Question

Disha Ltd. took over assets of ₹ 8,00,000 and liabilities of ₹ 3,00,000 from Kirti Ltd. for a purchase consideration of ₹ 6,00,000. The payment was made by issue of 9% Debentures of ₹ 100 each at 20% premium. 

Pass the necessary journal entries for the above transactions in the books of Disha Ltd.

Answer 1

In the books of Disha Ltd.
Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Sundry Assets A/c   ...Dr.		8,00,000	-
	Goodwill A/c   ...Dr.		1,00,000	-
	To Sundry Liabilities A/c		-	3,00,000
	To Kirti Ltd.		-	6,00,000
	(Being the assets and liabilities taken over.)
2.	Kirti Ltd. A/c   ...Dr.		6,00,000	-
	To 9% Debentures A/c (5,000 × ₹100)		-	5,00,000
	To Securities Premium A/c (5,000 × ₹ 20)		-	1,00,000
	(Being the issue of 9% Debentures at 20% premium in satisfaction of purchase consideration.)

Working Note:

1. Goodwill as the balancing figure = ₹ 6,00,000 – (₹ 8,00,000 – ₹ 3,00,000) = ₹ 1,00,000
2. Number of debentures issued = ₹ 6,00,000 ÷ ₹ 120 = 5,000 debentures.