question_answer

Ultimate Ltd purchased machinery form Evergreen Ltd for Rs. 10,00,000 to start a business of manufacturing low cost school dresses for children belonging to low income group. In made the payment as follows: Rs 2,00,000 by cheque, 5,000, 10% Preference Shares of Rs. 100 each at par, and 3,000, 10% Debentures of Rs. 100 each at par. You are required to

(i) Pass the Journal entries for the transactions; and

(ii) Identify the values conveyed by the company.

Answer:

(i)                                                                     JOURNAL

Date	Particulars		LF	Amt (Dr)	Amt (Cr)
	Machinery A/c	Dr		10,00,000
	To Evergreen Ltd.				10,00,000
	(Being the machinery purchased from Evergreen Ltd.)
	Evergreen Ltd.	Dr		10,00,000
	To Bank A/c				2,00,000
	To 10% Preference Share Capital A/c \[(5,000\times 100)\]				5,00,000
	To 10% Debentures A/c \[(3,000\times 100)\]				3,00,000
	(Being the consideration paid by issue of cheque for Rs. 2,00,000, 5,000, 10% preference shares of Rs.100 each and 3,000, 10% debentures of Rs. 100 each)

            (ii) Values conveyed by the company is Empathy towards children belonging to low income groups.