Question

Kumar Ltd purchase assets of Rs. 6,30,000 from Bhanu Oil Ltd. Kumar Ltd issued equity share of Rs. 100 each fully paid in consideration. What journal entries will be made, if the share are issued, (i) at par, (ii) at premium of 20%.

Answer 1

Case (i) $\text{Journal Entries}\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Amt.(Dr)}& \text{Amt.(Cr)}\\ \text{(i)}& \text{Sundry Assets A/c}& \text{Dr}& & 6,30,000& \\ & \text{To Bhanu Oil Ltd A/c}& & & & 6,30,000\\ & \text{(Assets purchased from Bhanu Oil Ltd)}& & & & \\ & \underset{–}{}& & & & \\ \text{(ii)}& \text{Bhanu Oil Ltd A/c}& \text{Dr}& & 6,30,000& \\ & \text{To Share Capital A/c}(6,300\times 100)& & & & 6,30,000\\ & \text{(6,300 shares issued at par Bhanu Ltd)}& & & & \end{array}$


Case(ii)
$\text{Journal Entries}\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Amt.(Dr)}& \text{Amt.(Cr)}\\ \text{(i)}& \text{Sundry Assets A/c}& \text{Dr}& & 6,30,000& \\ & \text{To Bhanu Oil Ltd A/c}& & & & 6,30,000\\ & \text{(Assets purchased from Bhanu Oil Ltd)}& & & & \\ & \underset{–}{}& & & & \\ \text{(ii)}& \text{Bhanu Oil Ltd A/c}& \text{Dr}& & 6,30,000& \\ & \text{To Share Capital A/c}& & & & 5,25,000\\ & \text{To Securities Premium A/c}& & & & 1,05,000\\ & \text{(5,250 shares are issued at}20\%\text{premium to}& & & & \\ & \text{Bhanu Ltd in consideration of assets purchased)}& & & & \end{array}$

Working Note:
Number of shares to be issued = $\frac{\text{Amount payable}}{\text{Face Value per share}}$

Case (i) = $\frac{6,30,000}{100}=6,300$ shares

Case (ii) = $\frac{6,30,000}{120}=5,250$ shares