Question : If a company issues a fully paid share of Rs.1,25,000 in consideration of net assets of Rs.1,50,000 to a vendor. The Balance of Rs.25,000 will be credited to:
Option 1: Goodwill Account
Option 2: Security Premium Account
Option 3: Statement of Profit and Loss Account
Option 4: Capital Reserve Account
Correct Answer: Security Premium Account
Solution :
Security Premium Reserve is the additional amount charged on the face value of any share of the company when the shares are issued, redeemed, and forfeited.
The following will be the journal entries:
Vendor A/c Dr. 1,50,000
To Equity Share Capital A/c 1,25,000
To Securities Premium Account A/c 25,000
(Being equity shares are issued to the vendor in consideration other than cash)
Hence the correct answer is option 2.
