T.S. Grewal Class 12 Vol 2 Chapter 2 Q.28 - Issue of Debentures

Question 28

Star Ltd. took over the assets of ₹6,60,000 and liabilities of ₹80,000 of Moon Ltd. for ₹6,00,000. Give the necessary Journal entries in the books of Star Ltd., assuming: Case (1): the purchase consideration was payable 10% in cash and the balance in 5,400; 12% Debentures of ₹100 each. Case (2): the purchase consideration was payable 10% in cash and the balance in 4,500; 12% Debentures of ₹100 each, issued at a 20% premium.

Solution

JOURNAL

Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	Assets A/c    Dr.		6,60,000
	Goodwill A/c (balancing figure)    Dr.		20,000
	To Liabilities A/c			80,000
	To Moon Ltd. A/c			6,00,000
	(Business of Moon Ltd. taken over)
Case (1)
	Moon Ltd. A/c    Dr.		6,00,000
	To Cash A/c			60,000
	To 12% Debentures A/c			5,40,000
	(Purchase consideration discharged, 10% in cash and the balance in 5,400; 12% Debentures of ₹100 each at par)
Case (2)
	Moon Ltd. A/c    Dr.		6,00,000
	To Cash A/c			60,000
	To 12% Debentures A/c			4,50,000
	To Securities Premium Reserve A/c			90,000
	(Purchase consideration discharged, 10% in cash and the balance in 4,500; 12% Debentures of ₹100 each at a 20% premium)

Working Note: Net assets acquired = 6,60,000 − 80,000 = ₹5,80,000. Goodwill = 6,00,000 − 5,80,000 = ₹20,000.