Question:
KM Ltd. acquired assets worth ₹ 7,20,000 and took over liabilities of ₹ 2,00,000 of LS Ltd. for a purchase consideration of ₹ 9,60,000. KM Ltd. issued 12% debentures of ₹ 100 each at a discount of 4% in favour of LS Ltd. for payment of purchase consideration. Pass necessary journal entries for the above transactions in the books of KM Ltd.
KM Ltd. acquired assets worth ₹ 7,20,000 and took over liabilities of ₹ 2,00,000 of LS Ltd. for a purchase consideration of ₹ 9,60,000. KM Ltd. issued 12% debentures of ₹ 100 each at a discount of 4% in favour of LS Ltd. for payment of purchase consideration. Pass necessary journal entries for the above transactions in the books of KM Ltd.
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When debentures are issued at discount, consider:
\[
\text{Issue Price} = \text{Face Value} - \text{Discount}
\]
Updated On: Feb 19, 2026
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Solution and Explanation
Journal Entries in the books of KM Ltd.:
| Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|
| Sundry Assets A/c To Sundry Liabilities A/c To LS Ltd. (To record purchase of assets and liabilities) | 7,20,000 | 2,00,000 9,60,000 |
| LS Ltd. A/c Discount on Issue of Debentures A/c To 12% Debentures A/c (Issue of debentures at 4% discount) | 9,60,000 40,000 | 10,00,000 |
Calculation:
Debentures issued = ₹ 9,60,000 / 96 × 100 = ₹ 10,00,000
= 10,000 debentures
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