Question

Sumi Ltd. acquired assets of ₹ 8,00,000 and took over sundry creditors of ₹ 2,00,000 from Pandora Ltd. for a purchase consideration of ₹ 9,00,000. The payment was made by issuing a cheque of ₹ 4,60,000 and the remaining amount by issuing 9\% Debentures of ₹ 100 each at a premium of 10\%. Pass the necessary journal entries for the above transactions in the books of Sumi Ltd.

Hint:

When issuing debentures at a premium, the premium amount is credited to a separate account, as it represents additional capital raised above the nominal value of the debentures.

Answer 1

The following journal entries will be recorded in the books of Sumi Ltd.: \begin{center} \renewcommand{\arraystretch}{1.5} \begin{tabular}{|p{10cm}|r|r|} \hline Particulars & Dr Amount (₹) & Cr Amount (₹)
\hline Assets A/c & 8,00,000 & --
Sundry Creditors A/c & -- & 2,00,000
To Pandora Ltd. & -- & 9,00,000
(Being the purchase of assets and assumption of liabilities) & &
\hline Pandora Ltd. A/c & 9,00,000 & --
To Bank A/c & -- & 4,60,000
To 9\% Debentures A/c & -- & 4,00,000
To Securities Premium A/c & -- & 40,000
(Being payment made to Pandora Ltd. through cheque and issue of debentures at a 10\% premium) & &
\hline \end{tabular} \end{center} Explanation: - Sumi Ltd. acquired assets worth ₹ 8,00,000 and took over creditors worth ₹ 2,00,000 for a total purchase consideration of ₹ 9,00,000. - The payment of ₹ 9,00,000 was made through: - ₹ 4,60,000 by cheque. - ₹ 4,00,000 by issuing 9\% debentures at par, and the remaining ₹ 40,000 was credited to the Securities Premium Account as the debentures were issued at a 10\% premium.