Romi Ltd purchased building worth ₹1,50,000, machinery ₹1,40,000 and furniture worth ₹10,000 from xyz co. and took over its liabilities of ₹20,000 for a purchase consideration of ₹3,15,000. They paid the purchase consideration by issuing 12% debentures of ₹100 each at a premium of 5%.
What will be the number of debentures issued by Romi Ltd?
Answer & explanation
Correct answer: option 3
The correct answer is option 3- 3,000.
Journal entry passed for the purchase of business is as follows-
Building Dr. ₹1,50,000
Machinery Dr. ₹1,40,000
Furniture Dr. ₹10,000
Goodwill Dr. ₹35,000 (Balancing figure)
To Liabilities ₹20,000
To xyz co. ₹3,15,000
(Assets purchased from xyz co.)
Purchase consideration of ₹3,15,000 is paid by issuing debentures of ₹100 at a premium of 5%.
Issue price of debenture = 100 + premium
= 100 + (100 x 5/100)
= 100 + 5
= ₹105
No of debentures issued = Purchase consideration / Issue price of debenture
= 3,15,000 /105
= 3,000