Advertisements
Advertisements
Question
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
APPEARS IN
RELATED QUESTIONS
State any three purposes other than 'issue of bonus shares' for which securities premium can be utilized.
For issuing shares at discount a company has to fulfil many conditions. State any three such conditions
'Cheques and drafts in hand' are not considered while preparing cash flow statement. Why?
Pass necessary Journal Entries for the following transactions in the books of Sudarshan Ltd.
(i) Redeemed 750, 12% Debentures of Rs 75 each by converting into Equity Shares of Rs 100 each. The Equity Shares were issued at a discount of 10%.
(ii) Converted 550, 12% Debentures of Rs 1,000 each into New 13% Debentures of Rs 100 each.
The New Debentures were issued at a premium of 10%.
What is the basis of preparing Receipt and Payment Account?
Answer briefly of the following question :
What is the minimum price at which a company can reissue its forfeited shares which were originally issued
at par?
Saturn Ltd. was registered with an authorized capital of ` 12,00,000. "divided into" ` 1,20,000 :equity shares of ` 10
"each. It issued "40,000" equity shares to the public at a premium of" ` 5 "per share, payable as follows": [12]
"On application" ` 6
"On allotment" ` 9 (including premium of 5)
All the shares were applied for and allotted. One shareholder holding 500 shares did not pay the allotment money
and his shares were forfeited. Out of the forfeited shares, the company reissued 400 shares at 7 per share fully
called up.
You are required to:
(a) Pass journal entries in the books of the company.
(b) Prepare :
(i) Securities Premium Reserve Account,
(ii) Share Capital Account.
The following balances have been extracted from the books of Vanity Ltd. as at 31st March, 2017:
Trial Balance as at 31st March, 2017
| Particulars | Debit | Credit |
| Equity Share Capital (5,000 shares of ` 100 each fully paid) | 5,00,000 | |
| Fixed Assets | 7,30,000 | |
| Reverses and Surplus | 2,00,000 | |
| Inventories | 50,000 | |
| Cash and Bank Balances | 1,70,000 | |
| Creditors | 40,000 | |
| Bills Payable | 20,000 | |
| Underwriting Commission on issue of shares | 10,000 | |
| 5% Debentures (1/5 of the Debentures to be redeemed on 31st March, 2018) | 2,00,000 | |
| Proposed Dividend | 12,000 | |
| Interest accrued and due on 5% Debentures | 8,000 | |
| Trade Receivables | 20,000 | |
| Total | 9,80,000 | 9,80,000 |
Modern Chemicals Co. Ltd. made an issue of 60,000 shares of Rs. 20 each payable as follows :
On application Rs. 5 per share
On allotment Rs. 5 per share
On first call Rs. 4 per share
On second call Rs. 3 per share
The company received applications for 65,000 shares of which applications for 5,000 shares were
rejected and money refunded.
All the shareholders paid up to second call except one shareholder, Mr. Bhupendra, the allotee of
100 shares, who did not pay the amount of the second call.
Give Journal Entries in the books of Modern Chemicals Co., Ltd.
Answer in one Sentence only :
Define securities premium.
State, whether the following statements is True or False.
Shares are issued for cash only.
What is meant by the issue of shares for consideration other than cash?
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%.
