Question

Sico Ltd. took over the assets of Rs 4,80,000 and liabilities of Rs 80,000 of Mittal Ltd. for a consideration of Rs 3,20,000. Rs 20,000 were paid by an acceptance in favour of Mittal Ltd. payable after 3 months and the balance by issue of fully paid $8\%$ Preference Shares of Rs 100 each at a premium of $50\%$. Pass the necessary journal entries for the above transactions in the books of Sico Ltd.

Answer 1

Books of Sico Ltd.

JOURNAL

$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F}& \text{Dr (Rs)}& \text{Cr. (Rs)}\\ \text{(i)}& \text{Sundry Assets A/c}& \text{Dr.}& & 4,80,000& \\ & \text{To Liabilities A/c}& & & & 80,000\\ & \text{To Mittal Ltd.}& & & & 3,20,000\\ & \text{To Capital Reserve A/c (Balancing figure)}& & & & 80,000\\ & \text{(Assets and Liabilities of Mittal Ltd. taken}& & & & \\ & \text{over)}& & & & \\ \text{(ii)}& \text{Mittal Ltd.}& \text{Dr.}& & 3,20,000& \\ & \text{To Bills Payable A/c}& & & & 20,000\\ & \text{To}8\%\text{Preference Share Capital A/c}& & & & 2,00,000\\ & \text{To Securities Premium Reserve A/c}& & & & 1,00,000\\ & \text{Bills payable accepted and 200 preference}& & & & \\ & \text{shares issued at a premium of}50\%)& & & & \end{array}$

Working Note:

$\begin{array}{ccc}& & \text{Rs.}\\ \text{Total amount payable}& & 3,20,000\\ \text{Less: B/P issued}& & 20,000\\ & & \overline{\underset{–}{\underset{–}{3,00,000}}}\end{array}$

Number of Preference Shares issued=$\frac{3,00,000}{150}=2,000$