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Pass Necessary Journal Entries for the Following Transactions in the Books of Rajan Ltd.: (A) Rajan Ltd. Purchased Machinery of Rs.7,20,000 from Kundan Ltd. the Payment Was Made to Kundan Ltd. by Issue of Equity Shares of Rs.100 Each at 10% Discount. - Accountancy

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Pass necessary journal entries for the following transactions in the books of Rajan Ltd.:

(a) Rajan Ltd. purchased machinery of Rs.7,20,000 from Kundan Ltd. The payment was made to Kundan Ltd. by issue of equity shares of Rs.100 each at 10% discount.

(b) Rajan Ltd purchased a running business from Vikas Ltd. for a sum of Rs.2,50,000 payable as Rs.2,20,000 in fully paid equity shares of Rs.10 each and balance by a bank draft. The assets and liabilities consisted of the following:

Plant & Machinery Rs.90,000; Building Rs.90,000; Sundry Debtors Rs.30,000; Stock Rs.50,000; Cash Rs.20,000; Sundry Creditors Rs.20,000.

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Solution

 

(a)

                                                                              Journal Entries

Date Particulars L.F. Debit (Rs.) Credit (Rs.)
 

Machinery A/c                                           Dr.

            To Kundan A/c

(Being machinery is purchased from Kundan Ltd. For Rs.7,20,000)

 

Kundan Ltd. A/c              Dr.

Discount on Issue of share A/c         Dr.

             To Equity share capital A/c

(Being issue of 8,000 shares at Rs 100 each at a discount of Rs.10 per share)

 

7,20,000

 

 

 

7,20,000

80,000

 

 

 

7,20,000

 

 

 

 

8,00,000

 

Working Note:

Calculation of Number of shares to be issued ( at discount of Rs 10)

`"No.of shares =""Purchase price"/"Issue Price"=720000/(100-10)=720000/90=8000" shares"`

(b)

                                                                                 Journal Entries

Date Particulars L.F. Debit (Rs.) Credit (Rs.)
 

Plant and Machinery A/c       Dr.

Building A/c                        Dr.

Sundry Debtors A/c            Dr.

Stock A/c                           Dr.

Cash A/c                            Dr.

             To Creditors A/c

             To Vikash Ltd. A/c

             To Capital Reserve A/c (balancing Figure)

(Being purchase of the business from Vikash ltd.)

 

Vikas Ltd. A/c                    Dr.

          To Equity Share Capital A/c

          To Bank A/c

(Being issue of 22,000 shares of Rs.10 each and remaining payment is made through bank draft)

 

90,000 

90,000

30,000

50,000

20,000

 

 

 

 

 

2,50,000

 

 

 

 

 

 

 

 

20,000

2,50,000

10,000

 

 

 

2,20,000

30,000

 

 Working Note:

Capital Reserve = Net Assets – Purchase Consideration

                        = Rs.2,60,000 – Rs.2,50,000

                        = Rs.10,000

 
Concept: Issue of Shares for Consideration Other than Cash
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