Based on following case, answer question :
A Ltd issued 2000, 10% debenture of ₹100 each on April 1, 2019 at a discount of 10% redeemable at a premium of 10% after five years. Company purchased assets of the book value of ₹ 2,20,000 from B Ltd. at book value and agreed to make payment of purchase consideration by issuing another 2000, 10% Debentures of ₹100 each at a premium of 10% on above mentioned date only.
Entry for issue of Debentures to B Ltd. would be:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4)-
B Ltd. Dr. ₹2,20,000
To 10% Debentures A/c ₹2,00,000
To Securities premium reserve A/c ₹20,000
Company purchased assets of the book value of ₹ 2,20,000 from B Ltd. at book value and agreed to make payment of purchase consideration by issuing another 2000, 10% Debentures of ₹100 each at a premium of 10%.
Assets = 2,20,000
Debenture issued = 2,000
Premium = 10
THE JOURNAL ENTRY FOR THIS IS AS FOLLOWS-
B Ltd. Dr. ₹2,20,000 (PURCHASE CONSIDERATION)
To 10% Debentures A/c ₹2,00,000 (2000 X 100)
To Securities premium reserve A/c ₹20,000 ( 2000 X 10)