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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:
- at par and
- a premium of 10%.
Solution
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 |
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