Question

Priti Ltd. purchased assets worth ₹5,40,000 and took over liabilities of ₹1,20,000 of Payal Ltd. for a purchase consideration of ₹5,28,000. Priti Ltd. paid half the amount by cheque, and the balance was settled by issuing 10% Debentures of ₹100 each at a premium of 10%.

Hint:

In case of debentures issued at a premium, the face value and premium must be recorded separately in the Debentures Account and Securities Premium Account, respectively.

Answer 1

Step 1: Analyze the transaction. Assets taken over: ₹5,40,000
Liabilities taken over: ₹1,20,000
Purchase consideration: ₹5,28,000
Payment: Half of ₹5,28,000 = ₹2,64,000 paid by cheque.
Remaining ₹2,64,000 settled by issuing 10% Debentures.
Debentures issued at a 10% premium: \[ \text{Face Value of Debentures} = \frac{\text{₹2,64,000}}{1.10} = ₹2,40,000 \] \[ \text{Premium Amount} = ₹2,40,000 \times 10\% = ₹24,000 \] Step 2: Journal Entries: \[ \begin{array}{|l|r|l|r|} \hline \textbf{Date} & \textbf{Particulars} & \textbf{Debit (₹)} & \textbf{Credit (₹)} \\ \hline -- & \text{Sundry Assets A/c Dr.} & 5,40,000 & -- \\ & \text{To Sundry Liabilities A/c} & -- & 1,20,000 \\ & \text{To Payal Ltd. A/c} & -- & 5,28,000 \\ & \text{(Being the assets and liabilities of Payal Ltd. taken over)} & & \\ \hline -- & \text{Payal Ltd. A/c Dr.} & 5,28,000 & -- \\ & \text{To Bank A/c} & -- & 2,64,000 \\ & \text{To 10\% Debentures A/c} & -- & 2,40,000 \\ & \text{To Securities Premium A/c} & -- & 24,000 \\ & \text{(Being the purchase consideration paid, half by cheque and the remaining settled by issuing 10\% Debentures at a 10\% premium)} & & \\ \hline \end{array} \] Working Notes:

• Cheque Payment: \[ \text{By Cheque} = \frac{\text{Purchase Consideration}}{2} = ₹2,64,000 \]
• Debenture Value and Premium: \[ \text{Debentures Face Value} = \frac{\text{Remaining Amount}}{1.10} = ₹2,40,000 \]
• \[ \text{Premium Amount} = ₹2,40,000 \times 10\% = ₹24,000 \]