Question

Mohit Ltd took over assets of Rs 8,40,000 and liabilities of Rs 80,000 of Ram Ltd at an agreed value of Rs 7,20,000. Mohit Ltd paid to Ram Ltd by issue of 9% debentures of Rs 100 each at a premium of 20%.. What is the amount of Capital Reserve and No. of debentures to be issued to Ram Limited. *

2 points


Mohit Ltd took over assets of Rs 8,40,000 and liabilities of Rs 80,000 of Ram Ltd at an agreed value of Rs 7,20,000. Mohit Ltd paid to Ram Ltd by issue of 9% debentures of Rs 100 each at a premium of 20%.. What is the amount of Capital Reserve and No. of debentures to be issued to Ram Limited. 





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Answer 1

Answer:

Mohit Ltd took over assets of Rs 8,40,000 and liabilities of Rs 80,000 of Ram Ltd at an agreed value of Rs 7,20,000. Mohit Ltd paid to Ram Ltd by issue of 9% debentures of Rs 100 each at a premium of 20%.. What is the amount of Capital Reserve and No. of debentures to be issued to Ram Limited. *

2 points

Mohit Ltd took over assets of Rs 8,40,000 and liabilities of Rs 80,000 of Ram Ltd at an agreed value of Rs 7,20,000. Mohit Ltd paid to Ram Ltd by issue of 9% debentures of Rs 100 each at a premium of 20%.. What is the amount of Capital Reserve and No. of debentures to be issued to Ram Limited. 

Answer 2

Mohit Ltd paid Rs 7,20,000 for the acquisition, there is a Capital Reserve of Rs 40,000 (Rs 7,60,000 - Rs 7,20,000) arising on the acquisition.

The purchase consideration for the acquisition of Ram Ltd's assets and liabilities by Mohit Ltd is Rs 7,20,000. Mohit Ltd paid for this consideration by issuing 9% debentures of Rs 100 each at a premium of 20%.

The premium on the issue of debentures is calculated as follows:

Premium = 20% of Rs 100 = Rs 20

Therefore, the issue price of each debenture is Rs 120 (Rs 100 + Rs 20).

The number of debentures to be issued to Ram Ltd can be calculated as follows:

Amount of consideration / Issue price of debentures = Rs 7,20,000 / Rs 120 = 6,000

So, Mohit Ltd needs to issue 6,000 debentures to Ram Ltd.

The total value of these debentures would be:

Total value of debentures = Issue price of debentures x Number of debentures

= Rs 120 x 6,000

= Rs 7,20,000

The value of assets acquired by Mohit Ltd is Rs 8,40,000, and the liabilities assumed are Rs 80,000. Thus, the excess of assets over liabilities is Rs 8,40,000 - Rs 80,000 = Rs 7,60,000.

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