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.
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
