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Anthony Ltd. issued 20,000, 9% Debentures of ₹100 each at a 10% discount to Mithoo Ltd., from whom assets of ₹23,50,000 and liabilities of ₹6,00,000 were taken over. Pass entries in the books of Anthony Ltd., if these debentures were to be redeemed at a 5% premium. (CBSE Sample Paper 2023)
JOURNAL (Books of Anthony Ltd.)
| Date | Particulars | L.F. | Dr. (₹) | Cr. (₹) |
|---|---|---|---|---|
| Goodwill A/c Dr. | 50,000 | |||
| Assets A/c Dr. | 23,50,000 | |||
| To Mithoo Ltd.’s A/c | 18,00,000 | |||
| To Liabilities A/c | 6,00,000 | |||
| (Assets and liabilities taken over from Mithoo Ltd.; Goodwill recognised as the excess of consideration — valued at the debentures’ issue price — over net assets acquired) | ||||
| Mithoo Ltd.’s A/c Dr. | 18,00,000 | |||
| Discount on Issue of Debentures A/c Dr. | 2,00,000 | |||
| Loss on Issue of Debentures A/c Dr. | 1,00,000 | |||
| To 9% Debentures A/c | 20,00,000 | |||
| To Premium on Redemption of Debentures A/c | 1,00,000 | |||
| (20,000; 9% Debentures of ₹100 each issued to Mithoo Ltd. at a 10% discount, in discharge of the assets and liabilities taken over, redeemable at a 5% premium) |
Working Note: Net assets acquired = 23,50,000 − 6,00,000 = ₹17,50,000. Consideration (at issue price ₹90 × 20,000) = ₹18,00,000. Goodwill = 18,00,000 − 17,50,000 = ₹50,000. Discount on issue (20,000 × ₹10) = ₹2,00,000. Premium on redemption (20,000 × ₹5) = ₹1,00,000, matched by an equal Loss on Issue of Debentures.
Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
This guide covers "T.S. Grewal Class 12 Vol 2 Chapter 2 Q.24 - Issue of Debentures", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to Chapter 2 - Issue of Debentures.
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