Jain and Co. purchased a machine from Young Life Machine Limited for Rs. 3,80,000. As per the purchase agreement, Rs. 20,000 were paid in cash and balance by issue of shares of Rs. 100 each. How many shares are issued if the shares are issued at 20% premium.
Answer & explanation
Correct answer: option 3
The correct answer is Option (2) → 3,000 shares
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Purchase price = ₹3,80,000
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Cash paid = ₹20,000
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Balance payable = ₹3,80,000 − ₹20,000 = ₹3,60,000
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Face value of each share = ₹100
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Issued at 20% premium → Issue price per share = ₹100 + ₹20 = ₹120
Number of shares= Balance amount payable/ Issue price per share= 3,60,000 / 120 =3,000