Question

Prime Ltd. took over the assets of ₹ 6,00,000 and liabilities of ₹ 1,00,000 of Rabi Ltd. for a purchase consideration of ₹ 3,60,000. Prime Ltd. issued 10% debentures of ₹ 100 each at a discount of 10% in full satisfaction of purchase consideration.

Pass the necessary journal entries in the books of Prime Ltd.

Answer 1

In the Books of Prime Ltd. Journal
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
	Sundry Assets A/c   ...Dr.		6,00,000	−
	To Liabilities A/c		−	1,00,000
	To Rabi Ltd.		−	3,60,000
	To Capital Reserve A/с		−	1,40,000
	(Being the purchase of assets and liabilities of Rabi Ltd.)
	Rabi Ltd.   ...Dr.		3,60,000	−
	Discount on Issue of Debentures A/c   ...Dr.		40,000	−
	To 10% Debentures A/c		−	4,00,000
	(Being purchase consideration discharged by issue of 4,000, 10% debentures of ₹ 100 each at 10% discount.)

Working Note:

Number of Debentures issued = `(3,60,000)/(100 - 10)`

= 4,000