Questions · Q4
Q.ABC Ltd. purchased a running business from Mehta Bros. for ₹4,50,000, payable by the issue of fully paid equity shares of ₹10 each at a premium of ₹5 per share. Pass journal entries in the books of ABC Ltd.
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Start your 14-day free trial to unlock the full solution →Step 1 — Number of shares to be issued.
Issue price per share = Face value + Premium = 10 + 5 = ₹15.
Number of shares = Purchase consideration ÷ Issue price = 4,50,000 ÷ 15 = 30,000 shares.
Step 2 — Split the purchase consideration between Share Capital and Securities Premium.
- Share Capital = 30,000 × 10 = ₹3,00,000
- Securities Premium = 30,000 × 5 = ₹1,50,000
Check: 3,00,000 + 1,50,000 = 4,50,000 ✓ (matches the purchase consideration).
Step 3 — Journal Entries.
| Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|
| Business Purchase A/c Dr. | 4,50,000 | |
| To Mehta Bros. A/c | 4,50,000 | |
| (Purchase consideration payable for the business acquired) | ||
| Sundry Assets A/c Dr. | 4,50,000 | |
| To Business Purchase A/c | 4,50,000 | |
| (Net assets taken over recorded, assumed equal to the purchase consideration) | ||
| Mehta Bros. A/c Dr. | 4,50,000 | |
| To Equity Share Capital A/c (30,000 × 10) | 3,00,000 | |
| To Securities Premium A/c (30,000 × 5) | 1,50,000 |
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