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it did not subscribe to rights shares and sold rights of all the 1000 shares 621454

Determination Of Cost Of Investment In Case Of A Rights Issue – Old HoldingMadhukar Finance Ltd. had acquired 2,000 shares of Krishnamurthy Aluminum Ltd. in July 2004. They were being carried in the 31–03-2006 balance sheet at Rs. 12,96,000. Krishnamurthy Aluminum Ltd. came out with a rights issue of 1 share each for every 2 shares held by the existing shareholders at a price of Rs. 450 each in the month of August 2006. Determine the cost of investment after the rights issue under the following three situations:

  1. Madhukar Finance Ltd. fully subscribed to the rights shares.
  2. It subscribed to only 500 rights shares and sold rest of the rights in the market for Rs. 260 each.
  3. It did not subscribe to rights shares and sold rights of all the 1000 shares.

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