Question

Paragon Ltd. acquired assets of ₹ 20 lakh and took over creditors of ₹ 2 lakh from Kapil Enterprises. Paragon Ltd. issued 8% Debentures of ₹ 100 each at a discount of 10% as purchase consideration.

Record necessary Journal entries in the books of Paragon Ltd.

Answer 1

Journal Entries In the Books of Paragon Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Sundry Assets A/c   ...Dr.		20,00,000
	To Sundry Creditors A/c			2,00,000
	To Kapil Enterprises A/c			18,00,000
	(Assets and creditors of Kapil Enterprises taken over)
2.	Kapil Enterprises A/c   ...Dr.		18,00,000
	Discount on Issue of Debentures A/c   ...Dr.		2,00,000
	To 8% Debentures A/c			20,00,000
	(20,000, 8% Debentures of ₹ 100 each issued at 10% discount as purchase consideration)

Working note:

Net assets taken over:

₹ 20,00,000 − ₹ 2,00,000 = ₹ 18,00,000

Therefore, Purchase Consideration:

₹ 18,00,000

Issue price of each debenture at 10% discount:

₹ 100 − ₹ 10 = ₹ 90

Number of debentures issued:

`(18,00,000)/90 = 20,000` debentures

Face value of debentures:

20,000 × ₹ 100 = ₹ 20,00,000

Discount on Issue of Debentures:

20,000 × ₹ 10 = ₹ 2,00,000