question_answer

(i) Laxmi Ltd purchased the assets of Shri Ram Ltd for Rs. 5,00,000, payable Rs. 1,00,000 in cash and the balance by issue of 7% debentures of Rs. 100. Pass necessary journal entries. (ii) Identify the value shown by the company by issuing debentures for consideration other than cash.

Answer:

(i)                                                                     JOURNAL

Date	Particulars		LF	Amt (Dr)	Amt (Cr)
	Sundry Assets A/c	Dr		5,00,000
	To Shri Ram Ltd				5,00,000
	(Being purchase of the business of new company)
	Shri Ram Ltd	Dr		5,00,000
	To Bank A/c				1,00,000
	To 7% Debentures A/c \[\left( 4,000\times 100 \right)\]				4,00,000
	(Being payment to Shri Ram Ltd by issue of 4,000 debentures of Rs.100 each and Rs. 1,00,000 in cash)

Working Note Number of Shares Issued\[=\frac{Amount\,Due}{Issue\,\Pr ice}\] \[=\frac{4,00,000}{100}=4,000\,Debentures\] (ii) Value shown by the company is sharing. By issuing debentures, the company has promised to share its future profits as interest with the vendors.