Green Ltd. Purchased the assets of Strong Ltd. For ₹ 40,00,000 and took over liabilities of ₹ 7,00,000 at an agreed value of ₹ 32,40,000. Payment was made by issuing 10% Debentures of ₹ 100 each at a discount of 10%. Pass the necessary Journal entries in the books of Green Ltd.

Answer

(i) Dr. Sundry Assets A/c by ₹ 40,00,000, Cr. Sundry Liabilities A/c by ₹ 7,00,000; Strong Ltd .by ₹ 32,40,000 and Capital Reserve A/c by ₹ 60,000;
(ii) Dr. Strong Ltd. By ₹ 32,40,000 and Capital Reserve A/c by ₹ 3,60,000; Cr. 10% Debentures A/c by ₹ 36,00,000.
Number iof Debentures to be issued = ₹ 32,40,000/ ₹ 90 = 36,000 Debentures .