Question

X Ltd. took over assets of ₹ 5,00,000 and liabilities of ₹ 1,00,000 of another company at an agreed price of ₹ 3,80,000. The purchase consideration was discharged by issuing debentures of ₹ 100 each at a discount of 10%. It was agreed that any fraction of the debenture be paid in cash. Give journal entries in the books of X Ltd.

Answer 1

In the books of X Ltd.
Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Sundry Assets A/c   ....Dr.		5,00,000	-
	To Sundry Liabilities A/c		-	1,00,000
	To Capital Reserve A/c		-	20,000
	To Vendor’s A/c (Balancing fig.)		-	3,80,000
	(Being assets and liabilities taken over.)
2.	Vendor’s A/c   ....Dr.		3,80,000	-
	Discount on Issue of Debentures A/c   ....Dr.		42,220	-
	To Debentures A/c		-	4,22,200
	To Bank A/c		-	20
	(Being debentures issued at 10% discount, fractional paid in cash.)

Working Note:

1. Number of Debentures = ₹ 3,80,000 ÷ ₹ 90 = 4,222.22
2. Debentures issued = 4,222; Fractional ₹ 20 paid in cash.
3. Discount = 4,222 × ₹ 10 = ₹ 42,220