Question

Amar Ltd. purchased assets of the book value of Rs 99,000 from Abhi Ltd. It was agreed that purchase consideration to be paid by issuing 11% Debentures of Rs 100 each Assume debentures have been issued.

1. At par

2. At Discount of 10% and

3. At Premium of 10%

Record necessary journal entries

Answer 1

Books of Amar Ltd.

Journal Entry

Working Notes :

WN1: Calculation of Number of Debentures, when Debentures issued at Discount of 10%

Number of Debentures Issued = Amount Payable/(Face Value - Discount) Per Debenture

= 99,000/100 − 10(100×10%)

= 1100 Debentures.

WN2: Calculation of Number of Debentures, when Debentures issued at Premium of 10%

Number of Debentures Issued = Amount Payable/(Face Value + Premium) Per Debenture

= 99,000/100+10(100×10%)

= 900 Debentures.