If the consideration for issue of Debentures is less than the amount of debentures issued, then the difference is :
Answer & explanation
Correct answer: option 3
The correct answer is option 3- Debited to Goodwill Account.
If the consideration for issue of Debentures is less than the amount of debentures issued, then the difference is goodwill.
In case of the whole business being taken over if the amount of debentures issued is more than the amount of the net assets taken over, the difference (excess) will be treated as value of goodwill and the same shall also be debited while passing the journal entry for the purchase of vendor’s business. But if it is the other way round, i.e., the value of debentures is less than the value of the net assets taken over the difference will be credited to capital Reserve accounts.