Question

A Company purchased assets of the book value of ₹ 6,00,000 and took over liabilities of ₹ 1,50,000 from Golden Ltd. It was agreed that the purchase consideration, settled at ₹ 4,80,000, be paid by issuing debentures of ₹ 100 each at a premium of 10%. It was further agreed that any fraction of the debenture be paid in cash. Give journal entries in the books of the purchasing company.

Answer 1

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Sundry Assets A/c   ...Dr.		6,00,000	-
	Goodwill A/c (Balancing Figure)   ...Dr.		30,000	-
	To Sundry Liabilities A/c		-	1,50,000
	To Golden Ltd.		-	4,80,000
	(Being purchase of assets and liabilities of the Vendor company)
2.	Golden Ltd.   ...Dr.		4,80,000	-
	To Debentures A/c		-	4,36,300
	To Securities Premium A/c		-	43,630
	To Bank A/c		-	70
	(Being issue of 4,363 debentures of ₹100 each at 10% premium and the balance paid in cash)

Working Note:

Number of Debentures to be issued = `"4,80,000"/"110"`

= 4363.63 or 4,363