Volume-2 | Chapter-2 | Question 16 to 20 | Issue of Debentures | Ts grewal solution 2020-21 | Class-12th

Page No 9.53:

Question 16:

Reliance Ltd. purchased machinery costing  `  1,35,000 . It was agreed that the purchase consideration be paid by issuing 9% Debentures of  `  100 each . Assume debentures have been issued
(i) at par and
(ii)at a discount of 10%.
Give necessary journal entries.



Answer:

 

Case 1

Books of Reliance Ltd.

Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

Machinery A/c

Dr.

 

1,35,000

 

 

To Vendor A/c

 

 

1,35,000

 

(Machinery Purchases)

 

 

 

 

 

 

 

 

 

Vendor A/c

Dr.

 

1,35,000

 

 

To 9% Debenture A/c

 

 

1,35,000

 

(Issued 1,350 debentures at par)

 

 

 

 

 

 

 

 

 

Working Note:

 

Number of debentute to be issued= Purchase consideration/issue price =1,35,000/100=1,350 Debentures

 

Case 2

Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

Machinery A/c

Dr.

 

1,35,000

 

 

To Vendor A/c

 

 

1,35,000

 

(Machinery purchased)

 

 

 

 

 

 

 

 

 

Vendor A/c

Dr.

 

1,35,000

 

 

Discount on Issue of Debentures A/c

Dr.

 

15,000

 

 

To 9% Debenture A/c

 

 

1,50,000

 

(Issued 1,500 debentures at 10% discount)

 

 

 

 

 

 

 

 

 

Working Note:

 

Number of debentute to be issued= Purchase consideration/issue price =1,35,000/=1,500 Debentures



Page No 9.53:

Question 17:

Bright Ltd. took over the assets of ` 6,60,000 and liabilities of ` 80,000 of Star 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 Bright 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.



Answer:

Books of Bright Ltd.
Journal

Date

Particulars

L.F.

Debit

Amount

(`)

Credit

Amount

(`)

 

Assets A/c

Dr.

 

6,60,000

 

 

Goodwill A/c(Balancing Figure)

Dr.

 

20,000

 

 

     To Liabilities A/c

 

 

 

80,000

 

     To Star Ltd.

 

 

 

6,00,000

 

(Purchase of business of Star Ltd.)

 

 

 

 

 

 

 

 

60,000

 

 

Star Ltd.

Dr.

 

 

60,000

 

  To Cash A/c

 

 

 

 

 

(Payment made in cash)

 

 

 

 

 

 

 

 

 

 

(a)

Star Ltd.

Dr.

 

5,40,000

 

 

  To 12% Debentures A/c 

 

 

 

5,40,000

 

( Purchase consideration discharged by issue of 12% Debentures)

 

 

 

 

 

 

 

 

 

 

(b)

Star Ltd.

Dr.

 

5,40,000

 

 

  To 12% Debentures A/c 

 

 

 

4,50,000

 

  To Security Premium Reserve A/c

 

 

 

90,000

 

( Purchase consideration discharged by issue of 12% Debentures)

 

 

 

 

 

 

 

 

 

 

(c)

Star Ltd.

Dr.

 

5,40,000

 

 

Discount on Issue of Debentures A/c

Dr.

 

60,000

 

 

  To 12% Debentures A/c 

 

 

 

6,00,000

 

( Purchase consideration discharged by issue of 12% Debentures)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Working Note:

 

1) Number of Debentures to issued=5,40,000/120=4,500 Debentures
2) Number of Debentures to issued=5,40,000/90=6,000 Debentures



Page No 9.53:

Question 18:

Star Ltd. took over the assets of ` 6,60,000 and liabilities of ` 80,000 of Moon Ltd. for ` 6,00,000. Give necessary Journal entries in the books of Star 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:

Journal

Date

Particulars

L.F.

Debit

Amount

(`)

Credit

Amount

(`)

 

Assets A/c

Dr.

 

6,60,000

 

 

Goodwill A/c (Balancing Figure)

Dr.

 

20,000

 

 

     To Liabilities A/c

 

 

 

80,000

 

     To Moon Ltd.

