CUET Preparation Today
Answer the questions from the passage- XYZ Ltd. purchased assets worth Rs 3,00,000 from Blue Prints Ltd., and took overs its liabilities of Rs 20,000 for a purchase consideration of Rs 3,15,000. XYZ Ltd., paid the purchase consideration by issuing 12% debentures of Rs 100 each at a premium of 5%. |
Which account, and with what amount, will be debited for the excess amount of the net assets over purchase consideration at the time of the purchase of the business by XYZ Ltd. |
Goodwill Rs 35,000 Capital reserve Rs 35,000 Goodwill Rs 25,000 Capital reserve Rs 25,000 |
Goodwill Rs 35,000 |
The correct answer is Option (1) → Goodwill Rs 35,000 Net Assets=Assets Taken Over−Liabilities Taken Over
Net Assets=Rs 3,00,000−Rs 20,000 = Rs 2,80,000
The company, XYZ Ltd., paid a Purchase Consideration (PC) of Rs 3,15,000 for Net Assets worth Rs 2,80,000.
Difference=Purchase Consideration−Net Assets
Difference=Rs 3,15,000−Rs 2,80,000=Rs 35,000
Since the Purchase Consideration (Rs 3,15,000) is higher than the Net Assets (Rs 2,80,000), the difference of Rs 35,000 is attributed to Goodwill and is debited. |
