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Pioneer Fitness… (Class 12 Accountancy SQP 2023-24, Q19a)

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AccountancyCBSE Class 12 · Sample paper, session 2023-24 · 3 marks · Short answer

CBSE Class 12 Accountancy sample paper 2023-24: question 19(a)

From the official CBSE sample question paper for 2023-24, section A, question 19(a), for 3 marks. Try it first; the hints and our step-by-step solution are below.

Q19(a) · 3 marks · Short answerIssue and Redemption of Debentures

Pioneer Fitness Ltd. took over the running business of Healthy World Ltd. having assets of ₹10,00,000 and liabilities of ₹1,70,000 by:
a) Issuing 8,000 8% Debentures of ₹100 each at 5% premium redeemable after 6 years @ ₹110; and
b) Cheque for ₹50,000.
Pass the Journal entries in the books of Pioneer Fitness Ltd.

Source: official sample paper from cbseacademic.nic.in (PDF). See it in the full Sample paper 2023-24.

Hints

Open one hint at a time and try again before the next.

Hint 1

Compare the total consideration with net assets to find goodwill.

Hint 2

Debentures at 5% premium are issued at ₹ 105.

Hint 3

Premium payable on redemption is a loss on issue.

Step-by-step solution

Each step shows the marks it earns, as an examiner would award them. Checked by an independent re-solve from the question paper.

  1. Net assets = ₹ 10,00,000 − ₹ 1,70,000 = ₹ 8,30,000. Consideration = 8,000 debentures at ₹ 105 (₹ 8,40,000) + cheque ₹ 50,000 = ₹ 8,90,000, so goodwill = ₹ 60,000.

    ParticularsDr. (₹)Cr. (₹)
    Sundry Assets A/c Dr.10,00,000
    Goodwill A/c Dr.60,000
    To Sundry Liabilities A/c1,70,000
    To Healthy World Ltd.8,90,000
    (Being business of Healthy World Ltd. taken over)
    1½ marks

  2. Premium on redemption = ₹ 10 × 8,000 = ₹ 80,000, a loss on issue.

    ParticularsDr. (₹)Cr. (₹)
    Healthy World Ltd. Dr.8,90,000
    Loss on Issue of Debentures A/c Dr.80,000
    To 8% Debentures A/c8,00,000
    To Securities Premium A/c40,000
    To Premium on Redemption of Debentures A/c80,000
    To Bank A/c50,000
    (Being consideration paid by 8,000 8% debentures at 5% premium redeemable at ₹ 110, and a cheque)
    1½ marks

Answer: Assets ₹ 10,00,000 and Goodwill ₹ 60,000 Dr. to Liabilities ₹ 1,70,000 and Healthy World ₹ 8,90,000; Healthy World ₹ 8,90,000 and Loss on Issue ₹ 80,000 Dr. to 8% Debentures ₹ 8,00,000, Securities Premium ₹ 40,000, Premium on Redemption ₹ 80,000, Bank ₹ 50,000

Where the marks are

  • Purchase of business with goodwill ₹ 60,000 (1½ marks)
  • Discharge by debentures and cheque with loss on issue (1½ marks)

Revise the chapter

Practise this chapterBoard-style questions from Issue and Redemption of Debentures, one at a time, marked against the answer key and marking points.Back to the full paperSample paper 2023-24: every question, by section.

The question is transcribed from the official paper; figures are described in words. The solution, hints and chapter tag are ours. Spotted an error? Write tosupport@questionbuddy.in.