Question

Lotus Ltd. took over assets of ₹ 2,50,000 and liabilities of ₹ 30,000 of Goneby Company for the purchase consideration of ₹ 3,30,000. Lotus Ltd. paid the purchase consideration by issuing debentures of ₹ 100 each at 10% premium.
Give journal entries in the books of Lotus Ltd.

Answer 1

Solution:

                                          Books of Lotus Ltd.

                                               Journal Entries  

Particulars                                                               Debit Rs.       Credit Rs.

Assets A/c                                                   Dr.       2,50,000

Goodwill A/c                                                Dr.       1,10,000

   To Sundry Liabilities A/c                                                             30,000

  To Goneby Company A c                                                          3,30,00

(Being business purchased of goneby company)

Goneby Company A/c                                Dr.      3,30,000

          To Debenture A/c                                                              3,00,000

          To Securities Premium A/c                                                  30,000

(Being issued 3,000 debenture at 10% premium)  

Working Note:  

Numbers of Debentures Issued = $\frac{Purchase Consideration}{Issue Price}$

                                                     =  $\frac{3,30,000}{100+ 10}$

                                                    = 3000 debentures