Question

Vayee Ltd. purchased the following assets of E.X. Ltd.:

Land and Building of ₹ 60,00,000 at ₹ 84,00,000; Plant and Machinery of ₹ 40,00,000 at ₹ 36,00,000.

The purchase consideration was ₹ 1,10,00,000. Payment was made by accepting a Bill of Exchange in favour of E.X. Ltd. of ₹ 20,00,000 and remaining by issue of 8% debentures of ₹ 100 each at a premium of 20%.

Record the necessary journal entries for the above transactions in the books of Vayee Ltd.

Answer 1

In the books of Vayee Limited
Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Land & Buildings A/c   ...Dr.		84,00,000	-
	Plant & Machinery A/c   ...Dr.		36,00,000	-
	To E.X. Ltd.		-	1,10,00,000
	To Capital Reserve A/c (Balancing figure)		-	10,00,000
	(Being assets purchased from E.X. Ltd and excess of Assets acquired over purchase consideration transferred to Capital Reserve A/c.)
2.	E.X. Ltd.   ...Dr.		1,10,00,000	-
	To Bills Payable A/c		-	20,00,000
	To 8% Debentures A/c (75,000 × 100)		-	75,00,000
	To Securities Premium Reserve A/c (75,000 × 20)		-	15,00,000
	(Being purchase consideration due to E.X. Ltd., settled by issuing 75,000 debentures of Rs. 100 per debenture at a premium of Rs. 20 per debenture and bill payable of Rs. 20,00,000.)

Working Note:

Number of debentures to be issued = `"Purchase Consideration"/"Issue Price"`

= `("1,10,00,000" - "20,00,000")/"(100 + 20)"` 

= 75,000 debentures