Question

Bansal Heavy Machine Ltd purchased a machine worth Rs. 3,80,000 from Handa Trader. Payment was made as Rs. 50,000 cash and the remaining amount by issue of equity shares of the face value of Rs. 100 each fully paid at an issue price of Rs 110 each.

Give journal entries to record the above transaction.

Answer 1

Journal Entries in the books of Bansal Heavy Machine Ltd.
Date	Particulars	L.F	Debit (₹)	Credit (₹)
1.	Machinery A/c   ...Dr.		3,80,000	-
	To Handa Traders A/c		-	3,80,000
	(Machine purchased on credit from Handa Trader)
2.	Handa Traders A/c   ...Dr.		50,000	-
	To Cash A/c		-	50,000
	(Immediate part-payment made to the vendor in cash)
3.	Handa Trader   ...Dr.		3,30,000	-
	To Share Capital A/c (3,000 × 100)		-	3,00,000
	To Securities premium (3,000 × 10)		-	30,000
	(Settlement of the remaining balance by issue of 3,000 equity shares of Rs. 100 each at a premium of Rs. 10 per share)

Working Notes:

Remaining Balance Outstanding to Handa Trader = 3,80,000 − 50,000

= 3,30,000

The Total Number of Equity Shares to be Issued:

Number of shares issued = `"Amount payable"/"Issue price"`

= `(3,30,000)/(110)`

= 3,000 Equity Shares