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Question
Exe Ltd. purchased the assets of the book value ₹4,00,000 and took over the liabilities of ₹ 50,000 from Mohan Bros.It was agreed that the purchase consideration ,settled at ₹3,80,000 be paid by issuing debentures of ₹ 100 each.
Pass journal entries if debenture are issued:
(a) at par
(b) at a discount of 10% and
(c) at a premium of 10%.
It was agreed that any fraction of debentures be paid in cash.
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Solution
Journal
|
Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
|
|
Assets A/c |
Dr. |
|
4,00,000 |
|
|
|
Goodwill A/c (balancing figure) |
Dr. |
|
30,000 |
|
|
|
To Liabilities A/c |
|
|
50,000 |
|
|
|
To Mohan Bros. A/c |
|
|
3,80,000 |
|
|
|
(Asset and liabilities purchased from Mohan Bros.) |
|
|
|
|
Case 1 When Debentures are issued at Par
|
Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
|
|
Mohan Bros. |
Dr. |
|
3,80,000 |
|
|
|
To Debenture A/c |
|
|
3,80,000 |
|
|
|
(Issued 3,800 debentures at par) |
|
|
|
|
Working Note:
No.of.debentures to be issued =
`"Purchase Consideration"/"Issue Price"`
`= 380000/100 = 3800 "debentures"`
Case 2 When Debentures are issued at 10% discount
Journal
|
Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
|
|
Mohan Bros. |
Dr. |
|
3,80,000 |
|
|
|
Discount on issue of Debenture A/c |
Dr. |
|
42,220 |
|
|
|
To Debenture A/c |
|
|
4,22,200 |
|
|
|
To Bank A/c |
|
|
20 |
|
|
|
(Issued 4,222 Debentures of Rs 100 each at 10% discount to Mohan Bros. and fraction of debentures is paid in cash)
|
|
|
|
|
Working Note:
No.of. debentures to be issued =
`"Purchase Consid eration"/"Issue Price"`
`= 380000/(100 - 10) = 380000/90`
= 4222.2 debentures
Case 3 When Debentures are issued at 10% premium
Journal
|
Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
|
|
Mohan Bros. |
Dr. |
|
3,80,000 |
|
|
|
To Debenture A/c |
|
|
3,45,400 |
|
|
|
To Securities Premium A/c |
|
|
34,540 |
|
|
|
To Bank A/c |
|
|
60 |
|
|
|
(Issued 3,454 Debentures of Rs 100 each at 10% premium to Mohan Bros. and fraction of debentures is paid in cash) |
|
|
|
|
Working Note :
No.of.debentures to be issued =
`"Purchase Consideration"/"Issue Price"`
`= 380000/(100 + 10) = 380000/110`
= 3454.6 debentures
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