Based on following case, answer question.
A Ltd issued 2,000, 10% debenture of ₹100 each on April 1, 2019 at a discount of 10% redeemable at a premium of 10% after five years. Company purchased assets of the book value of ₹2,20,000 from B Ltd. at book value and agreed to make payment of purchase consideration by issuing another 2000, 10% Debentures of ₹100 each at a premium of 10% on above mentioned date only.
Entry for issue of Debentures to B Ltd. would be:
Answer & explanation
Correct answer: option 4
The correct answer is option 4-
B Ltd. Dr. ₹2,20,000
To 10% Debentures A/c ₹2,00,000
To Securities Premium Reserve A/c ₹20,000
Assets = ₹2,20,000
Debentures issued = 2,000, 10% Debentures of ₹100 each at a premium of ₹10.
Purchase consideration = Debentures x ( Face value of ₹100 + Premium of ₹10)
= 2,000 debentures x 110
= 2,20,000
Journal entry for this issue-
B Ltd. Dr. ₹2,20,000
To 10% Debentures A/c (2,000 x 100) ₹2,00,000
To Securities Premium Reserve A/c (2,000 x 10) ₹20,000