Paying off the Debts (Dissolution)

Q. X Ltd . took over the assets of ₹ 6, 00, 000 and liabilities of ₹ 80, 000 of Y Ltd for an agreed purchase consideration of ₹ 6, 00, 000 payable 10% in cash and the balance by the issue of 12% Debentures of ₹ 100 each . Give necessary journal entries in the books of X Ltd., assuming that:
Case (a): The debentures are issued at par.
Case (b): The debentures are issued at 20% premium.
Case (c): The debentures are issued at 10% discount.

Q.

Pass journal entries in the following cases:
(a) A Co.Ltd. issued ₹40, 000; 12% Debentures at a premium of 5% redeemable at par.
(b) A Co.Ltd. issued ₹40, 000; 12% Debentures at a discount of 10% redeemable at par.
(c) A Co.Ltd. issued ₹40, 000; 12% Debentures at par redeemable at 10% premium.
(d) A Co.Ltd. issued ₹40, 000; 12% Debentures at a discount of 5% and redeemable at 5% premium.
(e) A Co.Ltd. issued ₹40, 000; 12% Debentures at a premium of 10% redeemable at 110%.

Q. Exe Ltd. purchased the assets of the book value ₹4, 00, 000 and took over the liabilities of ₹ 50, 000 from Mohan Bros.It was agreed that the purchase consideration , settled at ₹3, 80, 000 be paid by issuing debentures of ₹ 100 each.
Pass journal entries if debenture are issued:
(a) at par
(b) at a discount of 10% and
(c) at a premium of 10%.
It was agreed that any fraction of debentures be paid in cash.

Q.

Unrecorded Liability paid at the time of dissolution is debited to __________ and credited to ___________.

1. Cash A/c, Realisation A/c

2. Cash A/c, Partner's Capital A/c

3. Partner's Capital A/c, Cash A/c

4. Realisation A/c, Cash A/c

Q. Romi Ltd. acquired assets of ₹ 20 lakhs and took over creditors of ₹ 2 lakhs from Kapil Enterprises.
Romi Ltd. issued 8% Debentures of ₹ 100 each at a discount of 25% as purchase consideration.
Record necessary journal entries in the books of Romi Ltd.

Q.

Unrecorded Liability, when paid on the dissolution of a firm, is debited to -

1. Capital A/c

2. None of these

3. Realisation A/c

4. Revaluation A/c

Q. Tetley Ltd. issued 10, 000, 9% Debentures of ₹ 100 each at a discount of 5% redeemable at the end of 5 years at a premium of 10%. Tetley Ltd. has a balance of ₹ 50, 000 in Securities Premium Reserve . Loss on Issue of debentures is to be written off equally over the life of debentures.
Pass the journal entries for writing off the Loss on Issue of Debentures.

Q.

For expenses of realisation when actual expenses are paid by the partner on behalf of the firm, realisation account is ___

1. No entry

2. Not sure

3. credited

4. debited

Q.

Anup and Sumit are equal partners in a firm. They decided to dissolve the partnership on December 31, 2102. When the balance sheet is as under

$$\begin{array}{cccccccc}& & & & \text{Balance Sheet of Anup and Sumit}& & & \\ & & & & \text{as on December 31, 2012}& & & \end{array}$$
$$\begin{array}{cccccc}\text{Capital and Liabilities}& & \text{Amt.}& \text{Assets}& & \text{Amt.}\\ \text{Sundry Creditors}& & 27,000& \text{Cash at bank}& & 11,000\\ \text{Reserve Fund}& & 10,000& \text{Sundry Debtors}& & 12,000\\ \text{Loan}& & 40,000& \text{Plants}& & 47,000\\ \text{Capitals:}& & & \text{Stock}& & 42,000\\ \text{Anup}& 60,000& & \text{Leasehold Land}& & 60,000\\ \text{Sumit}& \underset{–}{60,000}& 1,20,000& \text{Furniture}& & 25,000\\ & & \underset{–}{}& & & \underset{–}{}\\ & & 1,97,000& & & 1,97,000\\ & & \underset{–}{}& & & \underset{–}{}\end{array}$$
The assets were realised as follows
$$\begin{array}{cc}\text{Leasehold Land}& Rs.72,000\\ \text{Furniture}& Rs.22,500\\ \text{Stock}& Rs.40,500\\ \text{Plant}& Rs.48,000\\ \text{Sundry Debtors}& Rs.10,500\end{array}$$

The creditors were paid Rs. 25, 500 in full settlement. Expenses of realisation amount to Rs. 2, 500.

Prepare realisation account, bank account, partner's capital account to close the books of the firm.

Q. The expenses incurred for realisation of assets and liabilities is called expenses.

1. revaluation
2. capital
3. realisation
4. goodwill

Q.

