Question

X Ltd. took over the assets of ₹ 6,60,000 and liabilities of ₹ 80,000 of Y Ltd. for ₹ 6,00,000. Give necessary journal entries in the books of X Ltd. assuming that:
Case (a): The purchase consideration was payable 10% in cash and the balance in 5,400; 12% Debentures of ₹ 100 each.
Case (b): The purchase consideration was payable 10% in cash and the balance in 4,500; 12% Debentures of ₹ 100 each issued at 20% premium.

Answer 1

Solution:

                                                      Journal  

Sr. No.       Particulars                                      Dr. Rs.          Cr. Rs.

                Assets A/c                         Dr.       6,60,000

Goodwill A/c (Balancing Figure)      Dr.        20,000         80,000

           Ti Liabilities A/c                                                        6,00,000

                To Y Ltd

(Being purchase of business took over)

(a)              Y Ltd                                  Dr.      6,00,000

           To Cash A/c                                                              60,000

     To 12 % Debenture A/c                                                5,40,000

(Being purchase consideration discharged)

(b)            Y Ltd                                   Dr.        6,00,000

          To Cash A/c                                                                60,000

      To 12% Debentures A/c                                                4,50,000

To Security Premium Reserve A/c                                       90,000

(Purchase consideration discharged)