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Question

R Ltd. purchased the assets of S Ltd. for ₹5,00,000. It also agreed to take over the liabilities of S Ltd. amounted to ₹ 2,00,000 for a purchase consideration of ₹2,80,000 . The payment of S Ltd. was made by issue of 9% Debentures of ₹ 100 each at par.
Pass necessary journal entries in the books of R Ltd.

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Solution

Books of R Ltd.

Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

Assets A/c

Dr.

5,00,000

To Liabilities A/c

2,00,000

To S Ltd.

2,80,000

To Capital Reserve A/c (balancing figure)

20,000

(Asset purchased and liabilities took over from S Ltd.)

S Ltd.

Dr.

2,80,000

To 9% Debentures A/c

2,80,000

(Issued 2,800 9% Debentures of Rs 100 each)

Working Note:


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