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.

Answer 1

(a) No of shares =$\frac{PurchasePrice}{IssuePrice}=\frac{7,20,000}{90(100-10)}$
$=8,000$ shares
(b) Capital Reserve =Net Assets - Purchase consideration
$Rs.2.60,000-Rs.2,50,000$.
$Rs..10,000$.