Question

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.

Answer 1

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Assets A/c	Dr.		4,00,000
	Goodwill A/c (balancing figure)	Dr.		30,000
	To Liabilities A/c				50,000
	To Mohan Bros. A/c				3,80,000
	(Asset and liabilities purchased from Mohan Bros.)

Case 1 When Debentures are issued at Par

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Mohan Bros.	Dr.		3,80,000
	To Debenture A/c				3,80,000
	(Issued 3,800 debentures at par)

Working Note:

Case 2 When Debentures are issued at 10% discount

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Mohan Bros.	Dr.		3,80,000
	Discount on issue of Debenture A/c	Dr.		42,220
	To Debenture A/c				4,22,200
	To Bank A/c				20
	(Issued 4,222 Debentures of Rs 100 each at 10% discount to Mohan Bros. and fraction of debentures is paid in cash)

Working Note:

Case 3 When Debentures are issued at 10% premium

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Mohan Bros.	Dr.		3,80,000
	To Debenture A/c				3,45,400
	To Securities Premium A/c				34,540
	To Bank A/c				60
	(Issued 3,454 Debentures of Rs 100 each at 10% premium to Mohan Bros. and fraction of debentures is paid in cash)

Working Note: