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Question
Wellbeing Ltd. took over assets of ₹ 9,80,000 and liabilities of ₹ 40,000 of HDR Ltd. at an agreed value of ₹ 9,00,000. Wellbeing Ltd. paid to HDR Ltd. by issue of 9% Debentures of ₹ 100 each at a premium of 20%. Pass necessary Journal entries to record the above transactions in the books of Wellbeing Ltd.
Solution
In the books of Wellbeing Ltd.
Journal
|
Date |
Particulars |
|
L.F. |
Debit |
Credit |
|
|
Sundry Assets A/c |
Dr. |
9,80,000 |
|
|
|
|
To Sundry Liabilities A/c |
|
|
40,000 |
|
|
|
To HDR Ltd. |
|
|
9,00,000 |
|
|
|
To Capital Reserve A/c |
|
|
40,000 |
|
|
|
(Being the purchase of business of HDR Ltd.) |
|
|
|
|
|
|
|
|
|
||
|
|
HDR Ltd. A/c |
Dr. |
9,00,000 |
|
|
|
|
To 9% Debentures A/c (7,500 × 100) |
|
|
7,50,000 |
|
|
|
To Securities Premium Reserve A/c (7,500 × 20) |
|
|
1,50,000 |
|
|
|
(Being 36,000, 10% debentures issued as purchase consideration) |
|
|
Working Notes:
Number of Debentures issued = (9,00,000/120) = 7,500 debentures.
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