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12th | Company Accounts- Issue of Debentures| Question No.  21 To 25 | Ts Grewal Solution 2022-2023

Question 21:


Green Ltd. purchased the assets of Strong Ltd. for ` 40,00,000 and took over liabilities of 7,00,000 at an agreed value of ` 32,40,000. Payment was made by issuing 10% Debentures of 100 each at a discount of 10%. Pass the necessary Journal entries in the books of Green Ltd.

Answer:


In the books of Green Ltd.

Journal

Date

Particulars

 

L.F.

Debit
(
`)

Credit
(
`)

 

Sundry Assets A/c

Dr.

 

40,00,000

 

 

  To Sundry Liabilities A/c

 

 

 

7,00,000

 

  To Strong Ltd.

 

 

 

32,40,000

 

  To Capital Reserve A/c

 

 

 

60,000

 

(Being the purchase of business of Strong Ltd.)

 

 

 

 

 

 

 

 

 

 

 

Strong Ltd. A/c

Dr.

 

32,40,000

 

 

Discount on Issue of Debentures A/c (36,000×10)

Dr.

 

3,60,000

 

 

  To 10% Debentures A/c

 

 

 

36,00,000

 

(Being 36,000, 10% debentures issued as purchase consideration)

 

 

 

 

Working Notes:


Number of Debentures issued= (32,40,000/90) = 36,000 debentures

 

Question 22:


Wellbeing Ltd. took over assets of ` 9,80,000 and liabilities of ` 40,000 of HDR Ltd. at an agreed value of ` 9,00,000. Wellbeing Ltd. paid to HDR Ltd. by issue of 9% Debentures of ` 100 each at a premium of 20%. Pass necessary Journal entries to record the above transactions in the books of Wellbeing Ltd.

Answer:


In the books of Wellbeing Ltd.

Journal

Date

Particulars

 

L.F.

Debit
(
`)

Credit
(
`)

 

Sundry Assets A/c

Dr.

 

9,80,000

 

 

  To Sundry Liabilities A/c

 

 

 

40,000

 

  To HDR Ltd.

 

 

 

9,00,000

 

  To Capital Reserve A/c

 

 

 

40,000

 

(Being the purchase of business of HDR Ltd.)

 

 

 

 

 

 

 

 

 

 

 

HDR Ltd. A/c

Dr.

 

9,00,000

 

 

  To 9% Debentures A/c (7,500 × 100)

 

 

 

7,50,000

 

  To Securities Premium Reserve A/c (7,500 × 20)

 

 

 

1,50,000

 

(Being 36,000, 10% debentures issued as purchase consideration)

 

 

 

 


Working Notes:


Number of Debentures issued = (9,00,000/120) = 7,500 debentures

 

Question 23:   Neeraj Ltd. took over business of Ajay Enterprises on 1-04-2020. The details of the agreement regarding the assets and liabilities to be taken over are:


Particulars

(Book Value)

(Agreed Value)

Building

20,00,000

35,00,000

Plant and Machinery

12,00,0000

8,00,000

Stock

4,00,000

4,00,000

Trade receivables

5,00,000

4,00,000

Creditors

2,00,000

3,00,000

Outstanding Expenses

50,000

1,00,000

It was decided to pay for purchase consideration as ` 7,00,000 through Cheque and balance by issue of

2,00,000, 9% Debentures of 20 each at a premium of 25%. Journalise. (CBSE Sample Paper 2020)

Answer:


Books of Neeraj Ltd.

Journal

Date

Particular

L.F.

Debit

`

Credit

`

 

Building A/c

Plant and Machinery A/c

Stock A/c

Trade receivables A/c

Dr.

Dr.

Dr.

Dr.

 

35,00,000

8,00,000

4,00,000

4,00,000

 

 

To Creditors A/c

 

 

3,00,000

 

To Outstanding Expenses A/c

To Ajay Enterprises’s A/c

 

 

1,00,000

47,00,000

 

 

 

 

 

 

(Being purchase of Business)

 

 

 

 

 

 

 

 

 

Ajay Enterprises’s A/c                                 Dr.

 

47,00,000

 

 

To Bank A/c

To 9% Debentures A/c

 

 

7,00,000

32,00,000

 

To Securities Premium Reserve A/c

 

 

8,00,000

 

(Being 12% 1,60,000 Debentures issued of ` 20 each at a premium of 25% at `25)

 

 

 

 

 

 

 

 

Question 24:


Grown Ltd. issued 500, 10% Debentures of ` 1,000 each credited as fully paid-up to the promoters for their services to incorporate the company. It also issued 100, 10% Debentures of ` 1,000 each credited as fully paid-up to the underwriters towards their commission. Pass the Journal entries.

Answer:


In the books of Grown Ltd.

Journal

Date

Particulars

 

L.F.

Debit
(
`)

Credit
(
`)

 

Incorporation Expenses A/c

Dr.

 

5,00,000

 

 

  To Promoters A/c

 

 

 

5,00,000

 

(Being amount due to promoters for their services)

 

 

 

 

 

 

 

 

 

 

 

Promoters A/c

Dr.

 

5,00,000

 

 

  To 10% Debentures A/c (500 × 1,000)

 

 

 

5,00,000

 

(Being 500, 10% debentures issued as purchase consideration)

 

 

 

 

 

 

 

 

 

 

 

Underwriting Commission A/c

Dr.

 

1,00,000

 

 

  To Underwriters A/c

 

 

 

1,00,000

 

(Being amount due to underwriters for their services)

 

 

 

 

 

 

 

 

 

 

 

Underwriters A/c

Dr.

 

1,00,000

 

 

  To 10% Debentures A/c (100 × 1,000)

 

 

 

1,00,000

 

(Being 100, 10%  debentures issued as purchase consideration)

 

 

 

 

 

 

 

 

 

 

 

Statement of Profit and Loss A/c

Dr.

 

6,00,000

 

 

  To Incorporation Expenses A/c

 

 

 

5,00,000

 

  To Underwriting Commission A/c

 

 

 

1,00,000

 

(Being expenses transferred to statement of profit and loss at the end of year)

 

 

 

 

 

 

 

 

 

 

 

 

Question 25:


Bright Ltd. took over the assets of ` 6,60,000 and liabilities of ` 80,000 of Star 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 Bright 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:


Books of Bright Ltd.
Journal

Date

Particulars

L.F.

Debit

 (`)

Credit

 (`)

 

Assets A/c

Dr.

 

6,60,000

 

 

Goodwill A/c(Balancing Figure)

Dr.

 

20,000

 

 

     To Liabilities A/c

 

 

 

80,000

 

     To Star Ltd.

 

 

 

6,00,000

 

(Purchase of business of Star Ltd.)

 

 

 

 

 

 

 

 

60,000

 

 

Star Ltd.

Dr.

 

 

60,000

 

  To Cash A/c

 

 

 

 

 

(Payment made in cash)

 

 

 

 

 

 

 

 

 

 

(a)

Star Ltd.

Dr.

 

5,40,000

 

 

  To 12% Debentures A/c 

 

 

 

5,40,000

 

( Purchase consideration discharged by issue of 12% Debentures)

 

 

 

 

 

 

 

 

 

 

(b)

Star 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)

Star 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:

1) Number of Debentures to issued=5,40,000/120=4,500 Debentures
2) Number of Debentures to issued=5,40,000/90=6,000 Debentures

 

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