Question:
Apoorv Ltd. acquired building worth Rs 15,50,000, Machinery worth Rs 11,40,000 and Furniture worth Rs 1,10,000 from Dhruv Ltd. and took over its liabilities of Rs 2,00,000 for a purchase consideration of Rs 25,00,000. Apoorv Ltd. paid the purchase consideration by issuing 12% debentures of Rs 100 each at a premium of 25%.
Pass the necessary journal entries in the books of Apoorv Ltd. for the above transactions.
Apoorv Ltd. acquired building worth Rs 15,50,000, Machinery worth Rs 11,40,000 and Furniture worth Rs 1,10,000 from Dhruv Ltd. and took over its liabilities of Rs 2,00,000 for a purchase consideration of Rs 25,00,000. Apoorv Ltd. paid the purchase consideration by issuing 12% debentures of Rs 100 each at a premium of 25%.
Pass the necessary journal entries in the books of Apoorv Ltd. for the above transactions.
Pass the necessary journal entries in the books of Apoorv Ltd. for the above transactions.
Show Hint
When purchasing assets/business:
1. Debit individual assets, Credit individual liabilities, Credit Vendor with Purchase Consideration (PC).
2. If Assets $>$ (Liabilities + PC), credit difference to Capital Reserve.
3. If (Liabilities + PC) $>$ Assets, debit difference to Goodwill.
4. When issuing shares/debentures for PC at premium/discount, calculate issue price per security and number of securities. Credit Share/Debenture Capital with Face Value and Securities Premium/Debit Discount on Issue accordingly.
Updated On: Jul 13, 2025
Hide Solution
Verified By Collegedunia
Solution and Explanation
1. Acquisition of Assets and Liabilities from Dhruv Ltd.
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
|---|---|---|---|---|
| Building A/c | 15,50,000 | |||
| Machinery A/c | 11,40,000 | |||
| Furniture A/c | 1,10,000 | |||
| To Sundry Creditors A/c | 2,00,000 | |||
| To Dhruv Ltd. | 25,00,000 | |||
| To Capital Reserve A/c | 1,00,000 | |||
| (Assets and liabilities acquired from Dhruv Ltd.) | ||||
Calculation of Capital Reserve:
Total Value of Assets Taken = Building + Machinery + Furniture
= 15,50,000 + 11,40,000 + 1,10,000
= 28,00,000
Liabilities taken = 2,00,000
Net Assets Taken = 26,00,000
Purchase consideration = 25,00,000
Capital Reserve = Net Assets Taken – Purchase consideration
26,00,000 - 25,00,000 = 1,00,000
2. Issue of 12% Debentures to Dhruv Ltd.
Face Value per Debenture: ₹100
Premium: 25%
Issue Price per Debenture: ₹100 + (25% of ₹100) = ₹125
Number of Debentures to be issued = Purchase Consideration / Issue Price per Debenture
Number of Debentures to be issued = 25,00,000 / 125 = 20,000 Debentures
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
|---|---|---|---|---|
| Dhruv Ltd. A/c | 25,00,000 | |||
| To 12% Debentures A/c | 20,00,000 | |||
| To Securities Premium Reserve A/c | 5,00,000 | |||
| (Issue of 20,000; 12% Debentures of ₹100 each at a premium of 25% in satisfaction of purchase consideration) | ||||
Explanation:
- Entry 1: Records the assets acquired and liabilities taken over. A capital reserve arises if the net assets acquired exceed the purchase consideration.
- Entry 2: Records the issue of debentures to settle the purchase consideration. The debentures are issued at a premium, so the "Securities Premium Reserve" account is credited with the premium amount.
Was this answer helpful?
1
0
Top Questions on Debentures
- Sandhya Ltd. took over the assets of ₹50,00,000 and liabilities of ₹7,00,000 of Guman Ltd. for purchase consideration of ₹40,00,000. The payment of purchase consideration was made by issue of 9% debentures of ₹100 each at a premium of 25% to Guman Ltd.
Pass necessary journal entries for the above transactions in the books of Sandhya Ltd. - Debentures which can be transferred by way of delivery and the company does not keep any record of the debentureholders are called:
- Shyamla Ltd. purchased machinery of ₹9,50,000 from Rohini Ltd. The payment was made by issue of 9% debentures of ₹100 each at a discount of 5% redeemable at a premium of 10% after four years. The number of debentures issued in favour of Rohini Ltd. will be:
- On 1st April, 2023, SM Ltd. issued 30,000, 12% debentures of ₹ 100 each at a premium of 10%, redeemable at par after four years. The company closes its books on 31st March every year. Interest on debentures is payable on 30\th September and 31st March every year on a half-yearly basis.
Pass necessary journal entries in the books of the company for issue of debentures and payment of interest for the year ended 31st March, 2024. - On 1stApril, 2023, YK Ltd. issued 20,000, 9% debentures of ₹ 100 each at a premium of 5%, redeemable after five years at par.
The company closes its books on 31st March every year. Interest on debentures is payable half yearly on 30th September and 31st March every year.
Pass necessary journal entries in the books of the company for issue of debentures and payment of interest for the year ending 31st March, 2024.
View More Questions
Questions Asked in CBSE CLASS XII exam
- Figure shows variation of Coulomb force (F) acting between two point charges with \( \frac{1}{r^2} \), \( r \) being the separation between the two charges \( (q_1, q_2) \) and \( (q_2, q_3) \). If \( q_2 \) is positive and least in magnitude, then the magnitudes of \( q_1, q_2 \), and \( q_3 \) are such that:
- CBSE CLASS XII - 2025
- Electrostatics
- Charlie’s desperate attempt to find the third level reflects his frustration with the modern world. Substantiate the above statement with evidence from the story. (The Third Level)
- After studying Entrepreneurship in Class XII, Neel completed a baking course and started a bakery. He set a target of earning a modest 10 percent return on investment in the first year. As he was supplying healthy bakery products, the demand kept increasing. Cakes and Bakes became a famous bakery in a year. He now wanted to develop a plan to define the direction and scope of Cakes and Bakes the long run. He made a marketing plan to decide if he could charge higher price to improve his return on investment, how to advertise the products, etc.
Quoting lines from the paragraph, identify and explain two types of plans discussed in the above case. - Three batteries E1, E2, and E3 of emfs and internal resistances (4 V, 2 \(\Omega\)), (2 V, 4 \(\Omega\)) and (6 V, 2 \(\Omega\)) respectively are connected as shown in the figure. Find the values of the currents passing through batteries E1, E2, and E3.
- CBSE CLASS XII - 2025
- Kirchhoff's Laws
- If \( \overrightarrow{a} + \overrightarrow{b} + \overrightarrow{c} = 0 \), \( |\overrightarrow{a}| = \sqrt{37} \), \( |\overrightarrow{b}| = 3 \), and \( |\overrightarrow{c}| = 4 \), then the angle between \( \overrightarrow{b} \) and \( \overrightarrow{c} \) is:
View More Questions