Question

Devi Ltd., on 1^st 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.

Answer 1

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				70,000
	To P & Co.				5,50,000
	(Purchase of assets and liabilities of P & Co.)
	P& Co.	Dr.		5,50,000
	Loss on Issue of Debentures A/c	Dr.		25,000
	To12% Debentures A/c				5,00,000
	To Securities Premium A/c				50,000
	To Premium in Redemption of Debentures A/c				25,000
	(5,000 debentures issued at premium of 10% with a term redeemable at premium of 5%)
	Profit and Loss Appropriation A/c	Dr.		2,50,000
	To Debentures Redemption Reserve (DRR) A/c				2,50,000
	(DRR created out of profit)
	12% Debentures A/c	Dr.		5,00,000
	Premium on Redemption of Debentures A/c	Dr.		25,000
	To Debenturesholders’ (P & Co.) A/c				5,25,000
	(Amount due on redemption)
	Debenturesholders’ A/c	Dr.		5,25,000
	To Bank A/c				5,25,000
	(Amount paid to debenturesholders)
	Debentures Redemption Reserve A/c	Dr.		2,50,000
	To General Reserve A/c				2,50,000
	(DRR transferred to General Reserve)