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Question
Devi Ltd., on 1st April 2006 acquired assets of the value of Rs 6,00,000 and liabilities worth Rs 70,000 from P & Co., at an agreed value of Rs 5,50,000. Devi Ltd. issued 12% Debentures of Rs 100 each at a premium of 10% in full satisfaction of purchase consideration. The Debentures were redeemable 3 years later at a premium of 5%. Pass entries to record the above including redemption of debentures.
Solution
|
Journal |
|||||
|
Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
|
|
Assets A/c |
Dr. |
|
6,00,000 |
|
|
|
Goodwill A/c (Bal. Fig.) |
Dr. |
|
20,000 |
|
|
|
To Liabilities A/c |
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|
70,000 |
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|
|
To P & Co. |
|
|
5,50,000 |
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|
|
(Purchase of assets and liabilities of P & Co.) |
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|
|
|
|
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|
|
|
|
|
|
|
P& Co. |
Dr. |
|
5,50,000 |
|
|
|
Loss on Issue of Debentures A/c |
Dr. |
|
25,000 |
|
|
|
To12% Debentures A/c |
|
|
5,00,000 |
|
|
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To Securities Premium A/c |
|
|
50,000 |
|
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|
To Premium in Redemption of Debentures A/c |
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|
25,000 |
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(5,000 debentures issued at premium of 10% with a term redeemable at premium of 5%) |
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Profit and Loss Appropriation A/c |
Dr. |
|
2,50,000 |
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To Debentures Redemption Reserve (DRR) A/c |
|
|
2,50,000 |
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(DRR created out of profit) |
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12% Debentures A/c |
Dr. |
|
5,00,000 |
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Premium on Redemption of Debentures A/c |
Dr. |
|
25,000 |
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|
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To Debenturesholders’ (P & Co.) A/c |
|
|
5,25,000 |
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(Amount due on redemption) |
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Debenturesholders’ A/c |
Dr. |
|
5,25,000 |
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To Bank A/c |
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5,25,000 |
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(Amount paid to debenturesholders) |
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Debentures Redemption Reserve A/c |
Dr. |
|
2,50,000 |
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To General Reserve A/c |
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2,50,000 |
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(DRR transferred to General Reserve) |
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Notes
Number of debentures to be issued=`"Purchase Consideration" / "Issue Price"=(5,50,000)/((100+10))=(5,50,000)/110`
= `5,000 `debenture
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