RM Ltd. acquired assets of ₹20 lakh and took over creditors of ₹2 lakh from Kapil Enterprises. RM Ltd. issued 8% debentures of ₹100 each at par as purchase consideration. What will be the journal entry for the purchase of the business?
Answer & explanation
Correct answer: option 1
The correct answer is option 1-
Sundry Assets A/c Dr. ₹20,00,000
To Kapil Enterprises ₹18,00,000
To Sundry Creditors A/c ₹2,00,000
(Purchase of the Vendors’ business)
Purchase consideration = 20,00,000 - 2,00,000
= ₹18,00,000
Journal entry will be:
Sundry Assets A/c Dr. ₹20,00,000
To Kapil Enterprises ₹18,00,000
To Sundry Creditors A/c ₹2,00,000
(Purchase of the Vendors’ business)