Question

Paradise Ltd. purchased assets of ₹ 4,40,000 from Suguna Furniture Ltd. It issued equity shares of ₹ 10 each fully paid in satisfaction of their claim. What entries will be made if such issue is:

1. at par and
2. a premium of 10%.

Answer 1

Calculation of the number of shares to be issued

Total amount = Rs. 4,40,000

Face value of share = Rs. 10

No. of. shares to be issued = `"Amount"/"Issued price"`

(a) at par. = `("Rs." 4,40,000)/("Rs." 10)` = 44,000 shares

(b) at a premium of 10% = 10 + `10 xx 10/100`

= Rs. 10 + 1 

= Rs. 11

`= (4,40,000)/11` = 40,000 shares

 

Date	Particulars	L.F.	Debit Rs.	Credit Rs.
(a)	at par
(1)	Assets A/c    Dr.     To Suguna Furniture A/c [Asset purchased]		4,40,000	4,40,000
(2)	Suguna Furniture Ltd A/c   Dr.    To Equity share capital A/c (44,000 x Rs.10) [Issue of shares for consideration other than cash]		4,40,000	4,40,000
(b)	at premium of 10%
(1)	Assects A/c    Dr.    To Suguna Furniture Ltd [Asserts purchased]		4,40,000	4,40,000
(2)	Suguna Furniture Ltd A/c    Dr.    To Equity share capital A/c (40,000 x Rs.10)    To Securities premium A/c [Issue of shares at a premium for consideration other than cash]		4,40,000	4,00,000 40,000