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.
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.
Solution
Total cost of machine = Rs. 3,80,000
Amount paid in cash = Rs. 20,000
Balance to be paid through shares = Rs. 3,80,000 - Rs. 20,000 = Rs. 3,60,000
Face value of each share = Rs. 100
Premium = 20% of Rs. 100 = Rs. 20
Issue price per share = Rs. 100 + Rs. 20 = Rs. 120
Number of shares issued =
Number of shares issued = = 3,000 shares
The company needs to issue 3,000 shares at Rs. 120 each (including 20% premium) to settle the balance payment of Rs. 3,60,000 for the machine purchase.
Correct Option: 3
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