Question

A company purchased a building for Rs-3,60,000 and issued As payment equity shares at 20% premium.
Journal entry will be

Answer 1

Building A/c Dr.   3,60,000

To Vendor A/c      3,60,000

(Being building purchased)

Vendor A/c Dr.    3,60,000

To Share Capital     3,00,000

To Securities Premium Reserve A/c      60,000    

(Being Shares issued at a premium of 20%)

Note:

If the price of a share is Rs. 100

Then number of shares at par = 3,60,000 ÷ 100 = 3,600

Number of shares at premium will be 3,60,000 ÷ 120 = 3,000 shares

Par value of 3000 shares = 3,00,000 which will go to share capital

Premium on 3000 shares = 60,000 which will go to securities premium