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Accounts amalgamation

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GOPAL AGGARWAL

DOING NOTHING

1339 Points Posted on 30 October 2011

A company "B" is absorbed by "A" ltd B ltd has 5,00,000/- 12% debentures O/s as on date of absorbtion. The scheme of absorbtion provides as under

12 % debentures holders of B ltd are to be paid at 8% premium by 15% debentures in A ltd issued at discount of 10%.

against this A ltd has passed the following entries

12% debentures holder A/c 5,40,000.00

Discount on issues of Debentures 60,000.00

To 15% Debentuers A/c 6,00,000.00

I am not clear about the above entries please help me in clerifing the above journal entry

Replies (3)

Sumit Grover

Chartered Accountant

3652 Points Posted on 30 October 2011

5,00,000 X 108 == (a) X 90

so, the value of (a) comes to Rs. 6Lakh.........

In the above equation, the left side product is the agreed amount of debentures redeemed( i.e. Rs. 5.4L).......and the missing figure(a) is face value of new debentures issued.(i.e. Rs 6 Lakh)

so, the remaning diff. comes to discount.

GOPAL AGGARWAL

DOING NOTHING

1339 Points Posted on 31 October 2011

brother I understand your clarification. but I have one confusion while we issue the debenture at disc. then they are shown at their face value. which is 5 lacs in my query.

If 5 lac is the face value then why we assume 5.4 lac equat to 90 %. In my opinion when 5.4 is equal to 90% then why we should not have to calculate premium on 6 lacs instead of 5 lacs.

GOPAL AGGARWAL

DOING NOTHING

1339 Points Posted on 31 October 2011

Sumit Ji

As I now understand from the problem that A Ltd issuing its debentures at 10% discount as purchase consideration to B ltd for purchasing its debentures. Please help in understanding