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.
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.
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When debentures are issued at discount, include the discount in debit side and calculate debentures based on issue price.
Updated On: Jul 7, 2025
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Solution and Explanation
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.
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