X Ltd. took over the assets of ₹ 6,00,000 and liabilities of ₹ 80,000 of Y Ltd for an agreed purchase consideration of ₹ 6,00,000 payable 10% in cash and the balance by the issue of 12% Debentures of ₹ 100 each. Give necessary journal entries in the books of X Ltd., assuming that:
Case (a): The debentures are issued at par.
Case (b): The debentures are issued at 20% premium.
Case (c): The debentures are issued at 10% discount.
Answers
Solution:
Sr. No. Particulars Dr. Rs. Cr. Rs.
Assets A/c Dr. 6,60,000
Goodwill A/c (Balancing figure) Dr. 20,000
To Liablities A/c 80,000
To Y Ltd 6,00,000
(Being purchase of business of Y Ltd)
Y Ltd Dr. 60,000
To Cash A/c 60,000
(Being payment made in cash)
(a) Y Ltd Dr. 5,40,000
To 12 % Debenture A/c 5,40,000
(Being purchase consideration discharged by issue of 12% Debentures)
(b) Y Ltd Dr. 5,40,000
To 12% Debentures A/c 4,50,000
To Security Premium Reserve A/c 90,000
(Being purchase consideration discharged by issue of 12 % Debentures)
(c) Y Ltd Dr. 5,40,000
Discount on Issue of Debentures A/c Dr. 60,000
To 12% Debenture A/c 6,00,000
(Being purchase consideration discharged by issue of 12% Debentures)
Working Notes:
1) Numbers of Debentures Issued = =
= 4, 500 Debentures
2) Numbers of Debentures = =
= 6, 000 Debentures