Question

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.

Answer 1

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Assets A/c	Dr.		6,60,000
	Goodwill A/c(Balancing Figure)	Dr.		20,000
	To Liabilities A/c				80,000
	To Y Ltd.				6,00,000
	(Purchase of business of Y Ltd.)
				60,000
	Y Ltd.	Dr.			60,000
	To Cash A/c
	(Payment made in cash)
(a)	Y Ltd.	Dr.		5,40,000
	To 12% Debentures A/c				5,40,000
	( Purchase consideration discharged by issue of 12% Debentures)
(b)	Y Ltd.	Dr.		5,40,000
	To 12% Debentures A/c				4,50,000
	To Security Premium Reserve A/c				90,000
	( Purchase consideration discharged by issue of 12% Debentures)
(c)	Y Ltd.	Dr.		5,40,000
	Discount on Issue of Debentures A/c	Dr.		60,000
	To 12% Debentures A/c				6,00,000
	( Purchase consideration discharged by issue of 12% Debentures)

Working Note:

$\text{1) Number of Debentures to issued}=\frac{5,40,000}{120}=4,500\text{Debentures}$
$\text{2) Number of Debentures to issued}=\frac{5,40,000}{90}=6,000\text{Debentures}$