Question

Vani Ltd. purchased furniture costing ₹ 2,20,000 from C.D Ltd. The payment was to be made by issue of 9% Preference Shares of ₹ 100 each at a premium of ₹ 10 per share. Pass necessary Journal entries in the books of Vani Ltd.

Answer 1

Journal Entries in the Books of Vani Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Furniture A/c Dr.		2,20,000
	To C.D. Ltd. A/c			2,20,000
	(Furniture purchased from C.D. Ltd.)
2.	C.D. Ltd. A/c Dr.		2,20,000
	To 9% Preference Share Capital A/c			2,00,000
	To Securities Premium A/c			20,000
	(2,000 9% Preference Shares of ₹ 100 each issued at a premium of ₹ 10 per share to C.D. Ltd.)

Working note:

Cost of furniture purchased:

₹ 2,20,000

Issue price of each 9% Preference Share:

₹ 100 + ₹ 10 = ₹ 110

Number of shares to be issued:

`(2,20,000)/110 = 2,000` shares