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R Ltd. Purchased the Assets of S Ltd. for ₹5,00,000. It Also Agreed to Take Over the Liabilities of S Ltd. - Accountancy

Journal Entry

R Ltd. purchased the assets of S Ltd. for ₹5,00,000. It also agreed to take over the liabilities of S Ltd. amounted to ₹ 2,00,000 for a purchase consideration of ₹2,80,000 . The payment of S Ltd. was made by issue of 9% Debentures of ₹ 100 each at par.
Pass necessary journal entries in the books of R Ltd.

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Solution

Books of R Ltd.
Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

Assets A/c

Dr.

 

5,00,000

 

 

To Liabilities A/c

 

 

2,00,000

 

To S Ltd.

 

 

2,80,000

 

To Capital Reserve A/c (balancing figure)

 

 

20,000

 

(Asset purchased and liabilities took over from S Ltd.)

 

 

 

 

 

 

 

 

 

S Ltd.

Dr.

 

2,80,000

 

 

To 9% Debentures A/c

 

 

2,80,000

 

(Issued 2,800 9% Debentures of Rs 100 each)

 

 

 

Working Note

No.of.debentures to be issued =

`"Purchase Consideration" / "Issue Price"`

`= 280000/100 = 2800  "debentures"`

Concept: Issue of Debentures for Consideration Other than Cash
  Is there an error in this question or solution?
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APPEARS IN

TS Grewal Class 12 Accountancy - Double Entry Book Keeping Volume 2
Chapter 2 Issue of Debentures
Exercise | Q 23 | Page 54
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