Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Accounting for Shares

Question:

For which of the following a company can issue shares for consideration other than cash?

Options:

Purchase of machinery

Purchase of business

Purchase of building

All of these

Correct Answer:

All of these

Explanation:

There are instances where a company enters into an arrangement with the vendors from whom it has purchased assets, whereby the latter agrees to accept, the payment in the form of fully paid shares of the company issued to them. Normally, no such cash is received for issue of shares. These shares can also be issued either at par, at premium or at discount, and the number of shares to be issued will depend upon the price at which the shares are issued and the amount payable to the vendor. The number of shares to be issued to the vendor will be calculated as follows:
Number of shares to be issued= Amount Payable / Issue Price