(I) P Company issued shares of Rs. 100 each at 10% discount to purchase following assets from S Company. Plant and machinery Rs. 6,00,000 Furniture Rs. 2,00,000 Inventory Rs. 1,00,000 Required:…

(I) Issue of Shares for Purchase of Assets

Step 1 – Calculate total consideration
$$\text{Plant \& Machinery}=6,00,000\text{Furniture}=2,00,000\text{Inventory}=1,00,000$$ $$\text{Total assets}=6,00,000+2,00,000+1,00,000=9,00,000$$

Step 2 – Determine number of shares to be issued

Nominal value per share = Rs. 100
Discount = 10 % → Issue price = Rs. 100 × (1‑0.10) = Rs. 90

$$\text{Number of shares}=\frac{9,00,000}{90}=10,000\mathbf{shares}$$

Step 3 – Journal entry (assets purchased by issuing shares)

The discount account records the 10 % discount on the issued share capital.

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(II) Issue and Redemption of Debentures

1. Issue of Debentures

• Face value per debenture = Rs. 1,000
• Premium = 5 % → Issue price = Rs. 1,000 + 5 % × 1,000 = Rs. 1,050
• Number of debentures = 500

$$\text{Proceeds}=500\times 1,050=5,25,000$$

Journal entry on issue

2. Redemption after 5 years (10 % discount)

• Redemption price per debenture = Rs. 1,000 − 10 % × 1,000 = Rs. 900
• Total redemption outflow = 500 × 900 = 4,50,000

Discount on redemption = Face value – Redemption price = 5,00,000 − 4,50,000 = 50,000

Journal entry on redemption

The profit & loss account absorbs the premium transferred from the securities premium account (Rs. 25,000) and the loss due to discount on redemption (Rs. 50,000), totalling Rs. 75,000.