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 (3) → 3000.
Machinery value = 3,80,000
Paid in cash = 20,000
Remaining balance = 3,80,000 - 20,000
= 3,60,000
Face value of share = 100
Shares are issued at premium of 20% i.e. 20.
Issue price = 100 + 20
= 120
No of shares issued = Purchase consideration/Issue price
= 3,60,000/120
= 3,000