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Question
Green Ltd. purchased the assets of Strong Ltd. for ₹ 40,00,000 and took over liabilities of 7,00,000 at an agreed value of ₹ 32,40,000. Payment was made by issuing 10% Debentures of 100 each at a discount of 10%. Pass the necessary Journal entries in the books of Green Ltd.
Solution
In the books of Green Ltd.
Journal
|
Date |
Particulars |
|
L.F. |
Debit |
Credit |
|
|
Sundry Assets A/c |
Dr. |
40,00,000 |
|
|
|
|
To Sundry Liabilities A/c |
|
|
7,00,000 |
|
|
|
To Strong Ltd. |
|
|
32,40,000 |
|
|
|
To Capital Reserve A/c |
|
|
60,000 |
|
|
|
(Being the purchase of business of Strong Ltd.) |
|
|
|
|
|
|
|
|
|
||
|
|
Strong Ltd. A/c |
Dr. |
32,40,000 |
|
|
|
|
Discount on Issue of Debentures A/c (36,000×10) |
Dr. |
3,60,000 |
|
|
|
|
To 10% Debentures A/c |
|
|
36,00,000 |
|
|
|
(Being 36,000, 10% debentures issued as purchase consideration) |
Working Notes:
Number of Debentures issued= (32,40,000/90) = 36,000 debentures.
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