Page 170 - ISCDEBK-12

7.6 Double Entry Book Keeping (Section A)—ISC XII

Solved Questions

Illustration 1.
Sweetwell Co. Ltd. purchased a running business from Lotus Ltd. for ` 18,00,000 payable
10% by cheque and the balance by the issue of fully paid Equity Shares of ` 100 each at
a premium of 20%. The assets and liabilities consisted of the following:
Building ` 9,00,000; Plant and Machinery ` 3,00,000; Stock ` 6,00,000; Trade Receivables
` 3,00,000; Trade Payables ` 2,40,000.
Pass necessary Journal entries in the books of Sweetwell Co. Ltd.

Solution: JOURNAL OF SWEETWELL CO. LTD.
Date Particulars L.F. Dr. (`) Cr. (`)
Building A/c ...Dr. 9,00,000
Plant and Machinery A/c ...Dr. 3,00,000
Stock A/c ...Dr. 6,00,000
Trade Receivables A/c ...Dr. 3,00,000
To Trade Payables A/c 2,40,000
To Lotus Ltd. 18,00,000
To Capital Reserve A/c (Balancing Figure) 60,000
(Being the purchase of Business from Lotus Ltd.)

Lotus Ltd. ...Dr. 1,80,000
To Bank A/c (` 18,00,000 × 10/100) 1,80,000
(Being the part payment made to vendor by cheque)
Lotus Ltd. ...Dr. 16,20,000
To Equity Share Capital A/c 13,50,000
To Securities Premium Reserve A/c 2,70,000
(Being the issue of 13,500 Equity Shares of ` 100 each at a premium of 20%)
Note: No. of Equity Shares to be issued = ` 16,20,000/` 120 = 13,500 shares.
Illustration 2.
East Coast Ltd. purchased a running business from Ronak Ltd. for ` 24,00,000
payable 10% by a cheque and the balance by the issue of fully paid Equity Shares of
` 100 each at a premium of 20%. The assets and liabilities consisted of the following:
Building ` 10,40,000; Plant and Machinery ` 4,00,000; Stock ` 8,00,000; Trade Receivables
` 4,00,000; Trade Payables ` 3,20,000.

Pass necessary Journal entries in the books of East Coast Ltd.
Solution: JOURNAL OF EAST COAST LTD.
Date Particulars L.F. Dr. (`) Cr. (`)
Building A/c ...Dr. 10,40,000
Plant and Machinery A/c ...Dr. 4,00,000
Stock A/c ...Dr. 8,00,000
Trade Receivables A/c ...Dr. 4,00,000
Goodwill A/c (Balancing Figure) ...Dr. 80,000
To Trade Payables A/c 3,20,000
To Ronak Ltd. 24,00,000
(Being the purchase of Business from Ronak Ltd.)