Question

Woodcraft Ltd. purchased machinery for ₹ 90,000 from Moons Ltd. As per the agreement,the payment is to be made by issuing shares of ₹ 100 each. While recording this transaction, Share Capital Account was credited by ₹ 72,000.

State whether the shares were issued at Par or Premium and also calculate the number of shares issued to Moons Ltd.

Answer 1

Purchase Consideration: ₹ 90,000

Share Capital credited: ₹ 72,000

Face value per share = ₹ 100

Number of shares issued = `(₹ 72,000)/(₹ 100) = 720` shares

Securities Premium:

₹ 90,000 − ₹ 72,000 = ₹ 18,000

Premium per share:

`(₹ 18,000)/(720) = 25`

The shares were issued at a premium of ₹ 25 per share (25%).

Number of shares issued: 720 shares.