Accountancy Part AIssue and Redemption of Debentures

Data Ltd. purchased assets of the book value ₹4,00,000 and took over…

Data Ltd. purchased assets of the book value ₹4,00,000 and took over the liability of ₹50,000 from Sona Ltd. It was agreed that purchase consideration will be settled by cheque of ₹1,00,000 and by issue of ₹2,00,000, 10% debentures at premium of 25%. The Amount of goodwill/capital reserve will be -

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → There will not be any Goodwill or Capital Reserve

Goodwill or capital reserve is the difference between the purchase consideration and the net assets taken over.

Net assets = ₹4,00,000 − ₹50,000 = ₹3,50,000

Purchase consideration:
Cheque = ₹1,00,000
Debentures at 25% premium = ₹2,00,000 × 125/100 = ₹2,50,000
Total = ₹3,50,000

Purchase consideration = net assets, so there is neither goodwill nor capital reserve.

NCERT (2026-27 edition):
Numerical Questions – “… 10. B. Ltd. purchased assets of the book value of Rs. 4,00,000 and took over the liability of Rs. 50,000 from Mohan Bros. It was agreed that the purchase consideration, settled at Rs. 3,80,000, be paid by issuing debentures of Rs. 100 each. What Journal entries will be made in the following three cases, if debentures are issued: (a) at par; (b) at 10% discount; (c) at premium of 10%? It was agreed that any fraction of debentures be paid in cash.”