Check sibling questions

Vedesh Ltd. purchased a running business of Vibhu Enterprises for a sum of ₹ 12,00,000. Vedesh Ltd. paid ₹ 60,000 by drawing a promissory note in favour of Vibhu Enterprises., ₹1,90,000 through bank draft and balance by issue of 8% debentures of ₹ 100 each at a discount of 5%. The assets and liabilities of Vibhu Enterprises consisted of Fixed Assets valued at ₹ 17,30,000 and Trade Payables at ₹ 3,20,000. You are required to pass necessary journal entries in the books of Vedesh Ltd.

Answer

Date Particulars L.F Dr (Amount) Cr (Amount)
  Sundry Assets A/c  Dr   1730000  
             To Sundry Liabilities      320000
             To Vibhu Enterprises     1200000
             To Capital Reserve     210000
  (Purchase of Business of Vibhu Enterprises)      

 

NOTE : When Net assets value exceeds purchase consideration, Capital Reserve appears

When Net assets value is less than purchase consideration, Good will appears.

Date Particulars L.F Dr (Amount) Cr (Amount)
  Vedesh Ltd.  Dr   1200000  
  Discount on Issue of Debentures A/c Dr   50000  
             To Promissory Note     60000
             To Bank Draft     190000
             To 8% Debentures A/c     1000000
  (Being issue of bank draft, acceptance of bill and issue of 8% debentures in settlement of purchase consideration)      

 

Particular Amount
Amount to be paid to Vedesh 1200000
Less : Promissory Note given 60000
Less : Bank Draft Given 190000
Amount to be received from debentures after 5% Discount 950000

 

 

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Transcript

Vedesh Ltd. purchased a running business of Vibhu Enterprises for a sum of ₹ 12,00,000. Vedesh Ltd. paid ₹ 60,000 by drawing a promissory note in favour of Vibhu Enterprises., ₹1,90,000 through bank draft and balance by issue of 8% debentures of ₹ 100 each at a discount of 5%. The assets and liabilities of Vibhu Enterprises consisted of Fixed Assets valued at ₹ 17,30,000 and Trade Payables at ₹ 3,20,000. You are required to pass necessary journal entries in the books of Vedesh Ltd. Answer Date Particulars L.F Dr (Amount) Cr (Amount) Sundry Assets A/c Dr 1730000 To Sundry Liabilities 320000 To Vibhu Enterprises 1200000 To Capital Reserve 210000 (Purchase of Business of Vibhu Enterprises) NOTE : When Net assets value exceeds purchase consideration, Capital Reserve appears When Net assets value is less than purchase consideration, Good will appears. Date Particulars L.F Dr (Amount) Cr (Amount) Vedesh Ltd. Dr 1200000 Discount on Issue of Debentures A/c Dr 50000 To Promissory Note 60000 To Bank Draft 190000 To 8% Debentures A/c 1000000 (Being issue of bank draft, acceptance of bill and issue of 8% debentures in settlement of purchase consideration) Particular Amount Amount to be paid to Vedesh 1200000 Less : Promissory Note given 60000 Less : Bank Draft Given 190000 Amount to be received from debentures after 5% Discount 950000

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Davneet Singh

Davneet Singh is a graduate from Indian Institute of Technology, Kanpur. He has been teaching from the past 12 years. He provides courses for Maths and Science at Teachoo.