Rahul Limited purchased building from Handa Limited for Rs.5,40,000 and the payment is to be made by the issue of shares of Rs.100 each. The number…

Given information:

• Purchase price of building = Rs. 5,40,000
• Face value per share = Rs. 100
• Premium = 20%

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When shares are issued at a premium of 20%, the issue price per share needs to be calculated:

Premium per share = 20% of Rs. 100 = Rs. 20

Issue price per share = Face value + Premium
Issue price per share = Rs. 100 + Rs. 20 = Rs. 120

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To find the number of shares to be issued:

Number of shares = $\frac{\text{Total consideration (Purchase price)}}{\text{Issue price per share}}$Issue price per shareTotal consideration (Purchase price)​

Number of shares = $\frac{5,40,000}{120}$1205,40,000​ = 4,500 shares

The company will issue 4,500 shares at Rs. 120 per share (Rs. 100 face value + Rs. 20 premium) to pay for the building worth Rs. 5,40,000.