Question

Bhushan Lamps Ltd. issued 30,000 Fully Paid-up shares of ₹ 100 each for purchase of the following assets and liabilities from Sharma & Co.

Plant	₹ 7,00,000	Stock-in-Trade	₹ 9,00,000
Land and Building	₹ 12,00,000	Sundry Creditors	₹ 2,00,000

You are required to pass necessary Journal entries.

Answer 1

Journal Entries in the Books of Bhushan Lamps Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Business Purchase A/c   ...Dr.		30,00,000
	To Sharma & Co. A/c			30,00,000
	(Purchase consideration due to Sharma & Co.)
2.	Plant A/c   ...Dr.		7,00,000
	Land and Building A/c   ...Dr.		12,00,000
	Stock-in-Trade A/c   ...Dr.		9,00,000
	Goodwill A/c   ...Dr.		4,00,000
	To Sundry Creditors A/c			2,00,000
	To Business Purchase A/c			30,00,000
	(Assets and liabilities taken over and goodwill recorded)
3.	Sharma & Co. A/c   ...Dr.		30,00,000
	To Share Capital A/c			30,00,000
	(30,000 fully paid-up shares of ₹ 100 each issued to Sharma & Co.)

Working Note:

Purchase Consideration:

30,000 fully paid-up shares of ₹ 100 each:

30,000 × ₹ 100 = ₹ 30,00,000

Net Assets Taken Over:

₹ 7,00,000 + ₹ 12,00,000 + ₹ 9,00,000 − ₹ 2,00,000

= ₹ 26,00,000

Since Purchase Consideration exceeds Net Assets:

₹ 30,00,000 − ₹ 26,00,000 = ₹ 4,00,000

Therefore, Goodwill = ₹ 4,00,000.