Question

(Issue of Shares for Purchase of Business).
Tiny Toys Ltd. purchased the business of Ram Bros. for Rs. 1,80,000 payable in fully paid Equity Shares of Rs. 10 each. What entries will be passed in the books of Tiny Toys Ltd. if the issue is :(i) at par and (ii) at a premium of 20%?

Answer 1

Working Notes: Number of Equity Shares to be issued=`("Purchase Consideration")/(" Issue Price of a Share")`
1. No. of Equity Shares=`(Rs. 1,80,000)/(Rs. 10)`=18,000 shares, 2. No. of Equity Shares = `(Rs. 1,80,000)/(Rs. 12)`=15,000 shares.