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. |
|||||
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