The sundry creditors of Rs. 70, 000 are paid off at a discount of 10, 000 rupees. The journal entry is-

1. Realisation A/c Dr. 60, 000

   To Bank A/c 60, 000

2. Realisation A/c Dr. 60, 000

   To Creditors A/c 60, 000

3. Realisation A/c Dr. 80, 000

   To Bank A/c 80, 000

4. Realisation A/c Dr. 80, 000

   To Creditors A/c 80, 000

Q. Mrs. Rita chowdhary and Miss Sobha are partners in a firm , Fancy Garments Exports , sharing profits and losses equally . On 1st April, 2018, the Balance Sheet of the firm was:

Liabilities				₹	Assets			₹
Sundry Creditors				75, 000	Cash			6, 000
Bills Payable				30, 000	Bank			30, 000
Mr. Chowdharys Loan				15, 000	Stock			75, 000
Reserve Fund				24, 000	Book Debts		66, 000
Mrs. Rita Chowdharys Capital				90, 000	Less: Provision for Doubtful Debts		6, 000	60, 000
Miss Sobhas Capital				30, 000	Plant and Machinery			45, 000
					Land and Building			48, 000
				2, 64, 000				2, 64, 000

The firm was dissolved on the date given above. The following transactions took place:
(a) Mrs. Rita Chowdhary undertook to pay Mr.Chowdharys Loan and took over 50% of the Stock at a discount of 20%.
(b) Book Debts realised ₹ 54, 000; balance of the Stock was sold off at a profit of 30% on cost.
(c) Sundry Creditors were paid out at a discount of 10%. Bills Payable were paid in full .
(d) Plant and Machinery realised ₹ 75, 000. Land and Building ₹ 1, 20, 000.
(e) Mrs. Rita Chowdhary took over the goodwill of the firm at a valuation of ₹ 30, 000.
(f) An unrecorded asset of ₹ 6, 900 was handed over to an unrecorded liability of ₹ 6, 000 in full settlement.
(g) Realisation expenses were ₹ 5, 250.
Show Realisation Account, Partners Capital Accounts and Bank Account in the books of the firm.

Q. Typhoo Ltd.issued 5, 000, 9% Debentures of ₹ 100 each at a discount of 5% redeemable at the end of 5 years at a premium of 10%. Typhoo Ltd.has a balance of ₹ 2, 00, 000 in Securities Premium Reserve . Loss on Issue of debentures is to be written off equally over the life of debentures from Securities Premium Reserve to the extent possible.
Pass the journal entries for writing off the Loss on Issue of Debentures.

Q. Journalise the following:
(a) A debenture issued at ₹95, repayable at ₹ 100.
(b) A debenture issued at ₹95, repayable at ₹ 105.
(c) A debenture issued at ₹95, repayable at ₹ 105.
The face value of debenture is ₹ 100 in each of the above cases.

Q.

For settlement of a creditor by transfer of fixed assets to him, realisation account is ___

1. No entry

2. Not sure

3. credited

4. debited

Q. Alka Ltd . issued 5, 000, 10% Debentures of ​₹ 1, 000 each at a discount of 10% redeemable at a premium of 5% after 5 years . According to the terms of issue ​₹ 500 was payable on application and the balance amount on allotment of debentures. Record necessary entries regarding issue of 10% Debentures.

Q.

Do we need to pass entry for assets taken over by a creditor?

1. Yes.

   Asset A/c Dr.

   To Creditors A/c

2. Yes.

   Creditors A/c Dr.

   To Asset A/c

3. No. Don't need to pass any entry.

4. None of these

Q. Prepare a Trading and Profit and Loss account for year ending December 31, 2010 from the balances extracted to M/s Rahul Sons. Also prepare a balance sheet at the end of the year.

Account Title	Amt. (Rs.)	Account Title	Amt. (Rs.)
Stock	50, 000	Sales	1, 80, 000
Wages	3, 000	Purchase Return	2, 000
Salary	8, 000	Discount Received	500
Purchase	1, 75, 000	Provision for Bad Debts	2, 500
Sales Return	3, 000	Capital	3, 00, 000
Sundry Debtors	82, 000	Bills Payable	22, 000
Discount Allowed	1, 000	Commission Received	4, 000
Insurance	3, 200	Rent	6, 000
Rent, Rates and Taxes	4, 300	Loan	34, 800
Fixtures and Fittings	20, 000
Trade Expenses	1, 500
Bad Debts	2, 000
Drawings	32, 000
Repair and Renewals	1, 600
Travelling Expenses	4, 200
Postage	300
Telegram Expenses	200
Legal Fees	500
Bills Receivable	50, 000
Building	1, 10, 000
	5, 51, 800		5, 51, 800

Adjustments
1. Commission received in advance Rs. 1, 000.
2. Rent received Rs. 22, 000.
3. Salary outstanding Rs. 1, 000 and insurance prepaid Rs. 800.
4. Further bad debts Rs. 1, 000 and provision for bad debts @ 5% on debtors and discount on debtors @ 2%.
5. Closing stock Rs. 32, 000.
6. Depreciation on building @ 6% pa.

