Question

Vahid Ltd. purchased the business of 'Rahim' Bros. for Rs. 2,00,000 payable in
fully paid shares of Rs. 100 each. What entries will be made in the books of Vahid
Ltd. if such issue is : (i) at Par; (ii) at a premium of 10%; and (iii) at a discount of
10%?
answer
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Answer 1

Answer:

200000+ +10+10 = 200300

Answer 2

At Par  

2,00,000 ÷ 100

=2000

At premium

2,00,000 ÷ 110

= 1,818

At discount

2,00,000 ÷ 90

= 2,222

Journal Entry

Sundry Assets A/c Dr.  2,00,000

To Rahim bros. A/c    2,00,000

(Purchased of business of Rahim bros for Rs. 2,00,000)

Rahim bros A/c Dr.   2,00,000

To Share Capital A/c    2,00,000

(2000 shares issued to Rahim bros at par)

Rahim bros A/c Dr.   2,00,000

To Share Capital A/c    1,81, 800

To Securities Premium A/c      18,200  

(1818 shares issued to Rahim bros at a premium of 10%)

Rahim bros A/c Dr.    2,00,000

Discount on issue of shares A/c    22,220        

To Share Capital A/c     2,22, 220

(2222 shares issued to Rahim bros at a discount of 10%)