T.S. Grewal Class 12 Vol 2 Chapter 1 Q.45 - Share Capital

Question 45

Mangla Cortubi Ltd. took over a unit of Mangla Tubes Ltd., consisting of Machinery ₹40,00,000, Tools and Dies ₹10,00,000, and Liabilities of ₹25,00,000, for a consideration of ₹20,00,000. The consideration was paid by issuing Equity Shares of ₹10 each at a premium of ₹5. Pass the Journal entries in the books of Mangla Cortubi Ltd.

Solution

JOURNAL (Books of Mangla Cortubi Ltd.)

Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	Machinery A/c    Dr.		40,00,000
	Tools and Dies A/c    Dr.		10,00,000
	To Sundry Liabilities A/c			25,00,000
	To Mangla Tubes Ltd.			20,00,000
	To Capital Reserve A/c			5,00,000
	(Purchase of assets and liabilities of Mangla Tubes Ltd.; net assets acquired at a bargain, the surplus credited to Capital Reserve)
	Mangla Tubes Ltd.    Dr.		20,00,000
	To Equity Share Capital A/c			13,33,330
	To Securities Premium A/c			6,66,665
	To Bank A/c			5
	(1,33,333 Equity Shares of ₹10 each issued at a ₹5 premium; the small residual balance of ₹5, arising because the purchase consideration does not divide evenly by the ₹15 issue price, settled in cash)

Working Note: Number of shares = 20,00,000 ÷ 15 = 1,33,333.33, rounded down to 1,33,333 whole shares (13,33,330 capital + 6,66,665 premium = 20,00,000 less ₹5).