Question

Bansal Heavy Machine Ltd purchased machine worth Rs. 3,20,000 from Handa Trader. Payment was made as Rs. 50,000 cash and remaining amount by issue of equity share of the face value of Rs. 100 each fully paid at an issue price of Rs. 90 each. Give journal entries to record the above transaction.

Answer 1

$\text{Journal Entries}\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Amt.(Dr)}& \text{Amt.(Cr)}\\ \text{(i)}& \text{Machinery A/c}& \text{Dr}& & 3,20,000& \\ & \text{To Cash A/c}& & & & 50,000\\ & \text{To Handa Traders A/c}& & & & 2,70,000\\ & \text{(Machine purchased from Handa Traders}& & & & \\ & \text{paid Rs 50,000 in cash immediately)}& & & & \\ & \underset{–}{}& & & & \\ & \text{Handa Traders}& \text{Dr}& & 2,70,000& \\ & \text{To Share Capital A/c}(3,000\times 100)& & & & 2,70,000\\ & \text{(3,000 share issued at Rs 90 face value of}& & & & \\ & \text{Rs 100 each to Handa Traders in consideration of}& & & & \\ & \text{amount due to him for machinery purchased)}& & & & \end{array}$

Working note:

Number of equity shares to be issued.

$\frac{\text{Amount payable}}{\text{Face Value (per share)}}=\frac{2,70,000}{90}=3,000$ shares