If vendors are issued fully paid shares of Rs1,25,000 in consideration of net assets of 1,50,000, the balance of Rs25,000 will be credited to which account?
Answer & explanation
Correct answer: option 4
Capital Reserve = Net Assets - Purchase consideration = Rs.1,50,000 - Rs.1,25,000 = Rs.25,000 = Capital Reserve. The journal entry will be:
Assets A/c Dr. 1,50,000 ---
To Vendor --- 1,25,000
To Capital Reserve A/c --- 25,000
Hence, the correct option is D