Question

Govind Pal Ltd., purchased running business of Hari Kishan for a purchase consideration of Rs. 20,00,000 and it took over their assets and liabilities as follows:

Land Rs. 3,00,000; Plant Rs. 5,00,000; Building Rs. 4,00,000; Cash Rs.50,000; Sundry Debtors Rs. 1,00,000; Sundry Creditors Rs. 70,000. It was decided between them to settle purchase consideration on the following basis : 20% in cash, 40% of the balance amount by accepting a bill of exchange and rest by issuing shares of Rs. 10 each at a premium of 20%.

Answer 1

JOURNAL

$\begin{array}{cccccc}\text{Date}& \text{Paticulars}& & \text{L.F.}& \text{Debit}& \text{Credit}\\ & & & & \text{(Rs)}& \text{(Rs)}\\ & \text{Land A/c}& \text{Dr.}& & 3,00,000& \\ & \text{Plant A/c}& \text{Dr.}& & 5,00,000& \\ & \text{Building A/c}& \text{Dr.}& & 4,00,000& \\ & \text{Cash A/c}& \text{Dr.}& & 50,000& \\ & \text{Sundry Debtors A/c}& \text{Dr.}& & 1,00,000& \\ & \text{Goodwill A/c(Balancing Figure)}& \text{Dr.}& & 7,20,000& \\ & \text{To Sundry Creditors A/c}& & & & 70,000\\ & \text{To Hari Kishan A/c}& \text{Dr.}& & & 20,00,000\\ & \underset{–}{\text{(Being assets and liabilities of Hari Kishan taken over)}}& & & & \\ & \text{Hari Kishan A/c}& \text{Dr.}& & 20,00,000& \\ & \text{To Cash A/c}& & & & 4,00,000\\ & \text{To Bills Payable A/c}& & & & 6,40,000\\ & \text{To Equity Share capital A/c}& & & & 8,00,000\\ & \text{To Securities Premium Reserve A/c}& & & & 1,60,000\\ & \text{(Being Hari Kishan is paid through cash, Bill of exchange and equity shares)}& & & & \end{array}$