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Question -

B.Ltd. purchased assets of the book value of ₹ 4, 00,000 and took over the liability of ₹ 50,000 from Mohan Bros. It was agreed that the purchase consideration, settled at ₹, 3, 80,000, be paid by issuing debentures of ₹ 100 each.

What Journal entries will be made in the following three cases, if debentures are issued: (a) at par; (b) at discount; (c) at premium of 10%? It was agreed that any fraction of debentures be paid in cash.



Answer -

Case(a)

Book of B. Ltd.

 

Journal

 

Date

Particulars

L.F.

Debit

Amount

₹

Credit

Amount

₹

Sundry Assets A/c

Dr.

4,00,000

Goodwill A/c

Dr.

30,000

To Sundry Liabilities A/c

50,000

To Mohan Bros.

3,80,000

(Assets and liabilities of Mohan Bros. taken over)

Mohan Bros.

Dr.

3,80,000

To Debenture A/c

3,80,000

(3,800 debentures of 100 each issued to Mohan Bros. in

consideration of assets and liabilities)

 

Case(b)

Sundry Assets A/c

Dr.

4,00,000

Goodwill A/c

Dr.

30,000

To Sundry Liabilities A/c

50,000

To Mohan Bros.

3,80,000

(Assets and liabilities of Mohan Bros. taken over)

Mohan Bros.

Dr.

3,80,000

Discount on Issue of Debenture A/c

Dr.

42,222

To Debenture A/c

4,22,200

To Bank A/c

22

(Issued 4,222 debentures of ₹ 100 each at 10% discount

and balance paid in cash)

Case(c)

 

 

Sundry Assets A/c

Dr.

4,00,000

Goodwill A/c

Dr.

30,000

To Sundry Liabilities A/c

50,000

To Mohan Bros.

3,80,000

(Assets and liabilities of Mohan Bros. taken over)

Mohan Bros

Dr.

3,80,000

To Debentures A/c

3,45,400

To Securities Premium A/c

34,540

To Bank A/c

60

(Issued of 3,454 debentures at 10% premium and balance

paid in cash)

 

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