The following journal entries are recorded in the books of Gundola Ltd.:
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Particulars & Dr Amount (₹) & Cr Amount (₹) \\
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Assets A/c & 9,00,000 & -- \\
To Liabilities A/c & -- & 3,00,000 \\
To AK Ltd. & -- & 14,00,000 \\
(Being purchase of assets and assumption of liabilities) & & \\
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AK Ltd. A/c & 14,00,000 & -- \\
To Bank A/c & -- & 5,00,000 \\
To 8\% Debentures A/c & -- & 9,00,000 \\
(Being payment made by bank draft and issue of debentures at a discount) & & \\
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Discount on Issue of Debentures A/c & 1,00,000 & -- \\
To AK Ltd. & -- & 1,00,000 \\
(Being discount on debentures adjusted) & & \\
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Explanation:
- Gundola Ltd. acquired assets valued at ₹ 9,00,000 and assumed liabilities amounting to ₹ 3,00,000, with a total purchase consideration of ₹ 14,00,000.
- The payment was settled as follows:
- ₹ 5,00,000 via bank draft.
- The balance of ₹ 9,00,000 was settled by issuing 8% debentures at a 10% discount. The total face value of the debentures issued is ₹ 10,00,000 (calculated as ₹ 9,00,000 / 0.90). The ₹ 1,00,000 discount is recognized in the Discount on Issue of Debentures Account.