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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.
Solution
| 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
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|
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