 

 

 

6,00,000

 

(Purchase of business took over)

 

 

 

 

 

 

 

 

 

 

a.

Moon Ltd.

Dr.

 

6,00,000

 

 

  To Cash A/c

 

 

 

60,000

 

  To 12% Debentures A/c 

 

 

 

5,40,000

 

(Purchase consideration discharged)

 

 

 

 

 

 

 

 

 

 

b.

Moon 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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Page No 9.54:

Question 19:

Romi Ltd. acquired assets of  ` 20 lakhs and took over creditors of  ` 2 lakhs from Kapil Enterprises.
Romi Ltd. issued 8% Debentures  of  ` 100 each at a discount of 10% as purchase consideration.
Record necessary journal entries in the books of Romi Ltd.



Answer:

Books of Romi Ltd.

Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

Assets A/c

Dr.

 

20,00,000

 

 

To Creditors A/c

 

 

2,00,000

 

To Kapil Enterprises

 

 

18,00,000

 

(Assets purchased and Creditors took over from Kapil Enterprises)

 

 

 

 

 

 

 

 

 

Kapil Enterprises

Dr.

 

18,00,000

 

 

Discount on Issue of Debentures A/c

Dr.

 

2,00,000

 

 

To 8% Debentures A/c

 

 

20,00,000

 

(Issued 20,000 8% Debentures of Rs 100 each at discount of 10% to Kapil Enterprises)

 

 

 

 

 

 

 

 

 

Working Note:

 

Number of debentute to be issued= Purchase consideration/issue price =18,00,000/100-10

=18,00,000/90=20,000 Debentures



Page No 9.54:

Question 20:

Exe Ltd. purchased the assets of the book value  `4,00,000 and took over the liabilities of ` 50,000 from Mohan Bros.It was agreed that the  purchase consideration ,settled at  `3,80,000 be paid by issuing debentures  of ` 100 each.
Pass journal entries if debenture are issued: 
(a) at par
(b) at a discount of 10% and
(c) at a premium of 10%.
It was agreed that any fraction of debentures be paid in cash.



Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit Amount

Rs

 

Assets A/c

Dr.

 

4,00,000

 

 

Goodwill A/c (balancing figure)

Dr.

 

30,000

 

 

To Liabilities A/c

 

 

50,000

 

To Mohan Bros. A/c

 

 

3,80,000

 

(Asset and liabilities purchased from Mohan Bros.)

 

 

 

 

 

 

 

 

 

Case 1 When Debentures are issued at Par

Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

Mohan Bros.

Dr.

 

3,80,000

 

 

To Debenture A/c

 

 

3,80,000

 

(Issued 3,800 debentures at par)

 

 

 

 

 

 

 

 

 

Working Note:

 

Number of debentute to be issued= Purchase consideration/issue price =3,80,000/100 =3,800 Debentures

 

Case 2 When Debentures are issued at 10% discount

Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

Mohan Bros.

Dr.

 

3,80,000

 

 

Discount on issue of Debenture A/c

Dr.

 

42,220

 

 

To Debenture A/c

 

 

4,22,200

 

To Bank A/c

 

 

20

 

(Issued 4,222 Debentures of Rs 100 each at 10% discount to Mohan Bros. and fraction of debentures is paid in cash)

 

 

 

 

 

 

 

 

 

 

Working Note:

 

Number of debentute to be issued= Purchase consideration/issue price =3,80,000/100-10

=18,00,000/90=4,222.2 Debentures

 

 

Case 3 When Debentures are issued at 10% premium

 

Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

Mohan Bros.

Dr.

 

3,80,000

 

 

To Debenture A/c

 

 

3,45,400

 

To Securities Premium A/c

 

 

34,540

 

To Bank A/c

 

 

60

 

(Issued 3,454 Debentures of Rs 100 each at 10% premium to Mohan Bros. and fraction of debentures is paid in cash)

 

 

 

 

 

 

 

 

 

Working Note:

 

Number of debentute to be issued= Purchase consideration/issue price =3,80,000/100+10

=18,00,000/110=3454.6 Debentures

 


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