T.S. Grewal Class 12 Vol 2 Chapter 1 Q.47 - Share Capital

Question 47

Sandesh Ltd. took over assets of ₹7,00,000 and liabilities of ₹2,00,000 from Sanchar Ltd. for a purchase consideration of ₹4,59,500. ₹8,500 was settled by accepting a draft in favour of Sanchar Ltd., payable after three months, and the balance was paid by issuing equity shares of ₹10 each at a premium of 10% in favour of Sanchar Ltd. Pass the necessary Journal entries in the books of Sandesh Ltd.

Solution

JOURNAL (Books of Sandesh Ltd.)

Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	Sundry Assets A/c    Dr.		7,00,000
	To Sundry Liabilities A/c			2,00,000
	To Sanchar Ltd.			4,59,500
	To Capital Reserve A/c			40,500
	(Purchase of assets and liabilities of Sanchar Ltd.; net assets acquired at a bargain, the surplus credited to Capital Reserve)
	Sanchar Ltd.    Dr.		4,59,500
	To Equity Share Capital A/c			4,10,000
	To Securities Premium A/c			41,000
	To Bills Payable A/c			8,500
	(41,000 Equity Shares of ₹10 each issued at a ₹1 premium; the balance of ₹8,500 settled by a three-month draft)

Working Note: Number of equity shares = (4,59,500 – 8,500) ÷ 11 = 4,51,000 ÷ 11 = 41,000 shares.

Note: The source credits the ₹8,500 to Bank A/c, but since it is settled by a draft payable three months later (not immediate cash), it is correctly a Bills Payable, as used above.