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Question
Neon Ltd. purchased assets worth ₹ 18,00,000 and took over liabilities of ₹ 2,00,000 of Zenith Ltd. for a purchase consideration of ₹ 15,00,000, Neon Ltd. paid the amount by accepting a bill of exchange of 3,00,000 and the balance was settled by issuing 10% debentures of ₹ 100 each at a premium of 20%. Pass necessary journal entries for the above transactions in the books of Neon Ltd.
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Solution
| In the books of Neon Ltd. Journal |
||||
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
| 1. | Sundry Assets A/c ...Dr. | 18,00,000 | ||
| To Liabilities A/c | 2,00,000 | |||
| To Zenith Ltd. | 15,00,000 | |||
| To Capital Reserve A/c (Bal. Figure) | 1,00,000 | |||
| (Being purchase of assets and liabilities of Zenith Ltd.) | ||||
| 2. | Zenith Ltd. ...Dr. | 3,00,000 | ||
| To Bills Payable A/c | 3,00,000 | |||
| (Being part payment made by accepting bill of exchange) | ||||
| 3. | Zenith Ltd. A/c ...Dr. | 12,00,000 | ||
| To 10% Debentures A/c | 10,00,000 | |||
| To Securities Premium Reserve A/c | 2,00,000 | |||
| (Being remaining amount of purchase consideration discharged by issue of 10,000, 10% debentures of ₹ 100 each at a premium of 20%) | ||||
Working Notes:
Number of Debentures Issued = `(₹ 15,00,000 - ₹ 3,00,000)/(₹ 100 + ₹ 20)`
`= (₹ 12,00,000)/(₹ 120)`
= ₹ 10,000
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