Q. 'Ananya Ltd.' had an authorised capital of ₹ 10, 00, 00, 000 divided into 10, 00, 000 equity shares of ₹ 100 each. The company had already issued 2, 00, 000 shares. The dividend paid per share for the year ended 31st March, 2007 was ₹ 30 . The management decided to export its products to African countries . To meet the requirements of additional funds, the finance manager put up the following three alternate proposals before the Board of Directors:
(a) Issue 47, 500 equity shares at a premium of ₹ 100 per share .
(b) Obtain a long-term loan from bank which was available at 12% per annum.
(c) Issue 9% Debentures at a discount of 5%.
After evaluating these alternatives , the company decided to issue 1, 00, 000, 9% Debentures on 1st April, 2008. The face value of each debentures was ₹ 100 . These debentures were redeemable in four installments starting from the end of third year, which were as follows:

Year	III	IV	V	VI
Amount (₹)	10, 00, 000	20, 00, 000	30, 00, 000	40, 00, 000

Prepare 9% Debenture Account form 1st April, 2008 till all the debentures were redeemed.

Q. Perfect Barcode Ltd. purchased computers from M/s. Computer Mart and paid the consideration as follows:
(a) 1, 000 , 10% Debentures of ₹ 100 each at a discount of 10% ; and
(b) Issued a cheque for ₹ 80, 000 for the balance amount.
Pass the journal entry in the books of Perfect Barcode Ltd.

Q. When we pay off the liabilities, we debit account and credit account.

1. realisation
2. capital
3. bank
4. liability

Q. Following is the Balance Sheet of Arvind and Balbir as at 31st March, 2018:

Liabilities		Amount (₹)	Assets		Amount (₹)
Trade Creditors		45, 000	Cash		750
Bills Payable		12, 000	Bank		12, 000
Mrs. Arvind's Loan		7, 500	Stock		7, 500
Mrs. Balbir's Loan		15, 000	Investments		15, 000
Reserve Fund		15, 000	Book Debts	30, 000
Investments Fluctuation Reserve		1, 500	Less: Provision for D. Debts	3, 000	27, 000
Capital A/cs:			Building		22, 500
Arvind	15, 000		Plant		30, 000
Balbir	15, 000	30, 000	Goodwill		6, 000
			Profit and Loss A/c		5, 250
		1, 26, 000			1, 26, 000

The firm was dissolved on the above date under the following arrangement:
(a) Arvind promised to pay off Mrs. Arvind's Loan and took Stock at ₹ 6, 000.
(b) Balbir took half the Investments @ 10% discount.
(c) Book Debts realised ₹ 28, 500.
(d) Trade Creditors and Bills Payable were due on average basis of one month after 31st March, but were paid immediately on 31st March @ 2% discount per annum.
(e) Plant realised ₹ 37, 500; Building ₹ 60, 000; Goodwill ₹ 9, 000 and remaining Investments ₹ 6, 750.
(f) An old typewriter , written off completely from the firm's books, now estimated to realise ₹ 450 . It was taken by Balbir at this estimated price.
(g) Realisation expenses were ₹ 1, 500.
Show Realisation Account , Capital Accounts of Partners and Bank Account.

Q. Credit balance shown by a bank column in cash book is ______.

1. Cash
2. Overdraft
3. Cash credit
4. None of the above

Q. Romi Ltd. acquired assets of ₹ 20 lakhs and took over creditors of ₹ 2 lakhs from Kapil Enterprises.
Romi Ltd. issued 8% Debentures of ₹ 100 each at a discount of 10% as purchase consideration.
Record necessary journal entries in the books of Romi Ltd.

Q.

When a partner discharges the liability of the firm, realisation account is ___

1. Debited

2. Credited

3. Not sure

4. None of these

Q. When we pay realisation expenses, we debit the account and credit the account.

1. bank
2. capital
3. realisation
4. liability

Q. A Trial Balance contains the following information :

Bad debts	Rs.5, 000
Discount allowed	Rs.4, 000
Provision for discount on debtors	Rs.2, 000
Provision for Doubtful Debts	Rs.5, 000
Sundry Debtors	Rs.50, 000

At the end of the year, it is desired to maintain a provision for debts at Rs. 4, 000 and provision for discount on debtors at Rs.2, 000. Sundry Debtors (after provision) will appear in the Balance Sheet at a figure of :

1. Rs.44, 000
2. Rs.38, 000
3. Rs.32, 300
4. Rs.44, 700

Q. From the following ledger balances, prepare a Trial balance of Shri Ramakant as on 31st March 2012.

Q.

For closure of liabilities accounts, Realisation account is ______.

1. None of these

2. Not sure

3. credited

4. debited

Q. Following are ledger balances of Mr. Jaydeep, you are required to prepare Trial Balance as on 31st March, 2012.