Sunlock Ltd. purchased assets of book value \u20b9 50,00,000 and took over liabilities of \u20b9 6,00,000 from Moondock Ltd. It paid the purchase consideration by issue of \u20b9 46,00,000, 8% debentures of \u20b9 100 each at a discount of 10%.
Record the journal entries in the books of Sunlock Ltd.
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Solution and Explanation
Working:
Issue price per debenture = ₹100 − 10% = ₹90
Number of debentures = ₹46,00,000 ÷ ₹90 = 51,111.11 ≈ 51,112 debentures (rounded)
Journal Entries:
1. For purchase of assets and liabilities:
| Particulars | Dr (₹) | Cr (₹) |
|---|---|---|
| Sundry Assets A/c | 50,00,000 | |
| To Sundry Liabilities A/c | 6,00,000 | |
| To Moondock Ltd. | 44,00,000 | |
| (Being purchase of business from Moondock Ltd.) | ||
2. For discharge of purchase consideration by issue of debentures:
| Particulars | Dr (₹) | Cr (₹) |
|---|---|---|
| Moondock Ltd. A/c | 46,00,000 | |
| Discount on Issue of Debentures A/c | 5,11,200 | |
| To 8% Debentures A/c | 51,11,200 | |
| (Being issue of 51,112 debentures of ₹100 at 10% discount in settlement of consideration) | ||
Final Answer: 51,112 debentures issued at 10% discount to settle ₹46,00,000.
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