16 By C/B A/c 30,000 450 26,775
(Bal. fig.) (Sale)

1-10-16 By C/B A/c - 1,125 -

(Interest)
31-12-16 By Bal c/d 50,000 1,125 43,312
1,00,000 7,350 87,737 1,00,000 7,350 87,737
1. Purchase of Government Stock – 15-03-2016- Cum-interest
Face Value = Rs. 100,000 [No. of stock = Rs.100, 000 ÷ Rs. 100 = 1000]

Interest = Face value x Rate of Interest x

Months
12 Months
= Rs. 100,000 x 9% x 2.5 Months
12 Months = Rs. 1,875

Cost (Cum-Interest) = [No. of Stock x Market Rate] – Interest Amount

= [1,000 stock x Rs.88.50] – Rs. 1,875
= Rs. 88,500 – Rs. 1,875
= Rs. 86,625
2. Interest on 1st April, 2016

Face value = Total Debit side Face value – Total Credit side Face value

Interest = Face value x Rate of Interest x Months

12 Months
= Rs. 100,000 x 9% x 3 Months
12 Months
= Rs. 2,250

3. Interest on 1st July, 2016

Face value = Total Debit side Face value – Total Credit side Face value

Interest = Face value x Rate of Interest x Months

12 Months
= Rs. 100,000 x 9% x 3 Months
12 Months
= Rs. 2,250

4. Sale of Investment – 1-08-2016- Cum-Interest

Face Value = Rs. 20,000 [No. of stock = Rs.20, 000 ÷ Rs. 100 = 200]

Interest = Face value x Rate of Interest x Months

12 Months
= Rs. 20,000 x 9% x 1 Months
12 Months = Rs. 150

Cost (Cum-Interest) = [No. of Stock x Market Rate] – Interest Amount

= [200 stock x Rs.89] – Rs. 150
= Rs. 17,800 – Rs. 150
= Rs. 17,650
 Calculate Profit and Loss Account
Sale Proceeds [Cost] = Rs. 17,650
Less: Cost of investment Sold = Rs. 17,325

Face Value Cost Value

Rs. 100,000 Rs. 86,625
Rs. 20,000 ?
= Rs. 20,000 x Rs. 86,625
Rs. 100,000
Profit on Sale of Investment 325

5. Sale of Investment – 1-09-2016- Ex-Interest

Face Value = Rs. 30,000 [No. of stock = Rs.30, 000 ÷ Rs. 100 = 300]

Interest = Face value x Rate of Interest x Months

12 Months
= Rs. 30,000 x 9% x 2 Months
12 Months = Rs. 450

Cost (Ex-Interest) = No. of Stock x Market Rate

= 300 stock x Rs.89.25
= Rs. 26,775

Calculate Profit and Loss Account

Sale Proceeds [Cost] = Rs. 26,775
Less: Cost of investment Sold = Rs. 25,988

Face Value Cost Value

Rs. 80,000 Rs. 69,300
Rs. 30,000 ?
= Rs. 30,000 x Rs. 69,300
Rs. 80,000
Profit on Sale of Investment 787
6. Interest on 1st October, 2016

Face value = Total Debit side Face value – Total Credit side Face value

Interest = Face value x Rate of Interest x Months

12 Months
= Rs. 50,000 x 9% x 3 Months
12 Months
= Rs. 1,125

7. Closing Balance – 31-12-2016

Face Value (Bal. fig.) = Rs. 50,000 [No. of stock = Rs.50, 000 ÷ Rs. 100 = 500]

Interest = Face value x Rate of Interest x Months

12 Months
= Rs. 50,000 x 9% x 3 Months
12 Months
= Rs. 1,125

Cost = Market Price given (The market value on 31-12-2016 was Rs.90)
Market Value (500x Rs.90) = Rs. 45,000

Cost Value (Bal. fig.) = Rs. 43,312

Whichever is lower value = Rs. 43,312