Question

R Ltd. purchased the assets of S Ltd. for ₹ 5,00,000. It also agreed to take over the liabilities of S Ltd. amounted to ₹ 2,00,000 for a purchase consideration of ₹ 2,80,000. The payment of S Ltd. was made by issue of 9% Debentures of ₹ 100 each at par.
Pass necessary journal entries in the books of R Ltd.

Answer 1

Solution:

                                      In the books of R Ltd.

                                           Journal Entries  

Particulars                                                            Debit Rs.     Credit Rs.

Assets A/c                                            Dr.         5,00,000

     To Sundry Liabilities Ac                                                     2,00,000

     To S Ltd. A/c                                                                       2,80,000

    To Capital Reserve A/c                                                         20,000

(Being assets purchased and liabilities took over from S Ltd.)

S Ltd. A/c                                              Dr.        2,80,000

To 9% Debenture A/c                                                                2,80,00

(Being issued 2,800 9% debenture of Rs.10 each)  

Working Note:  

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

                                                      = $\frac{280,000}{100}$

                                                      = 2,800 Debentures