A company purchased new machinery for rs. 25,00,000 out of which rs. 5,00,000 were paid in cash . Balance amount was paid by issue of equity shares of rs. 10 each at 25% premium .How many shares will be issued by the company?
Answers
Answer:
machinery account dr 2500000
to Vendor account 25,00,000
Vendor account dr 25,00,000
to Cash account 500000
to equity share capital a/c 16,00,000
to Security Premium a/c 4,00,000
Explanation:
amount paid by the way of share capital=25,00,000-5,00,000= 20,00,000
issue price=10Rs+25% =12.50 Rs per share
No of shares issued=20,00,000/12.50
No of shares issued=1,60,000 shares
Equity share capital always recorded at face value
excess amount received recorded as security premium
Answer:
A total of 1,60,000 shares would be issued to make the payment for the machinery.
Journal Entry:
Machinery account (Debit)2500000
to Vendor account (Credit)25,00,000
(Being machinery bought from the vendor)
Vendor account (Debit) 25,00,000
to Cash account (Credit) 500000
to equity share capital a/c (Credit) 16,00,000
to Security Premium a/c (Credit) 4,00,000
(Being machinery paid for)
Explanation:
Total Amount to be paid for machinery = 2500000
Amount paid by cash = 500000
Amount to be paid with equity =25,00,000-5,00,000
Amount to be paid with equity = 20,00,000
Issue price of share = 10 at 25% premium thus,
Issue price = 10Rs+25% = 12.50 Rs per share
Issue price = 12.50 Rs per share
No. of shares issued = 20,00,000/12.50
No of shares issue d= 1,60,000 shares
- Equity share capital always recorded at face value
- The excess amount received is recorded as a security premium
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