Question

Astha Ltd. took over assets of ₹ 20,00,000 and took over liabilities of  ₹ 1,00,000 of Nabha Ltd. for a purchase consideration of ₹ 18,00,000. Astha Ltd. paid half of the amount of purchase consideration through a bank draft and the balance amount was settled by issuing 12% Debentures of ₹ 100 each at a discount of 10% in favour of Nabha Ltd.

Pass necessary Journal entries for the above transactions in the books of Astha Ltd.

Answer 1

Journal Entries In the Books of Astha Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Sundry Assets A/c   ...Dr.		20,00,000
	To Sundry Liabilities A/c			1,00,000
	To Nabha Ltd. A/c			18,00,000
	To Capital Reserve A/c			1,00,000
	(Assets and liabilities of Nabha Ltd. taken over for a purchase consideration of ₹ 18,00,000)
2.	Nabha Ltd. A/c   ...Dr.		18,00,000
	Discount on Issue of Debentures A/c   ...Dr.		1,00,000
	To Bank A/c			9,00,000
	To 12% Debentures A/c			10,00,000
	(Purchase consideration paid half by bank draft and balance by issue of 10,000, 12% Debentures of ₹ 100 each at 10% discount)

Working note:

Net Assets taken over:

₹ 20,00,000 − ₹ 1,00,000 = ₹ 19,00,000

Purchase Consideration:

₹ 18,00,000

Therefore, Capital Reserve:

₹ 19,00,000 − ₹ 18,00,000 = ₹ 1,00,000

Half of Purchase Consideration paid by Bank Draft:

₹ 18,00,000 × `1/2` = ₹ 9,00,000

Balance payable by Debentures:

₹ 18,00,000 − ₹ 9,00,000 = ₹ 9,00,000

Issue price of each ₹ 100 Debenture at 10% discount:

₹ 100 − ₹ 10 = ₹ 90

Number of Debentures issued:

`(9,00,000)/90 = 10,000` Debentures

Face value of Debentures:

10,000 × ₹ 100 = ₹ 10,00,000

Discount on Issue of Debentures:

10,000 × ₹ 10 = ₹ 1,00,000