T.S. Grewal Class 12 Vol 2 Chapter 1 Q.48 - Share Capital

Question 48

Sandesh Ltd. purchased a running business from Sanchar Ltd. for ₹15,00,000, payable 10% by cheque and the balance by the issue of fully paid Equity Shares of ₹100 each at a premium of 20%. The assets and liabilities, at agreed values, consisted of: Building ₹6,50,000 (book ₹5,00,000); Plant and Machinery ₹2,50,000 (book ₹3,00,000); Stock ₹5,00,000 (book ₹6,00,000); Trade Receivables ₹2,50,000 (book ₹2,80,000); Trade Payables ₹2,00,000 (book ₹1,80,000). Pass the necessary Journal entries in the books of Sandesh Ltd.

Solution

JOURNAL (Books of Sandesh Ltd.)

Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	Goodwill A/c    Dr.		50,000
	Building A/c    Dr.		6,50,000
	Plant and Machinery A/c    Dr.		2,50,000
	Stock A/c    Dr.		5,00,000
	Trade Receivables A/c    Dr.		2,50,000
	To Trade Payables A/c			2,00,000
	To Sanchar Ltd.			15,00,000
	(Business of Sanchar Ltd. taken over at agreed values; purchase consideration of ₹15,00,000 exceeds net assets of ₹14,50,000 by ₹50,000, recognised as Goodwill)
	Sanchar Ltd.    Dr.		15,00,000
	To Bank A/c			1,50,000
	To Share Capital A/c			11,25,000
	To Securities Premium Reserve A/c			2,25,000
	(10% of the purchase consideration paid by cheque; the balance settled by 11,250 shares of ₹100 each at a 20% premium)

Note: The source’s two journal entries credit/debit “Sandesh Ltd.” (the acquiring company itself), which cannot be right; the vendor being settled is Sanchar Ltd., as corrected above.