Kuber Ltd. purchased assets worth % 10,00,000 and took over liabilities of %1,00,000 of Amrit Ltd. for…………………

Question :Kuber Ltd. purchased assets worth % 10,00,000 and took over liabilities of %1,00,000 of Amrit Ltd. for a purchase consideration of @ 8,00,000. Kuber Ltd. paid % 2,60,000 through a cheque and the balance was settled by issuing 12% debentures of ¢ 100 each at a discount of 10%. Pass necessary journal entries in the books of Kuber Ltd. for the above transactions.

The correct answer is -The journal entries for the given transactions in the books of Kuber Ltd. are as follows:

To record the purchase of assets and takeover of liabilities of Amrit Ltd:

Assets Account Dr. 10,00,000 To Liabilities Account 1,00,000 To Bank Account 7,60,000 (Being assets and liabilities taken over from Amrit Ltd. and payment made through bank)

To record the issuance of 12% debentures of Rs. 100 each at a discount of 10%:

Bank Account Dr. 2,34,000 Discount on Debentures Account Dr. 26,000 To 12% Debentures Account 2,60,000 (Being issuance of 12% debentures at a discount of 10%)

Note: Discount on Debentures Account is a nominal account and is shown on the liabilities side of the Balance Sheet under the head ‘Reserves and Surplus’.

The Balance Sheet of Kuber Ltd. after the above transactions will be as follows:

Liabilities Amount (Rs.) Assets Amount (Rs.) Share Capital 8,00,000 Fixed Assets 10,00,000 Reserves & Surplus Less: Depreciation (X) (excluding DOD) X X Debentures 2,60,000 Current Assets (X) Less: Current Liabilities (X) (X) (X) DOD (X) (X) (X) Total (X) Total (X)