Question

R Limited took over assets of 5,60,000 and creditors of 80,000 from S Limited
R Limited issued 8% debentures of rs 20 each at a premium of 20% as purchase
Calculate the amount of purchase consideration, number of debentures issued by
R Limited and pass the necessary journal entries in the books of R Limited from the

above mentioned informations.​

Answer 1

Answer:

Explanation:

Purchase Consideration is the sum (market value) of the equity, preference, and cash received by the transferor firm's shareholders from the bought company. Notes: There is no subtraction. Everything that the purchasing business sends gets added.

Given:

The following journal entry will be made in A Ltd.'s records for the specified purchase transaction: => 5,60,000 in assets A/C

creditors of  S limited:80,000

R Limited issued: 8% debentures of 20

purchase:20%

Find:

purchase consideration

number of debentures

Solution:

purchase consideration = equity + preference + cash received

                                         = 80,000

Number of debentures to be issued = purchase consideration/ issue                     price  

Number of debentures to be issued = 80000 /20

                                                             = 4000 debentures

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