Question

Under issue of shares for consideration other than cash, the number of shares to be issued to the vendor will be calculated as ___________________.

• A. Amount Payable/Issue Price
• B. Issue Price/Amount Payable
• C. Issue Price/No. of Shares
• D. No. of Shares/Issue Price

Answer 1

The correct option is A Amount Payable/Issue Price

There are instances where a company enters into an arrangement with the vendors from whom it has purchased assets, whereby the latter agrees to accept, the payment in the form of fully paid shares of the company issued to them. Normally, no cash is received for such issue of shares. These shares can also be issued either at par, at premium or at discount, and the number of shares to be issued will depend upon the price at which the shares are issued and the amount payable to the vendor. Thus, to find the number of shares to be issued to the vendor will be calculated as follows:

No. of shares to be issued = Amount Payable/Issue Price.