Question

A Ltd. purchased a running business from B Ltd. for a sum of ₹ 6,00,000 payable by issue of 12,000 equity shares of ₹ 10 each at a premium of ₹ 10 per share. The assets and liabilities consisted of the following:}
Sundry Assets ₹ 6,45,000
Sundry Liabilities ₹ 90,000 Pass journal entries in the books of A Ltd.

Hint:

When a company acquires a business, compare net assets with the purchase consideration to determine goodwill. The journal entry must record both asset/liability values and how payment is made.

Answer 1

Step 1: Calculate Net Assets Acquired

\[ \text{Net Assets} = \text{Assets} - \text{Liabilities} = ₹ 6,45,000 - ₹ 90,000 = ₹ 5,55,000 \]

Step 2: Calculate Purchase Consideration Paid

\[ \text{Consideration} = 12,000 \text{ shares} × ₹ 20 = ₹ 2,40,000 \text{ (face ₹ 10 + premium ₹ 10)} = ₹ 6,00,000 \]

Step 3: Identify Goodwill (if any)

\[ \text{Goodwill} = \text{Purchase Consideration} - \text{Net Assets} = ₹ 6,00,000 - ₹ 5,55,000 = ₹ 45,000 \]

Journal Entries:

Particulars	Amount (₹)
Sundry Assets A/c Dr.  Goodwill A/c Dr.      To Sundry Liabilities A/c      To B Ltd. A/c  (Being assets and liabilities taken over and goodwill recorded)	6,45,000  45,000  90,000  6,00,000
B Ltd. A/c Dr.      To Equity Share Capital A/c      To Securities Premium A/c  (Being consideration discharged by issue of 12,000 shares of ₹10 each at ₹10 premium)	6,00,000  1,20,000  1,20,000