A Company purchased assets of a book value of र1,90,000 from another company and agreed to make the payment of purchase consideration by issuing 2,000, 10% debentures of र100 each at a discount of 5%. What will be the journal entry for the allotment of shares?
Answer & explanation
Correct answer: option 4
The correct answer is option 4-
Vendors Dr. र1,90,000
Discount on Issue of Debenture A/c Dr. र10,000
To 10% Debentures A/c र2,00,000
(Debentures allotted to vendors at discount)
1. On purchase of assets:
Sundry Assets A/c Dr.
To Vendor’s
(Purchase of business)
2. On issue of debentures At a discount:
Vendors Dr.
Discount on Issue of Debenture A/c Dr.
To Debentures A/c
(Debentures allotted to vendors at discount)
So, vendor account is debited with ₹1,90,000
Debentures = 2000 x 100
= ₹2,00,000 (Credit side)
Discount = 2,000 x 5
= ₹10,000 (Debit side)
So, the correct journal entry is-
Vendors Dr. र1,90,000
Discount on Issue of Debenture A/c Dr. र10,000
To 10% Debentures A/c र2,00,000
(Debentures allotted to vendors at discount)