A new process for development of Active Pharmaceutical ingredients (APIs) is developed by Prof. Shastri. The process is subsequently patented. The APIs are used to manufacture medicines for cure of cardiac diseases. The

CS Executive · Corporate Accounting and Financial Management · PYQS · June 2025
A new process for development of Active Pharmaceutical ingredients (APIs) is developed by Prof. Shastri. The process is subsequently patented. The APIs are used to manufacture medicines for cure of cardiac diseases. The patent is bought by a pharmaceutical company Ratna & Co. The patent was bought for a consideration of ₹ 45,00,00,000. The deal involves payment of ₹ 15,00,00,000 to Prof. Shastri and allotment of shares of ₹ 10 each at a discount of ₹ 2 per share for balance consideration of ₹ 30,00,00,000. Prepare necessary journal entries in the books of Ratna & Co.

Answer & Explanation:

In the books of Ratan & Company Journal Entry Entry No. Particulars Dr. (₹) Cr. (₹) 1. Patent A/c Dr. 45,00,00,000 To Prof. Shastri A/c 45,00,00,000 (Being patent acquired from Prof. Shastri) 2. Prof. Shastri A/c Dr. 45,00,00,000 Discount on issue of shares (W.N.) Dr. 7,50,00,000 To Bank A/c 15,00,00,000 To Share Capital A/c 37,50,00,000 (Being consideration for patent) Working Note: Calculation of discount on issue of shares ₹ Total consideration 45,00,00,000/- Direct payment 15,00,00,000/- Shares issued 30,00,00,000/- Face value of shares issued (30,00,00,000 * 10 / 8) 37,50,00,000/- Discount on issue of shares 7,50,00,000/-

Topics: Corporate Accounting

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