Question

Sunlock Ltd. purchased assets of book value \u20b9 50,00,000 and took over liabilities of \u20b9 6,00,000 from Moondock Ltd. It paid the purchase consideration by issue of \u20b9 46,00,000, 8% debentures of \u20b9 100 each at a discount of 10%. Record the journal entries in the books of Sunlock Ltd.

Hint:

When debentures are issued at discount, include the discount in debit side and calculate debentures based on issue price.

Answer 1

Working:

Issue price per debenture = ₹100 − 10% = ₹90

Number of debentures = ₹46,00,000 ÷ ₹90 = 51,111.11 ≈ 51,112 debentures (rounded)

Journal Entries:

1. For purchase of assets and liabilities:

Particulars	Dr (₹)	Cr (₹)
Sundry Assets A/c	50,00,000
To Sundry Liabilities A/c		6,00,000
To Moondock Ltd.		44,00,000
(Being purchase of business from Moondock Ltd.)

 

2. For discharge of purchase consideration by issue of debentures:

Particulars	Dr (₹)	Cr (₹)
Moondock Ltd. A/c	46,00,000
Discount on Issue of Debentures A/c	5,11,200
To 8% Debentures A/c		51,11,200
(Being issue of 51,112 debentures of ₹100 at 10% discount in settlement of consideration)

 

Final Answer: 51,112 debentures issued at 10% discount to settle ₹46,00,000.