Question

Grapple Ltd. took over assets of \rupee25,00,000 and liabilities of \rupee5,00,000 from Allore Ltd. for an agreed purchase consideration of \rupee18,00,000. Grapple Ltd. issued 11\% Debentures of \rupee100 each at 20\% premium in satisfaction of the purchase consideration. Pass necessary journal entries in the books of Grapple Ltd.

Hint:

Premium on issue of debentures is credited to "Securities Premium A/c" and must be disclosed under the "Reserves and Surplus" head in the Balance Sheet.

Answer 1

Step 1: Calculation of Issue Price of Debentures - Face value of debentures = \rupee100 each. - Premium = \(20\%\) of \rupee100 = \rupee20. - Issue price = \rupee100 + \rupee20 = \rupee120 per debenture. \[\text{Number of Debentures to be Issued} = \frac{\text{Purchase Consideration}}{\text{Issue Price}} = \frac{18,00,000}{120} = 15,000 \text{ Debentures}.\] Journal Entries:\begin{center}\begin{tabular}{|l|p{8cm}|c|r|}\hlineDate & Particulars & L.F. & Amount (\rupee)
\hline2025-01-14 & Sundry Assets A/c Dr. & & 25,00,000
\cline{2-4} & To Sundry Liabilities A/c & & 5,00,000
\cline{2-4} & To Allore Ltd. & & 18,00,000
\cline{2-4} & \multicolumn{3}{|l|}{(Assets and liabilities taken over from Allore Ltd.)}
\hline2025-01-14 & Allore Ltd. Dr. & & 18,00,000
\cline{2-4} & To 11\% Debentures A/c & & 15,00,000
\cline{2-4} & To Securities Premium A/c & & 3,00,000
\cline{2-4} & \multicolumn{3}{|l|}{(15,000 debentures of \rupee100 each issued at a premium of \rupee20)}
\hline\end{tabular}\end{center}