Question

Madhav Ltd. issued fully paid equity shares of Rs 80 each at a discount of Rs 5 per share for the purchase of a running business from Gupta Bros. for a sum of  Rs 15,00,000. The assets and liabilities consisted of the following : Plant Rs 5,00,000; Trucks Rs 7,00,000; Stock Rs 3,00,000; Machinery Rs 6,00,000 and Sundry Creditors Rs 5,00,000. You are required to pass necessary journal entries for the above transactions in the books of Madhav Ltd.

Answer 1

Journal
Date	Particulars	L.F.	Dr. Rs	Cr. Rs
	Plant A/c              Dr. Trucks A/c           Dr. Stock A/c            Dr. Machinery A/c       Dr.        To Capital Reserve A/c (Balancing Figure)        To Sundry Creditors A/c        To Gupta Bros (Being Assets and Liabilities purchased from Gupta Bros)		5,00,000 7,00,000 3,00,000 6,00,000	1,00,000 5,00,000 15,00,000
	Gupta Bros A/c     Dr. Discount on Issue of Shares A/c (20,000 Shares × Rs 5)     Dr.       To Equity share capital A/c (20,000 shares × Rs 80) (Being 20,000 equity shares of Rs 80 each issue at discount of Rs 5 to Gupta Bros)		15,00,000 1,00,000	16,00,000

Working Note

Calculation of Number of Equity shares issued

Number of Equity Shares = `"Purchase Consideration"/"Issue Price(Face Value - Discount)"`

`= 1500000/(80 - 5)`

= 20,000 Equity Shares